IMAX has announced a joint venture with Hoyts Cinemas, one of Australia’s largest exhibitors, to build four theatres featuring IMAX Digital technology. The theatres will be built in Sydney, Perth and Melbourne with the first three opening in November of 2008 for the release of “Harry Potter and the Half Blood Prince”. The deal, which will double the number of IMAX theatres in Australia, is the first international joint venture in IMAX’s history.
The agreement has IMAX and Hoyts splitting the profits from the four new theatres as well as the cost of building them. The latter is not insignificant as both companies have not had an easy go of it financially over the past several years. In 2006, IMAX made their second unsuccessful attempt to find a buyer and was rumored to be near bankrupt. Their stock price, which in 1999 reached a high of $49 plummeted to below $4.00 in 2007 when the company revealed it was responding to a Securities and Exchange Commission accounting investigation and that year over year revenue was off.
As for Hoyts, after two years of poor performance revenue-wise, Pacific Equity Partners bought the theatre chain in the third quarter of 2007 for AUD $440 million from James Packer’s Publishing & Broadcasting and West Australian Newspapers. In a press release statement Hoyts CEO, Delfin Fernandez, was not shy about highlighting the financial benefits of the venture. Besides offering incremental revenue from increased attendance, Fernandez said:
“. . . IMAX Digital projection system eliminates the need for film prints, which significantly lowers operating costs and enables us to offer our customers a wider range of IMAX content.”
In an effort to stay relevant during a time when the industry is trending toward digital cinema IMAX launched IMAX Digital System in June. The projection system provides the same large format visuals that IMAX built it’s reputation on in both 2D and 3D. Despite their financial woes, over the last seven months the company has been busy signing contracts with exhibitors for upwards of 180 systems, 50 of which will be installed before the end of the year. Last December, IMAX signed a deal similar to the Hoyts agreement with AMC Entertainment that will have 100 new IMAX Digital theatres opening in 33 markets across the United States over the next three years. Like the Hoyts deal, the AMC pact doubles the number of IMAX screens in the territory. Then in March, IMAX entered into an agreement with Regal Entertainment Group to build 31 new theaters in 20 U.S. markets by the end of 2010.
You might be asking yourself where the cash poor IMAX will be getting all of the dough for such rollouts, though back in May the company lined up financing through Wachovia Capital Finance Corporation as well as an USD $18 million investment from their largest shareholder.
One of the benefits for Hoyts in doing a deal with IMAX is that the chain will be able to deploy some form of digital cinema equipment at time when the company has halted such rollouts to wait out the virtual print fee (VPF) battle between Australian exhibitors and Hollywood studios. Because Australian theatres are usually alloted recycled prints, the studios have shown little interest in giving exhibitors in the territory a worthwhile VPF.
The first three IMAX theatres will be installed at Sydney’s Entertainment Quarter 12, the Carousel 16 in Perth and the Highpoint 17 in Melbourne. The fourth theatre will be built next year in Melbourne.