China Cinema Digest – Thursday 22 January 2015

Wanda Cinema Line Logo

Sina Finance highlights three pertinent questions about Wanda Cinemas raised during the ‘road show’ ahead of the company’s IPO.

Concerned about the point two: how to face the the new media shocks?

In the conference, another concern is that the new media development, Wanda Cinema traditional marketing model of how to face the competition…

In this regard, Zeng-Mao also said that at present the company a single month counter ticketing and network ticketing of the proportion of month 6: 4, 2013 box office income share 76.74%, network sales at present in a single month accounting for about 40%, network sales accounting for showed a gradual upward trend, company there are Wanda movie network, Wanda movie APP such as its own electronic channels, at the same time also, and domestic professional network of ticketing website cooperation.

At present, Wanda Cinema uses a “cinema system” model of development, Ye Ning said Wanda Cinema business uses a pure asset coupling mode, is currently well-known theaters in only one using the model of the company.  LINK

China cinema box office split

On the occasion of Wanda Cinema’s IPO a good in-depth overview of how the cinema market works in China and Wanda’s role, down to specifics of revenue split and tax, is provided by Win Business Network . Several pages long, but worth reading in full.

Cinemas implement licensing system, the relevant policies and regulations, 15 or more in assets and the distribution for the film in theaters as a link to the different provincial regions, provinces can set up a cinema company. As of the end of 2013 there were 45 theaters license.

Unity in accordance with their respective cinema theater company plans to row reflect the showing of the film.

American film industry chain is the core part of the copyright, movie box office revenues accounted for 30% of the film side (producers and issuers) income is less than, in addition to creating revenue through digital television, Internet video, brand licensing, and other aspects of overseas exports . Because domestic copyright, among other factors, led to 85% of the producers are the cinema box office revenue contribution.  LINK

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Cinema in China Is Still Headed for Crash – Five Trends Show Why

Taking of Tiger Mountain

With Wanda Cinema’s IPO imminent we thought it would be a good to revisit the article ‘China’s Multiplexes Are Headed For a Crash – Statistics Show Why‘ that we published last April. With another year of strong box office growth in China and no large scale cinemas going bust in the Mainland, were we wrong?

At the time we wrote that “It is too early to say whether Chinese cinema exhibitors are in for a hard crash or a soft landing, but a correction is now becoming overdue.” It increasingly seems like 2015 will be the year that the correction is due, with several troubling indicators making themselves felt.

We will not re-hash the arguments from the original article, which remain valid, so we urge anyone not familiar with it to read it first. We will instead look at some new factors that we did not highlight back then.

It is also worth noting that at the time overall growth in China was slipping below 8% and now it has fallen even more. For the third year running China has missed its export target and as the FT reports,

The missed target comes as China prepares to release annual gross domestic product figures next week that will show growth in the world’s largest economy (in purchasing power terms) came in below the government’s annual target for the first time since 1998.

This is the macroeconomic picture to keep in the back of the mind when discussing the cinema market in China.

In broad strokes, the five trends can be summarised as follows:

  1. Mistaken belief in a demographic cinema dividend;
  2. Unsustainable price-war in micro-blog ticket services;
  3. Inability of Hollywood films to fill a post-quota gap;
  4. Failure of Chinese film production due to censorship;
  5. A ‘hidden’ decline in the growth rate of the box office.

1 – The demographic cinema dividend fallacy

Wanda Cinema is very confidant about the future growth of the China cinema market, as stated in its IPO document, which begins with the bold claim “The company’s main business is the cinema industry, [and] the [cinema] industry has always come out on top”:

Our cinema industry in the future continue to benefit from the rapid growth of the film industry

In recent years, China’s film market continues to maintain a rapid development momentum, the movie industry revenue is expected to usher in the 2015-2016 phase of explosive growth. We believe that our large population, the urban population has a number of screens compared with Europe and other developed countries, a big gap under the background of the geographical distribution of the theater, the per capita number of screens there is a large room for improvement, the cinema industry will continue to maintain a high level of development.

This is a refrain often heard in discussions about Chinese cinema: that the country is under-screened compared to markets in Europe or that cinema attendance is low compared to that in the US. As the market matures it will continue to grow, is the belief.

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Daily Cinema Digest – Monday 19 January 2015

Microsoft smartphone cinema

Has Microsoft discovered a way to make smartphones less annoying in cinemas? For those who can’t bear to switch them off for a couple of hours, this could be the solution.

A patent granted to Microsoft this week could automatically adjust the settings on your phone to make it less annoying in movie theaters.

Granted on January 13, the patent details an “inconspicuous mode” which would automatically adjust brightness, mute sounds and offer reduced information on the lock screen when the owner goes to the theater or is about to head to bed.

Inconspicuous mode would be triggered using sensors on the device when visiting a venue like a movie theater, or could be manually enabled by the user.  LINK

regal-entertainment1

USA – Regal is not for sale. The company has decided against putting itself up for sale. It always seemed unlikely, more like a distraction from two consecutive quarters of bad growth.

Regal Entertainment Group, which operates the nation’s largest theater chain, is no longer looking for a buyer, the company said Thursday.

The Knoxville, Tenn.-based chain announced that its board of directors has “determined that a sale of the company would not be in the best interest of shareholders at this time,” according to a statement. “The board, consistent with its fiduciary duties, remains committed to evaluating any alternatives that would enhance shareholder value.”

Regal said it arrived at its decision after examining strategic alternatives with the advice of Morgan Stanley & Co.  LINK

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And the Oscar Goes to… Digital Cinema! (Specifically TI)

AMPAS Sci-Tec announcement

Last year the Motion Picture Academy’s Science and Technology branch effectively closed the book on film as a distribution medium for motion pictures by awarding the Academy Award of Merit (Oscar Statuette) to every single film processing lab in the world. So it is perhaps fitting and symmetrical that this year’s recognition would go to the technology that replaced it, i.e., digital cinema, or more specifically Texas Instruments’s team of engineers (and one from Dolby, more on which later).

The Academy of Motion Picture Arts and Sciences or AMPAS (to give the Oscar Academy, or just ‘the Academy’ its full name) is staying true to the latter part of its name (‘Science’) by each year recognising those people behind the scenes that have contributed to the advancement of motion picture technology, and thus storytelling, by handing out the Scientific and Technical Awards at a ceremony prior to the red carpet Oscars. As AMPAS puts it:

The Academy’s Scientific and Technical Awards honor the men, women and companies whose discoveries and innovations have contributed in significant and lasting ways to motion pictures. Honorees are celebrated at a formal dinner held two weeks prior to the Oscar ceremony. The Sci-Tech Awards presentation has become a highlight of the Academy Awards season.

It is important to remember that these are not awarded to companies but to people, though individuals given the awards have often made their achievements working for companies that have often also given the name to the technology being recognised. While it honors the technologies, it is the people behind them that are being feted.

There are furthermore three levels of recognition: the Technical Achievement Awards (which entails an Academy Certificate), the Scientific and Engineering Awards (gets you an Academy Plaque), the Academy Award of Commendation (Special Plaque), and finally the Award of Merit (an actual Oscar statuette). What is remarkable is that this year Texas Instruments was selected in not one but all three of the main categories, putting a big AMPAS seal of approval on the digital cinema technology that has defined the cinema business.

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Daily Cinema Digest – Thursday 15 January 2015

Cineworld lesbians

UK – Cineworld clearly has to work on more LGBT awareness (not to mention common sense) for its staff, after a lesbian couple were evicted for (wait for it) using the Ladies toilet. A £20 voucher and two free tickets hardly seem like an adequate apology for treating paying customers this way.

A lesbian couple were kicked out of the ladies’ toilets during a trip to the cinema because the security guard thought they were men.

Tracey Seaton and Keira Williams had just popped to the toilet after watching a film at Cineworld in east London.

But a guard followed them in and forced them to leave after insisting they were men.  LINK

Odeon wheelchair evict

UK – Meanwhile Odeon staff evicted a disabled man because a few people complained that his ventilator was making too much noise. Seriously, do UK cinemas feel that they have too many patrons to go throwing out ticket-paying customers like this? I mean it as a serious question. Tell me your views in the ‘Comments’ section below, please.

A cinema-goer with Duchenne muscular dystrophy was thrown out part way through a film after complaints his life-saving ventilator was a “noise nuisance”.

Richard Bridger, 31, was asked to leave an Odeon cinema in Epsom, Surrey, as he watched Taken 3, the Liam Neeson thriller, with his carer.

It happened just a week after volunteers from the Motor Neurone Disease Association were allowed to make bucket collections at the cinema, which is screening the film about the wheelchair-bound science genius Stephen Hawking, The Theory of Everything.  LINK

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Daily Cinema Digest – Wednesday 14 January 2015

AMC Wanda logo

USA (NV) – Is AMC going to ditch Imax for Dolby Cinema? Of course not, but this and other nuggets emerge from a Citi Global Internet, Media & Telecommunications Conference transcript with AMC’s Craig Ramsey, EVP and CFO, where he talks about the company’s five different strategies.

But to my point about our proprietary brands, I want to do a plug on — and we love IMAX. I’m not being negative against IMAX, because it’s been a great partner. But if you think about it, really there’s only one party that needs to make the decision on the proprietary brand whether a film is in the big auditorium with the big-screen, the big seats, and the Dolby Atmos sound system that you’ve spent a ton of money on, and it’s us. Because you don’t have to reformat that film.

And so you can deliver, I think, an IMAX-like experience over a broader range of product. Some that hasn’t been. So I think the growth opportunity, at least for us, we’ve got 17 of our private label and I think we have a big growth opportunity in more rollout of our AMC Prime proprietary product. In some cases where we also have IMAX, because the two can be complementary. LINK

Worth reading in full – this is after all the exhibitor that has 67% of the screens of Regal but generates 90% of the revenue that Regal does. Read about the ‘recliner’ strategy. Nothing is more important in the US exhibition business right now than seating. Repeat: nothing. Not even Imax/Dolby Cinema.

I don’t know if you’ve been — we operate — I said 344 theaters. 55 of those theaters we have remodeled, which has included taking out two-thirds of the seats. Where we had three seats, we have one. And that one is a plush, automatic, motorized recliner, which gives the moviegoer seat east and west more room, and north and south more room. We’ve — it’s been an unbelievable positive response from the guest, more privacy, greater comfort.

What you may be thinking well, but you’ve taken all that capacity out of the auditorium. You probably are missing some attendance because of the sellouts.

On the whole, our industry operates on about 11% capacity utilization. There’s a lot of room in this business to take seats out and deliver a better guest experience through a better seat. Recliner reseats, take two-thirds of the seats out, and attendance on average in these theaters has increased 50%. In an industry that is experiencing declining attendance, our recliner reseat theaters are growing attendance by 50% year over year. Pretty dramatic.

cineworld-logo.jpg

UK/Europe – Cineworld’s diversification strategy of spreading out across Central and Eastern Europe (and Israel) seems to be paying off in offsetting declines in cinema going in the UK, where higher ticket prices still kept profits ticking.

Cineworld has unveiled a blockbuster trading update, saying its full-year earnings will be at the top end of analysts’ expectations after it managed to persuade British cinema-goers to spend more on their tickets.

The company said that while admissions in its UK & Ireland business declined by 3.7 per cent during the year, this was offset by growth of 4 per cent in the average ticket price.

Visiting cinemas is not a declining trend across its entire business, however.  LINK

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Tim League Discusses the Alamo Drafthouse Smartphone Policy

Tim League Alamo Drafthouse

Alamo Drafthouse is the premier up-market cinema chain in the United States. Yet it is sometimes better known for its ‘zero tolerance’ approach to people using cellphones, smartphones or even Google Glass in its cinemas.

Following the big response we had to the topic of smartphone use in cinemas (‘Smartphones Are Killing the Cinema Experience‘) we got in touch with Tim League, Alamo Drafthouse Cinemas’ founder and CEO to quiz him about the background and specifics of his chain policy and practices.

Celluloid Junkie: What was the origin of Alamo Drafthouse’s ‘zero tolerance’ towards cellphones, smartphones and wearable devices?

Tim League: For the first few weeks of operation back in 1997, we didn’t have a formal policy. About a month in, we had midnight screenings of “Blue Velvet” which sold out. We had a really cheap Pabst Blue Ribbon special that sold really well and we unfortunately had our first rowdy audience.

I went in the theater and it was out of control. People were chatting and shouting at the screen. I felt sick to my stomach. This wasn’t the theater that I wanted to build. That week I bought a copy of Final Cut Pro 1.0 and taught myself how to use it. I cut together our first Don’t Talk PSA and the zero-tolerance policy was born.

CJ: How was the policy formulated and what staff training was required to put it into practice?

TL:In the old days, I was there every day and I was the enforcer. When there was a complaint, I came in to sort the problem. These days, we have a good amount of training on how to deal with upset customers. We probably throw out 100 or so customers a year, but in general most people quiet down when they get their first warning.

CJ: Can you tell us about the ‘silent notification’ process?

If you have a loud table nearby, you just write down where they are sitting on paper supplied at the table. A server slinks in and takes the note and alerts the manager. A manager will stand in the theater until it happens again. When it does he or she will give the table a warning and tell them they will be thrown out without a refund if it happens again.

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Daily Cinema Digest – Monday 12 January 2015

Glitz Cinema

India – Carnival group has acquired small Indian multiplex operator Glitz, having previously bought most of Big Cinemas.

After buying Anil Ambani’s Big Cinemas, the Carnival Group has picked up elder brother Mukesh Ambani’s majority stake in Stargaze which operates the multiplex chain “Glitz” for an undisclosed amount. Network 18 Media and Investments Ltd, on Thursday said its venture capital unit, Capital 18 has sold nine operational screens in Rajasthan, MP, Chhattisgarh, Uttaranchal and UP and one non-operational screen. Network 18 has sent a brief notice to the exchanges. The latest acquisition take the Carnival group ,which has over 300 screens, closer to their top competition PVR which still leads at 462 screens. Around two weeks ago, the Shrikant Bhasi-led Carnival acquired Big Cinemas for around Rs 700 crore.  LINK

 There will be blood

USA – Will cheaper oil/petrol prices lead to more discretionary income and more cinema visits? This Seeking Alpha analyst thinks so.

The stunning collapse in the price of oil can be considered a “tax cut” that will allow for additional spending. To quantify the impact, it is expected that the average family will see an additional $500 in funds which can be earmarked as they see fit. With wage growth virtually stagnate over the past few years; the relief on the consumer due to lower energy prices will be welcomed. In my view, an investable trend has emerged where a clear path for higher discretionary spending. Unlike in recent times, I expect consumers to continue to be cautious with their spending and expect some of the funds to be earmarked for savings and debt reduction which will consume a portion of the savings. With this backdrop in mind, the stronger plays will be those companies that offer affordable luxuries to the masses. The theatrical exhibition chains neatly fall into the above definition as their product is affordable and offers a bit of an “escape” from the everyday routine. In the article below, I will detail the investment case for AMC Entertainment Holdings Inc (NYSE:AMC).  LINK

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China Cinema Digest – Friday 9 January 2015

away with bullets

China’s State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) has taken note of the danger to the cinema experience if films are shown in poor conditions, such as insufficient brightness (particularly for 3D) and poor audio. It has therefor put cinemas in notice, as well as giving audiences a way to complain (call Tel: 010-82024005 13901121804). If only other countries film and cinema bodies (France’s CST notwithstanding) were as forward looking. The first paragraph ought to be gold plated.

Bulletin

[If] film screenings technical quality can not be effectively guaranteed, it will harm the legitimate interests of moviegoers and film copyright holders, and film digitization has brought technological achievements do not match the long run, is not conducive to the sustainable development of the film industry, and will lead to the theater in market lost credibility. In order to further improve the quality of film screenings, are hereby notified of the following matters:

First, the film shows the vitality of the quality of films, the movie business is a concrete manifestation of good faith, must lead to radio and television departments at all levels and industry associations, cinema, cinemas highly valued, not for any reason reduce film screening criteria.

Second, each company must immediately cinema this notice will be forwarded to the respective theater, and the organization of specialized personnel to show the quality of the census, for the existence of film screenings quality is not up to the standard of the phenomenon must be promptly corrected. Each theater should seriously organize self, responsibility to the people, for the presence of screening quality problems, to identify the reasons for immediate rectification.  LINK

Wanda Group

Photo credit: Caixin Online

Are the wheels starting to come off the Wanda bandwagon even before the cinema IPO? In an article titled ‘Hong Kong-Listed Wanda No Longer Boy Wonder’ by Beijing-based Caixin Online it is pointed out that the Dalian Wanda Commercial Property IPO was expected to raise USD $5 billion to $6 billion but only $3.71 billion. Yet it is the anecdotal evidence that indicates that all is not well with the cinema portfolio either:

A recent business trip experience for a Hong Kong investment banker, who chose not to be named, highlights oft-heard concerns about Wanda’s future. The banker traveled to a Wanda resort in the seaside city of Sanya, in the island province of Hainan, with plans to stay three nights.

But the banker checked out after just one night at the Wanda Culture Center at Haitang Bay because, he said, the place was as lonely as a ghost town. Moreover, he said, in Sanya he saw an upscale, Wanda-owned movie theater that seemed much too remote to draw cinema-goers.

“It’s hard to imagine movie-goers going there because taxi drivers refuse to take you unless you pay a higher fare,” he said.  LINK

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