IMAX China sets box office sales record with ‘Warcraft’ debut; analysts forecast brisk summer sales for movie chain

PUBLISHED : Thursday, 09 June, 2016, 5:13pm
UPDATED : Friday, 10 June, 2016, 2:40pm

Widescreen film provider IMAX China Holding, which broke first-day box office records with the debut of “Warcraft” on Wednesday, is poised for strong summer ticket sales, industry experts say.

IMAX provides theatres with the system to display films on larger screens and in far higher resolution compared to traditional cinema screens.

“After a weak spring, the tide should turn in summer,” UBS analyst Archibald Pei said in a recent report, citing a strong film pipeline along with an expansion of its revenue-sharing business model.

IMAX box office sales increased by 19.5 per cent in the first quarter on year, lagging behind overall box office sales growth of 51 per cent, said UBS, citing figures from Chinese market research firm Entgroup.

The Hong Kong-listed company is already showing promising signs of a recovery with its latest launch of the movie “Warcraft”.

IMAX ticket sales for “Warcraft”, the cinematic adaptation of a popular video game, totalled 35 million yuan (HK$41.4 million) for its first day screenings on Wednesday in China, according to an IMAX statement.

It broke Chinese box office records in the IMAX format, beating blockbuster hit “Fast and Furious 7”, which raked in 31 million yuan on its opening day in April last year.

“Warcraft”, which has a massive fan base in China, generated 300.4 million yuan in ticket sales overall in all theatres on its opening day, mainland media reported. It surpassed the previous 272 million yuan record by domestic film “The Mermaid” which launched earlier this year.

“I’m thrilled to see what Wanda IMAX screens have achieved in presale and midnight show box office, which is the best example to show that the pairing of Wanda Cinema’s premier theatre environment and IMAX technologies has been strongly recognised by the Chinese moviegoers,” Wanda Cinema Line President and board director John Zeng said.

The movie’s production company Legendary Entertainment is owned by property and entertainment conglomerate Wanda Group, which also operates China’s largest cinema chain.

Analysts predict the film’s release will dominate China’s box office and gross up to 3 billion yuan.

“Warcraft” only marks the beginning of a strong summer for IMAX in China, Pei added, as a strong film lineup with other predicted hits, including Pixar’s “Finding Dory”, “Teenage Mutant Ninja Turtles”, and “Star Trek Beyond”, set to boost revenues.

IMAX China’s boom is largely expected to tap into China’s box office growth because of its shift in business model from a one-off system sales model to a more sustainable revenue sharing model, analysts said.

The shift would allow the company to profit more from box office revenues from IMAX films.

The proportion of IMAX theatres in China which adopted the revenue sharing model rose from 42 per cent in 2012 to 58 per cent last year, according to GF Securities Brokerage.

Revenue contribution from IMAX box office sales also surged from 36 per cent to 57 per cent in the same period.

With 307 IMAX theatres in China, the company has a low penetration rate compared with other countries, but its network is set to expand further.

“A solid order backlog and incoming new orders will provide momentum for the company’s theatre network expansion over the next few years,” said Ryan Zhu, an analyst at GF Securities.

The company signed contracts for 215 new theatres by the end of 2015 which are slated to open within the next five years, Zhu said.

But analysts point out that its success is also contingent on whether Wanda Cinema would renew its contract, which is currently under negotiation.

Wanda Cinema, owned by China’s richest man Wang Jianlin, is IMAX China’s only full joint-venture partner.

Jessie Guo, an equity analyst at Jefferies, cited relationship risk as a potential negative for IMAX, noting that the company’s valuation depended heavily on its film distribution contract with Wanda.

However, Zhu from GF Securities said that the company’s long-term growth outlook remains positive, given that it is an exclusive licensee of the IMAX brand.

IMAX’s shares tumbled 3.1 per cent in Hong Kong trade on Wednesday, bringing its losses for the year to 26 per cent. Hong Kong’s stock market was closed for a public holiday on Thursday.