The past decade has seen cinemas increasingly written off as a graveyard industry. Where movie buffs once had to make a non-optional trip to the theatres to catch the latest blockbuster, the impact of video streaming services like Netflix and Hulu have since given movie-goers cheaper and more convenient options. Following the imposition of social-distancing measures during the Covid-19 pandemic, cinemas appeared consigned to the ash heap of history.
The release of Christopher Nolan’s Oppenheimer, however, may signal a potential reprieve for cinemas going into the age of streaming. Filmed in 70mm Imax, the biopic is best enjoyed in a specially constructed theatre designed to bring out the full majesty of Nolan’s cinematographic wizardry. While the film can be digitised for alternative formats, the end-product cannot compare to the quality of the original format, which is filmed with film reels weighing 600 pounds (272.15kg).
“We put a lot of effort into shooting the film in a way that we can get it out on these large-format screens. It is just a great way of giving people an experience that they can’t possibly get in the home,” said director Nolan in an interview with Associated Press. “We’re able to do things with the picture now that before we were only able to do with sound in terms of an oversized impact for the audience — an almost physical sense of response to the film.”
Khalid Al Mkhlaafy, programme leader, BA(Hons) Film at Lasalle College of the Arts, says: “The visual quality produced by Imax cameras is the best currently available due to the superior resolution and colour depth captured by such cameras as they also use specialised lenses that offer greater clarity, light transmission and minimise distortion.”
“The improvement is worth it as it not only future-proofs the images as projection and display technologies are constantly evolving, it also provides a more immersive or life-like cinematic experience, which is also due to the superior sound quality associated with Imax,” Khalid tells The Edge Singapore. These efforts appear to be paying off at the box office. As of Aug 6, Oppenheimer grossed US$552.9 million ($750.13 million) worldwide, making it the highest-grossing World War II film of all time. Despite its largely non-risqué subject matter, the film, which features scenes of nudity and sexual intimacy, broke into the top 10 highest-grossing R-rated films of all time.
Viewers have shown a willingness to go above and beyond to see the film in its full cinematic majesty. In Boston, for instance, some movie-goers have resorted to driving across state lines to Providence, Rhode Island, an hour’s drive away, just to find a theatre equipped to screen in Imax 70mm format. Currently, only 19 theatres in the US are equipped to show films in this format. Data analysis by The Economist notes that while consumers still have a taste for cinema, the pandemic has slowed the production of films available to watch.
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Poster of Oppenheimer / Image from Universal Pictures
Movie magic
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Filming in Imax, however, is no walk in the park. Even getting a real Imax camera is difficult given the rarity of such equipment. Nevertheless, the preponderance of high-end digital cinema cameras from brands like Arri, Red and Sony means that most professional directors of photography familiar with this technology can easily operate an Imax camera if they can get hold of one.
“The creative and technical skills remain constant, regardless of the resolution and aspect ratio being captured,” Khalid explains. Still, he remarks that Imax cameras tend to be more difficult to manoeuvre due to their size and weight although “stronger tripods and heads, dollies, cranes and rigs” can be rented at additional cost for such shots.
That said, Imax — the Canada-based firm behind the eponymous cameras — has introduced a new “Filmed in Imax” scheme to ease the costs of filming an Imax film. “Based on average rental prices, it would be safe to say that filming on an Imax camera would probably cost two to three times more compared to filming on a high-end digital cinema camera from manufacturers such as Arri, Red or Sony,” says Khalid.
These difficulties are balanced out against the potentially higher prices associated with Imax film tickets. Khalid notes that cinemas could benefit if the audience can afford to pay a premium to view a film with such superior quality. High-budget epic-scale films relying on large nature panoramic shots or high-impact action scenes, Khalid remarks, would benefit the most from filming and exhibiting in Imax as investors may view the cost as being worth the risk.
Andre James, global head of media & entertainment at Bain and Company, sees cinema companies seeking to “premium-ise” their products to improve customer experience. Besides Imax, theatres are also offering premium services like comfortable reclining seats and “dine-in” options, though balance sheet pressure from the pandemic makes such investment difficult.
“I do think that will help the theatrical exhibition industry become healthier because you’re getting higher revenue per ticket out of an Imax theatre than you are out of a traditional theatre,” James tells The Edge Singapore. Such offerings are key to driving cinema growth in developed markets, given that there is less room to open new theatres and markets as is the case in developing markets.
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Buying the box office
The stock best able to capitalise on a potential embrace of these more complex film techniques is Imax itself. As of July 28, Barrington Research has reiterated an “outperform” recommendation on the stock, citing a 32.55% upside as of July 6. The counter showed a record-breaking 20% indexing at US$35 million following the release of Oppenheimer.
“It is increasingly clear that the future of the movie business is Imax, as moviegoers show a growing preference for the premium Imax Experience, our market share remains robust, and our network and content portfolio expand in the most promising international growth markets for global cinema,” says Richard L Gelfond, CEO of Imax.
Imax’s stock performance is seen to improve further following its privatisation of Imax China in a US$123 million deal. With the Chinese film industry expected to grow at a staggering 9.71% CAGR from 2022 to 2028, the acquisition of this “hugely profitable” business arm will prove a boost to Imax’s earnings as Chinese cinema screens have grown 20-fold since 2007. Such gains, however, will be tempered by strong economic headwinds affecting the Chinese economy, which could weaken consumer confidence.
If it can successfully capitalise on a potential new Imax trend, American cinema company AMC Entertainment could see higher earnings going forward. AMC is currently the largest movie entertainment company in the US and the world. It may thus have the economies of scale needed to develop improved Imax facilities. The stock has recovered from its “meme stock status” where it traded as high as US$70 but the consensus of experts is that AMC is currently underperforming. Its target price is now just US$2.16.
Nevertheless, AMC is the largest Imax exhibitor in the US, controlling a 55% market share and 186 Imax screens. “As part of our long-term growth strategy, we expect to continue to expand our Imax relationship across the US and Europe, further strengthening our position as the largest Imax exhibitor in the US and a leading Imax exhibitor in the United Kingdom and Europe,” said AMC in its latest 10-K report.
Closer to home, investors can consider investing in Cinema XXI, Indonesia’s largest cinema chain. The IDX counter, trading as Nusantara Sejahtera Raya, has only recently listed on the Indonesian stock exchange for a low IDR270 ($0.024) per share. Yet, given Indonesia’s rapidly growing middle class, cinema revenue is projected to grow by a CAGR of 6.52% from 2022 to 2027, by which it is seen to have a market volume of US$170 million. Chandra Pasaribu, head of research at Indonesian broking firm PT Yuanta Sekuritas, told DealStreetAsia that low cinema penetration in Indonesia suggests significant room for growth.
Imax’s first-ever Indonesian film in 2022 delivered a top 10 all-time Imax opening weekend in the market. Cinema XXI is now looking to grow its partnership with Imax, with plans in the works for 10 new Imax locations in Indonesia.
“As the world’s fourth most populous nation and home to a thriving moviegoing audience, Indonesia holds enormous promise for Imax and we are excited to deepen our commitment to this market with a worldclass partner such as Cinema XXI,” says Imax CEO Gelfond. In contrast to recent pessimism surrounding the cinema industry, James of Bain believes that there is still hope for the industry. The movies, he says, are too much a part of the social fabric — at least in the US — to die a sudden death. “I’m bullish that theatres will get back to maybe not all the way to what it was in 2019. But I think it still has some headroom from where it is today,” he tells The Edge Singapore.
