The recent reopening of the mainland Chinese box office, including a $1 billion Chinese New Year holiday season, has put a different complexion on the global theatrical industry. Few companies could be closer to that change in fortune than Imax China, a stock market-listed subsidiary of the Imax Corp.
The company operates as both a supplier of screens, audio and projection equipment for premium cinemas and as a partner in making local Chinese films fit for exhibition in the giant format. During Chinese New Year, Imax was represented by “Avatar: The Way of Water” and four Chinese movies.
Daniel Manwaring, CEO of Imax China, spoke to Variety in his first interview since taking on the top job in January.
How has the company managed to get so many Chinese Imax movies of late?
It’s really easy, but it involves a very proprietary technology. First, it involves having an intimate relationship with the filmmaker and the producers in order to get into post-production early enough so that we have enough time to ensure proper DMR-ing. In the past that was a real issue because we had to literally ship the DCP back to California and then have it shipped back to China. Fortunately, in recent years, we’ve been able to work on a cloud system that now allows us to do the DMR in a really fast and technology-driven way. I refer to it as the formatting of local language films.
Is that your main task, or is the focus still on building more screens in China?
We’re not a builder in the sense that we’re going out and physically building theaters. Our business is working with best-in-class exhibitors and ensuring that we have an Imax screen in the best locations. Our network now is at 794 screens across China, and we’ve got over 200 in the backlog. Approaching 1,000 screens in China is just a mind-blowing number.
What does that number mean for the Imax group?
It’s an extremely important part of the global group’s revenue. On any given year it can account for a third of the business. However, the global side is still focusing on other expanding territories like Southeast Asia and India.
A lot of the things that we’re doing here in China in the local language space will be applied to other territories. Yes, we’ll always have our catalogue of Hollywood films coming in every year. But the importance and the growth of local language globally in every country is undeniably important.
That’s a lesson that I think the world has been taught even more by streaming in the last few years when people were locked down and started watching things which they might not have expected to watch.
How do you see the state of the Chinese theatrical marke, and Imax’s position within that?
We can’t answer that question without referring to the incredible Chinese New Year we had. Imax [box office] was 54% above the previous year, which shows that audiences here are eager to go to the movies. And they are willing to pay for a premium experience. Our indexing has never been higher.
We refer to indexing as our market share of a film’s ticket sales. “The Wandering Earth 2” is our highest grossing local-language film of all time in Imax and third after “Avengers: Endgame” and “Avatar 2.” Our indexing on “Wandering Earth 2” was 9%. That’s astounding.
So, what that tells me is that Chinese audience were trapped in their houses for a very long time, just like the rest of the world, and came out and enjoyed revenge spending. If you’re not watching movies, you’re missing out on tableside conversations.
The movie-goer has really never been stronger. Some survey data came out recently in China Business News [asking about consumer priorities] after the pandemic. Travel was first. Entertainment came second, with 90%. It’s very telling of how strong our audiences are here in China.
Is that sustainable?
In order for our business to survive, we need supply. Right now, we have got more supply than we ever had. We have Hollywood films [where] our indexing is as strong as ever. We see that as a major driver through the rest of the year. I don’t believe in this notion that Chinese people don’t want to watch Hollywood movies anymore. People were telling me that even when I was at CAA five years ago. It’s simply not true. I think Chinese audiences are becoming more sophisticated, care about storylines, and have an acute sense of what is a good movie. I feel that we’re going to still see big hits with higher quality films.
This year [has the potential for] “Fast 10,” “Transformers,” “Mission Impossible” and “Guardians of the Galaxy.” From May, we have a new Imax title every week until the rest of the year.
And I have a knack for improving the quality and elevating the Chinese film industry. So, I am inherently bullish on local-language films in China.
What is your understanding of the Chinese regulatory picture and how it is changing?
Policy changes seem to have happened in stages. The first major signal that there was going to be a wave of new policy changes was when “Avatar 2” was allowed to continue through the Chinese New Year. That is typically a blackout period, and you would never have a big Hollywood movie played through Chinese New Year. Not only did it play, it then got a second extension well into March.
Signal number two came much more behind the scenes. Chinese studio heads were essentially called in to the Film Bureau and asked about their slates. And within a short time were asked to resubmit all these movies [for approval]. We know that the industry needs supply. And the tone of these meetings has been business recovery.
The most significant changes came in the last few weeks, when we started seeing the dating policy change. So, with the exception of big, blackout periods like the May Day holiday, the October holiday and Chinese New Year, those other windows in between, we’re starting to see films get dates as late as July.
That might not sound significant [overseas], but [in China] that is hugely important to our business. Now we’ve got a runway of marketing time that we compared to before. I can’t remember the last time this happened, probably 2018, when studios were allowed to date their own films. That allowed them to have much more efficient marketing budgets. They could come up with more creative campaigns and angle the film into a certain audience. Instead of just being told that their release date is next week and scramble to make people aware. It has been three years. To me, this is the most promising change that I’ve seen.
And then obviously, Hollywood coming back to China which is indeed a very positive signal.
What do you see as the explanation for the restart of Hollywood film imports?
It’s about business. I wish I could tell you secretly the U.S. relationship with China’s getting better, but I don’t have insights into that.
We hear that the emphasis is business recovery after the changes of COVID policy. The leaders of this country [understood that] Hollywood movies still make up a very large percentage of total box office and that as leaders they need to go and help restore every sector. And the film business, is a significant business in the cultural sector.
China has made it very clear that we’re not going to get a big bailout, as they had done in the past. So the only other way they could do it is just to simply increase the supply of content for exhibitors. It was to save the theatres.
What are the major objectives for your first year as CEO of the company?
Well, objective number one is focusing on our core business, expanding our backlog, making sure that we’re continuing to roll out new installations and improving other parts of the Imax experience – everything from upgrading projectors from Xenon bulbs to our newest laser systems and improving our customer care program. We’ll soon be announcing a really cool initiative about audience as our biggest asset. We have one of the stickiest loyal fan groups that I’ve ever seen. We’re going to be doubling down on the audience experience both in the theatre as well as outside of the theatre.
We’re living in an age where that’s becoming more challenging. You’ve got small screens, you’ve got streaming, you’ve got all of these other options for a consumer. And so the only way that you’re going to bring those audiences into the movie theatres to offer something really special, and you have to take their breath away.
My long-term goal is when people think of Imax, in addition to the great experience in a in a theatre, they’re really thinking about passionate film people, passionate audiences, passionate directors, who are using our cameras, wanting Imax formats because the color is deeper.
Do you care whether exhibitors build or lease?
It’s our clients’ choice. They can either flat-out acquire our system. Or if they don’t want to make that capex investment, we set up a joint venture, in which case, we end up having more of a back end relationship on the box office. We’re not really trending one way or the other. Some clients simply want to own the system. Others, who may be rolling out a much larger network across the country, because of that capex, want them all be joint venture.
[At the end of December there were 794 systems in the Imax theater network in Greater China. Of these, 401 operate under full revenue sharing arrangements (‘joint venture’), 112 under hybrid revenue sharing arrangements and 281 operate under sales arrangements.]
Is that what has made Imax China’s profits somewhat lumpy?
During the pandemic, everything was lumpy. The rest of the world had a terrible 2021, while in China we had a great year, and vice versa in 2022.
It’s actually not a very lumpy business. The box office side can be, because you never know when you’re going to have a massive breakout hit – I don’t think anyone thought that ‘Full River Red’ would be the box office champion over Chinese New Year – but [the exhibition and installation business is steadier].
Also we have the luxury of dabbling in not only Hollywood films but in local language titles too. We now DMR a lot more movies, so the exhibitors have the choice to put on whichever Imax film is trending.
That’s a change compared with a few years back.
We’ll have multiple films during the May holiday. Previously, we were sort of just picking one, betting on one horse. Now we’ve got a lot more horses in the race.
What is the ceiling for the number of Imax screens you could have in China?
We have been using a zone approach to evaluate the areas which has business potential to open an Imax theater, considering the local population, consumption, GDP and local urban construction projects etc. For now, we think there are approx. 1,400 zones total in Greater China, with approx. 440 still ‘open.’ But the zone number is kept adjusting considering the evolving economic and urban development factors.
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