The headline from Reuters was as stark as it was misleading: “Struggling Cineworld paints bleak picture for cinemas” It is true that the world’s second largest cinema chain is facing major challenges as it navigates the choppy Chapter 11 waters, while waiting for the return of the Hollywood blockbusters this month. Far from cartoon vultures circling it, reports are that Canadian Cineplex is circling, or rather having discussions with Cineworld’s creditors about acquiring the Regal chain in the US.
So why it is that a chain whose operating profit rose to $57.3 million in the first six months of the year is called “struggling,” while a cinema chain that recorded a loss before tax of USD $890,000 is described as “loved by every man?” Not least by the financial markets, which values the much-smaller Everyman Media Group at twice the market cap of Cineworld. It cannot purely be down to the debt of Cineworld and comfy sofas of Everyman.
The metrics of success have been re-written by the pandemic and the current cost of living crisis. “EDITDA is vanity, but profit is sanity,” a chief financial officer I once worked with used to repeat even when times were good. With interest rates going up all around the world, debt-financed growth is out of fashion. Debt in itself is not out, but you need to have a convincing growth trajectory and story to justify it. This is what makes Everyman and some other global mid-size cinema circuits (we are looking at you Kinepolis and Marcus Theatres) a stronger prospect for a market revival (NB: This is NOT investment advice). While their shares have declined between 20% and 40% in the past year, this is often in line with the overall direction of the stock market and far better than the largest global cinema circuits.
At some point the cinema market will bounce back, even as the prospect of a return to 2019 levels recedes from 2024 to 2025. We cannot be sure if or when audience levels will return, or if premiumisation will have to make up for a shortfall in admissions. The numbers for the “Avatar” re-release (USD $58 million global cume as of its second weekend) are cause for cautious optimism that cinema audiences have not forgotten or tired of the world of Pandora, ahead of the release “Avatar: The Way of Water.” Meanwhile small titles such as “The Woman King” and “Smile” are doing better than expected.
There will be a time soon when cinemas will reap the rewards of the bigger titles during the fourth quarter of this year, 2023 and beyond. Far from a “bleak picture for cinemas,” the cinemas that expanded prudently will soon be operating in a much more optimistic cinematic landscape. Even as the northern hemisphere moves into dark winter months, it looks like the projector light will be burning even more brightly than it did this summer.
Last but very much not least, a big congratulations to the new board of the European Digital Cinema Forum (EDCF), including Cathy Huis in ‘t Veld-Esser, CTO of Gofilex, who will serve as the EDCF’s new President. A thank you also to David Hancock for seven years of hard work, much of it behind the scenes and without fanfare in getting the EDCF into its current good shape.
Finally, don’t forget to sign up for the CJ Cinema Summit being held on Thursday, 6 October. We will welcome Lucy Jones and Paul Degarabedian of Comscore. They will present never before seen data and analysis pertinent to the future of the cinema industry. We’ll also be joined by Natalia Baydan, CEO of Planeta Kino in Kyiv who will give us an update on the situation with cinemas in Ukraine and more, seven months on from Russia’s February invasion.
Take a Cinematic Trip Back in time in Dolby
Director Olivia Wilde explains the ways in which Dolby allows her to accentuate the iconography of the 1950s and give audiences the best possible visual and sonic experience.
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