thinking big

THINKING BIGJuliana Hee, Steffen Janzen, Meghan Mackintosh

Introduction

Founded in 1967 Headquarters:

Mississauga, Ontario 400+ IMAX theatres in

over 40 countries IMAX is one of the world’s

leading entertainment technology companies which specializes in immersive motion picture technologies.

Company Overview

1960’s-1970’s•Expo ’67 - Montreal•Expo ‘70 - Osaka•Ontario Place's Cinesphere

1980’s• Competition grows• Showscan• Iwerks

1990’s• Expo ‘90• IMAX bought by WGIM Corp for ~$100 million• Goes public - $13.50/share

• An Oscar!

2000’s• Slowing North American entertainment market

• Shares drop by 70%

• 12 IMAX customers went bankrupt

Timeline

Original Business Model

ACADEMY Format

24 frames per second

60-180 minute movies

ComparisonsIMAX Format 48 frames per

second 40-50 minute movies

International Expansion 38 countries 100 screens in 25 yrs 60% in Canada and US Institutional exhibitors• US• Mexico• United Kingdom

• Amsterdam• India• Russia

Licensing agreements Licensee pays

royalties $1.3 million for

installing IMAX system

$20, 000 for 2D print $40, 000 for 3D print

Old Business Model

High film costs

Why didn’t the old model work?

High installation costs

High transportation costs

1994 - New CEO’s Richard Gelfond & Brad Wechsler

Try to move IMAX into commercial movies Initial success, but even greater failure IMAX up for sale in 2000 & 2006

◦ No buyers!

Transitioning

IMAX Share Prices

New Business Model

Hollywood support

Rise of 3-D

Market Opportunities

Joint Ventures

Conversion to Digital

Premium Theatre Experience

New Business Model

Turning Point

IMAX puts up the cost of the IMAX system◦ $500,000

JV partner puts up the cost of building/retrofitting the theatre◦ $150,000 to convert

Box office profits split between the two◦ IMAX usually receives a 10%-15% share

Joint Ventures

Cost savings = more flexibility◦ Able to double the amount of films showing

Going Digital

Film$30,000/print Digital $400/print

IMAX scaled itself down to Hollywood’s size◦ Converting Hollywood blockbusters to IMAX’s

more vivid & immersive format◦ Screening films in reconfigured multiplexes ◦ Premium vs truly unique viewing experience

Premium Theatre Experience

15% bigger screen

Seats shifted forward 16 ft

Front seats removed

Better sound Better image

quality

What does “premium” look like?

IMAX needed content Hollywood needed to increase “WOW”

factor to compete with stunning home theatre systems

Game changers - Hollywood takes notice◦ Matrix movies (1999, 2003)◦ The Polar Express (2004)◦ 300 (2006)◦ The Dark Night (2008)

$65 million in IMAX ticket sales 10% of total from 1% of theatres Partially shot on IMAX cameras

Hollywood Support

IMAX has always been a 3-D leader Already has the 3-D technology installed

Rise of 3-D

GLOBAL EXPANSION

Why go global?Market Penetration

Importance of International

Market

Imax as global standard

1. Market Penetration◦ 40% market penetration in North America◦ 15% market penetration overseas◦ IMAX is not something you can fit in every

theatre

Why go global?

2. Importance of International Market◦ Trend is that foreign box office is increasingly

larger than domestic Avatar: 74% foreign Harry Potter & the Half-Blood Prince: 68% Ice Age 3: 78%

Why go global?

Why go global?“While the domestic release is important, the international release is even more important because when you have big franchise films like Harry Potter, they make more money internationally than they do in the domestic market.”

Larry O’Reilly, IMAX Executive Vice President

3. Set a global standard◦ IMAX brand has an

opportunity to set itself as the global standard in the new areas of 3D and “premium” theatre experiences

◦ First-mover advantage

Why go global?

Global Expansion StrategyPick blockbuster films and make them bigger

Align with top exhibitors worldwide

Mixture of licensing and joint ventures

Differentiated Strategies• Joint

ventures• Start small

Developed Markets

• Licensing• Minimize riskEmerging

Markets

Worldwide Expansion

Theatres

2004 2005 2006 2007 2008 20090

50100150200250300350400450

Rest of the WorldChinaJapanEuropeMexicoUSCanada

Joint VenturesDeveloped Markets

USA – 1st Joint Venture AMC Entertainment

◦ North America’s second-largest exhibitor◦ Joint venture solution to overcoming the high cost

of installing IMAX technology◦ Tested joint venture model beginning in 2003◦ 100 theatres in 2008

Regal Entertainment Group◦ USA’s biggest exhibitor◦ 31 theatres in 2008

Japan Tokyu Recreation - 2009

◦ Owns one of Japan’s largest exhibition chains◦ to open 4 IMAX theatres (3 opened to date)◦ Japan is world’s No. 2 movie going market

Agreement follows record-setting event◦ Tokyo Dome converted to huge IMAX theatre for

release of Speed Racer: The IMAX Experience◦ 25,000 people attended

South Korea Joint Venture with CJ CGV - March 2010

◦ Operates S. Korea’s largest multiplex cinema chain

◦ A global firm operating in China and expanding into the USA this year

◦ Has 5 existing IMAX theatres under license model◦ Will add 10 joint venture locations in major cities

Austria Cineplexx Kinobetriebe

◦ Owns 20 cinemas◦ 160 screens

3 cities in 2009◦ Graz◦ Vienna ◦ Hohenems

England ODEON cinemas

◦ Europe’s largest cinema company 2009

◦ Greenwich◦ Wimbledon◦ Market share before 50%◦ After 3 IMAX movies played market share 67.3%

Other city success ◦ Existing theatre in Manchester 108% increase in

annual ticket sales for 2007 compared to 2006

IMAX theatre in London

European Expansion Timeline

Spain 2004

Germany 2006

Austria 2009

Russia 2009

England 2009

The Netherlands

2009

Russia 2010

LicensingEmerging Markets

Politics• Films and content

are highly regulated• Varying degrees of

censorship• Only 20 foreign films

are allowed each year

Culture • Importance of

relationships• CEO Gelfond began

to travel to China 12 years ago

Factors affecting IMAX’s expansion in China

China

2002• IMAX theatre

attendance averaged 60% of capacity (4 times the 15% required to be successful)

• Often sold out at 9 or 10 am

2009• WTO orders Beijing to

stop forcing owners of copyrighted materials to deal only with a single government controlled distribution company

China’s Potential

2001• First IMAX

projection system installed in China

2004 • First

commercially-operated IMAX theatre in China

2007• MPX theatre

at Suzhou Science and Cultural Art Center

IMAX Milestones in China

June 2009◦ IMAX announces a three-film deal with Huayi

Brothers First major Chinese film studio to list on a stock

exchange Voted #42 Most Innovative Company by Fast

Company Magazine (Facebook #1, Amazon #2, Apple #3, Microsoft #48, Twitter #50)

Huayi Brothers

Year Number2006 102007 142008 182009 222010 29?2012 42?

IMAX Theatres in China

India 6 IMAX theatres + Contracts for 4 more

• AEREN R Enterprises 2005• Reliance ADA Group 2009• First digital projector in Mumbai

o Heart of Bollywood IMAX might consider agreement

with Bollywood similar to Huayi Brothers

Evaluation

• “Our IMAX theatres are boosting attendance and driving more traffic to our multiplexes, which positively impacts our bottom line. IMAX’s digital theatre system and joint venture model improves the economics of the IMAX theatre business for us, which creates even more opportunities to expand our relationship and offer more customers the IMAX experience at more locations”–Mr. Kim Joo Hyung, CJ CGV CEO

Quotes