Although they are not (yet) celebrating, cinema operators can be heard exhaling a collective sigh of relief at the moment. “The Super Mario Bros. Movie” outperformed everyone’s expectations, the success of “Air” has demonstrated that there is not just an appetite for adult drama at the multiplex, but that streamers like Amazon see value in a regular release window, while the likes of Apple are now committed to spend a cool billion dollars on films that will first head to cinemas. Meanwhile exhibitors ranging from Everyman to PVR-INOX are seeing attendance and/or revenue creeping up to pre-COVID levels.
Nobody has forgotten that Cineworld is still completing its bankruptcy reorganization, while US cinema advertiser NCM has a similar troubled path to read (more on this in a future CJ post and Marquee issue). But even here there is a silver lining that the Regal/Cineworld saga could be over by mid-year, with the company back in business under new ownership in the second half of the year. The slate of films for this summer is looking very strong and no doubt there will be even more shown at this month’s CinemaCon in Las Vegas. Reasons enough to be cheerful?
Current optimism, however, needs to be held in check by a healthy dose of caution. The spurt of good news should not obscure the fact that the cinema recovery is a marathon, not a sprint (expression © Rob Arthur). The reason so many cinemas survived the pandemic is because it is hard to close a shuttered cinema, particularly when the government is paying the wages of your staff, or in the case of France, paying the equivalent of a sold-out cinema house and giving you enough money to upgrade or even buy more cinemas. However, just like after any financial crisis, there are a number of “zombie” companies out there, stumbling along even long after they ought to have died.
This is not the same as the lazy journalist cinema-is-dying narratives or alarmist sub-editor headlines about your local multiplex being at the risk of closing. Cineworld was an outlier in terms of over-leveraging. The industry will survive its restructuring and even break-up. At most a handful of Cineworld sites will close. But what happens if AMC CEO Adam Aron stumbles during his financial balancing act and angers the apes. AMC becoming a meme stock was a Hail Mary save that is unlikely to be repeated. The optics of that would be worse than Cineworld/Regal’s Chapter 11, if that comes to pass.
Above all, the biggest restructuring of the global cinema industry still lies ahead. Cineworld could quite possibly be split up and nobody knows into how many component parts. India’s PVR and INOX have merged, suddenly creating a new global top 10 industry player. AMC is withdrawing in all-but-name from Saudi Arabia. China’s Wanda is again looking to sell Australian Hoyt’s, while fellow Aussies EVT (nee Event Cinemas) is very likely to put Germany’s CineStar back up for sale. France’s CGR could be close to having a buyer. There are other mid-size deals that will also come as a surprise.
The era of cheap money is over, so don’t expect any aggressive or ego-driven take-overs or mergers. But they will happen. Because in the age of the experience economy, cinema still represents a good long term investment. Despite the squeeze on consumer spending, everyone from airlines and hotels to restaurants and bars are still seeing significant recovery. Don’t lump cinemas in with streamers or other online platforms, not least as it is doing better than the social media giants hurt by the advertising downturn. Equally, don’t think that Web3 nonsense and ChatGPT somehow need to be shoehorned into the big screen experience. Think of cinema like the railway industry – something that’s been there for over 125 years, maybe not as sexy as it once was and definitely not the only choice for transport/entertainment, but reliable, ever-present and not going away.
When Warren Buffett and his right-hand man Charlie Munger spent USD $4.73 billion in 2007 to buy a 17.5% stake in Burlington Northern Santa Fe (BNSF, the largest US railway operator), they wrote in their letter to shareholders, “Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.” The cinema industry could do with more “boring” investors like Messrs Buffett and Munger. So for all the turbulence that still lies ahead for the cinema industry, remember that it is and remains a fundamentally dependable long-term business. This is the main reason to be cheerful about it.
Exhibitors
China’s Wanda Once Again Tries to Sell Hoyts
China’s Wanda has once agin put Hoyts up for sale. The chain was acquired in 2015 as part of Wanda’s global expansion drive, but it is now looking to complete the divestment of all overseas operation to focus on consolidating its position as the biggest Chinese cinema operator. Wanda has already sold its entire stake in AMC, the parent company of Odeon Cinemas Group in Europe.
Hoyts is the second largest cinema operator in Australia, with cinemas in New Zealand as well. In 2022 it operated 46 sites with a total of 412 screens. In addition, it is also the parent company of regional cinema advertising major Val Morgan. Credit Suisse and Nomura have been appointed to handle the sale.
Bidders are understood to have access to a “stapled debt” package (a line of agreed financing arranged by the banks) if the potential buyer cannot arrange sufficient finance of their own. A first deadline for bids is set at the beginning of May, with final offers to be submitted by the end of June.
Variety
Expectations are that the sale could raise AUS $1 billion (USD $670 million), with a private equity firm seen as the most likely new owner. The code-name for the sale is “Operation Mario,” which could be a timely reference to the current Universal/Illumination hit “The Super Mario Bros. Movie.” After being hit by closures relatively late in the pandemic, Hoyts revenue recovered to AUS $550 million ($369 million) in 2022, and is forecast to hit AUS $638 million ($427 million) in the current year.
The sale of Hoyts would represent a final step in Wanda’s retreat from ambitions to be a global film/cinema/entertainment major that spanned everything from theme park, film studios, an HQ presence in Beverly Hills and mooted parent company of production majors such as Dick Clark Productions. Meanwhile there is speculation that fellow Australian cinema operator EVT (formerly Event Cinemas) could be looking to try to once again to sell off its CineStar operation in Germany, after the original sale to Vue was terminated.
Source: Variety
Exhibitors
UK’s No. 4 Cinema Chain Everyman Sees Strong Growth
UK boutique cinema chain Everyman Media Group has returned to profit, demonstrating audiences’ appetite for high/end cinema as an “affordable treat.” Everyman recorded a profit of GBP £402,000 in the year to 29 December, compared to a loss of GBP £2.2 million the previous (pandemic) year. Underlying earnings rose from GBP £8.3 million to GBP £14.5 million on an adjusted basis. Meanwhile admissions rose from 2 million to 3.4 million. Everyman is now the United Kingdom’s fourth largest cinema chain.
Everyman CEO Alex Scrimgeour sees Everyman being resilient even in challenging economic circumstances. Ticket price went up from GBP £11.00 to GBP £11.29, but food and drink spending rose from an average of GBP £9.07 to GBP £9.34. Everyman is the largest UK cinema chain to regularly show films from both Hollywood studios and independents, but also streamers such as Netflix, Amazon Prime, Apple TV+, Curzon, Sky and others.
“The diversity of content was bolstered by streamers demonstrating a further commitment to cinema and increasingly seeing the value in original content for theatrical release. Key examples of this were Netflix’s ‘Knives Out: A Glass Onion Mystery’ and Apple’s ‘Spirited’.”
Alex Scrimgeour, CEO Everyman Media Group
Like other UK cinema operators, Everyman saw an increase on the back of 2022 blockbusters such as “Top Gun: Maverick” and “Avatar: the Way of Water.” Overall UK box office rose by 64% in 2022 to GBP £979 million.
Everyman opened two new sites in 2022, located in Edinburgh and Egham outside London, giving it a total of 38 locations and 130 screens. This year it is opening a further six sites, including Durham, Plymouth, Bury St. Edmunds and Marlow.
Source: The Times
Cinemas
Regal to Reopen Former Arclight Theatre at The Paseo
Regal, the second largest cinema chain in North America, will be taking over the Arclight theatre location at The Paseo in Pasadena, California. The exhibitor entered into a lease agreement with Onni Group to operate the the 14-screen theatre which closed in March 2020 due to COVID-19 restrictions and never returned to business. Regal will be announcing grand opening details soon including promotional offers and an official opening date for Regal Paseo.
“The Paseo development has long been the entertainment destination for Pasadena; however, since 2020, it has been missing one important element, a state-of-the-art theatre.” said Mooky Greidinger, CEO of Cineworld, parent company of Regal. “In collaborating with our new partners at Onni Group, we are proud to be the new operators of Regal Paseo with exciting upgrades to the theatrical experience forthcoming for this destination location.”
The Paseo is destination for shopping, dining and entertainment located in the heart of historic downtown Pasadena. Its catchment area extends into the highly populated suburbs north of Los Angeles give its access to the 210 and 110 freeways. Less than 10 miles (16 kilometres) away is the AMC Americana at Brand 18 in Glendale, one of the highest grossing cinemas in the United States.
Source: Celluloid Junkie
Sponsor Spotlight
Smart Solutions for the Best Performance
Dolby Auditorium Packages are engineered exclusively for the best cinema performance. Our products are quality tested in multiple configurations in our own engineering labs to ensure the highest quality and reliability.
Celluloid Junkie is the leading online resource dedicated to the global film and cinema business. The Marquee is our newsletter focused on motion picture exhibition; keeping industry professionals informed of important news, the latest trends and insightful analysis