thinking big

Joint Ventures in Asia

THINKING BIGJuliana Hee, Steffen Janzen, Meghan Mackintosh

Introduction

http://www.youtube.com/watch?v=hQIAZknxqUI&feature=related2Founded in 1967Headquarters: Mississauga, Ontario400+ IMAX theatres in over 40 countriesIMAX is one of the worlds leading entertainment technology companies which specializes in immersive motion picture technologies.

Company Overview

IMAX is one of the worlds leading entertainment technology companies which specializes in immersive motion picture technologies.

3Timeline

1960s-70sExpo 67two of IMAXs founders presented films and experienced technical difficulties with the Cinerama multi-projector system they were usingdecided to develop a new system for movie projection - IMAXExpo 70first IMAX film was presented - Tiger Child 1971the first permanent Imax projection system was installed at Ontario Place's Cinesphere

1980sShowscan revolutionized the industry and released a new technique in 84 that offered 3D picture without viewers having to wear the blue and red glasses.

1990sIMAX releases its version of 3D IMAX Solido in 1990 and in the same year the first 3D theatre was built in Vancouver.In 1994 IMAX was purchased for $100 million by __ and __ and went public with shares costing $13.50In 1998 IMAX wins the first and only Oscar for Scientific and Technical Achievement

2000s

4Original Business Model

ACADEMY Format24 frames per second60-180 minute movies

ComparisonsIMAX Format48 frames per second40-50 minute movies

International Expansion 38 countries100 screens in 25 yrs60% in Canada and USInstitutional exhibitors

USMexicoUnited Kingdom

AmsterdamIndiaRussia

Licensing agreementsLicensee pays royalties$1.3 million for installing IMAX system$20, 000 for 2D print$40, 000 for 3D print

Old Business Model

High film costsWhy didnt the old model work?High installation costsHigh transportation costs

101994 - New CEOs Richard Gelfond & Brad WechslerTry to move IMAX into commercial moviesInitial success, but even greater failureIMAX up for sale in 2000 & 2006No buyers!

Transitioning

IMAX Share Prices

New Business Model

Turning Point

IMAX puts up the cost of the IMAX system$500,000JV partner puts up the cost of building/retrofitting the theatre$150,000 to convertBox office profits split between the twoIMAX usually receives a 10%-15% share

Joint Ventures

15Compared to old model: So whereas we used to have a chicken and egg problem, which was the theaters were too expensive for the exhibitors -- not only did they have to put up the $1.3 million but they had to build the box, now they put up $150,000 to convert the box. And whereas the studio used to have to put up this cost of print, now they put up very little in order to get their films shown in IMAX. So basically our presentation, the rest of it, shows that in different ways, but that's really the short version of the IMAX story.Cost savings = more flexibilityAble to double the amount of films showing

Going Digital

IMAX scaled itself down to Hollywoods sizeConverting Hollywood blockbusters to IMAXs more vivid & immersive formatScreening films in reconfigured multiplexes Premium vs truly unique viewing experience

Premium Theatre Experience

15% bigger screenSeats shifted forward 16 ftFront seats removedBetter soundBetter image qualityWhat does premium look like?

IMAX needed contentHollywood needed to increase WOW factor to compete with stunning home theatre systemsGame changers - Hollywood takes noticeMatrix movies (1999, 2003)The Polar Express (2004)300 (2006)The Dark Night (2008)$65 million in IMAX ticket sales10% of total from 1% of theatresPartially shot on IMAX camerasHollywood Support

19Today the studios are calling IMAXIMAX has always been a 3-D leaderAlready has the 3-D technology installedRise of 3-D

GLOBAL EXPANSION

Why go global?

1. Market Penetration40% market penetration in North America15% market penetration overseasIMAX is not something you can fit in every theatre

Why go global?

2. Importance of International MarketTrend is that foreign box office is increasingly larger than domesticAvatar: 74% foreignHarry 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 OReilly, IMAX Executive Vice President

3. Set a global standardIMAX brand has an opportunity to set itself as the global standard in the new areas of 3D and premium theatre experiencesFirst-mover advantage

Why go global?

Global Expansion Strategy

Align with top exhibitors worldwide with new Digital Theatre System

Our international growth strategy is based on building momentum with existing successful relationships. CEO Richard Gelfond

27Differentiated Strategies

Its harder to rely on independent market researchers in Taiwan, China, India, and other countries that track box-office sales at individual theatres

Legal system

28Worldwide Expansion

Theatres

Joint Ventures

Developed MarketsUSA 1st Joint VentureAMC Entertainment North Americas second-largest exhibitorJoint venture solution to overcoming the high cost of installing IMAX technologyTested joint venture model beginning in 2003100 theatres in 2008

Regal Entertainment GroupUSAs biggest exhibitor31 theatres in 2008

Talk about why entering the USA existing theatres, brand recognition, no.1 movie going culture32JapanTokyu Recreation - 2009Owns one of Japans largest exhibition chainsto open 4 IMAX theatres (3 opened to date)Japan is worlds No. 2 movie going market

Agreement follows record-setting eventTokyo Dome converted to huge IMAX theatre for release of Speed Racer: The IMAX Experience25,000 people attended

Tokyo Dome converted to huge IMAX theatre for release of Speed Racer: The IMAX Experience25,000 people attended (largest IMAX audience ever for a single screening)Follows IMAX strategy of building on existing successful relationships

33South KoreaJoint Venture with CJ CGV - March 2010Operates S. Koreas largest multiplex cinema chainA global firm operating in China and expanding into the USA this yearHas 5 existing IMAX theatres under license modelWill add 10 joint venture locations in major cities

45% market share in S. Korea

34AustriaCineplexx Kinobetriebe Owns 20 cinemas160 screens

3 cities in 2009GrazVienna Hohenems

Want to help strengthen the brand in the region and expand their audience.retrofit into existing auditoriums35EnglandODEON cinemasEuropes largest cinema company2009GreenwichWimbledonMarket 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

Before release of AVATAR in December 2009Has a total of 6 theatre deals with ODEON now in Europe

36

IMAX theatre in London

European Expansion Timeline

JV in spain 3, Germany 5JV in Austria 3, JV in Russia (1), JV in England (2), the netherlands 3, JV in Russia (2)

,38LicensingEmerging Markets

Factors affecting IMAXs expansion in China

China

2002 state film distribution monopoly = tightly restricts number of foreign films released in China; takes a significant cut of box office revenues and charges studios high fees.

and periodic bans on directors who have offended party bosses

For the first 5 years of travel to China IMAX did no expansion... Only went to learn about the market and make relationships40Chinas Potential

In 2002, one year after IMAX entered China, IMAX theatre attendance averaged 60% - 4 times the 15% required to be successful and films were often sold out by 9 or 10 amIn 2009 barriers were lessened when the WTO ordered Beijing to stop forcing owners of copyrighted materials to deal only with a single government controlled distribution company this creates more options for distribution, increased competition and savings!IMAX films difficult to copy

41IMAX Milestones in China

2004 IMAX opens the first commercially operated IMAX theatre in China Peace Cinema IMAX theatre in Shanghai

42June 2009IMAX announces a three-film deal with Huayi BrothersFirst major Chinese film studio to list on a stock exchangeVoted #42 Most Innovative Company by Fast Company Magazine (Facebook #1, Amazon #2, Apple #3, Microsoft #48, Twitter #50)

Huayi Brothers

Huayi Brothers- Chinas biggest studio; gives IMAX its first foreign language moviesAlliance will help when IMAX films are not among the 20 foreign films the Chinese govt allows domestic theatres to show... Now if China does not approve an IMAX film, theatres will still have locally produced IMAX movies.Trend in Hollywood where studios are looking to expand internationally by creating local movies for audiences that prefer films in their local language.

Currently, IMAX licenses its technology to developers in China who build the theatres. IMAX receives an upfront fee, royalties, and between 10 and 15%

43YearNumber200610200714200818200922201029?201242?IMAX Theatres in China

As of the end of 2009 there are 22 IMAX theatres in China, but looking to expand to 29 by this summer and to 42 by 2012.

44India

6 IMAX theatres + Contracts for 4 moreAEREN R Enterprises 2005Reliance ADA Group 2009First digital projector in MumbaiHeart of BollywoodIMAX might