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People purchase movie tickets at the Cineplex Scotiabank Theatre in Toronto on Feb. 11, 2014. (Matthew Sherwood for The Globe and Mail)
People purchase movie tickets at the Cineplex Scotiabank Theatre in Toronto on Feb. 11, 2014. (Matthew Sherwood for The Globe and Mail)

Cineplex profit drops on weak summer box office sales Add to ...

Third-quarter profit at Cineplex Inc. plunged 39 per cent after some of the weakest summer box office sales in the past decade pushed attendance down 5.1 per cent. But the company’s chief executive officer is confident that revenue from moviegoers “will come back.”

The movie theatre giant’s financial results missed analyst expectations, but “we knew it was going to be a tough summer,” said president and CEO Ellis Jacob, as he looked to shift attention to a more promising 2015 film slate.

A continued expansion of premium services showed promising signs, as patrons’ average spend on drinks and snacks hit an all-time high and tickets to special theatres with VIP or UltraAVX luxuries accounted for a larger slice of revenue. But none of it was enough to offset a lacklustre lineup of summer films suffering from a dearth of titles appealing to young audiences.

“One of the big differences is there was not enough kid-focused movies, and that took a chunk out of us,” Mr. Jacob said on a conference call with analysts.

Cineplex reported earnings of $15.9-million, or 25 cents a share, down from $26-million and 41 cents a share in the same quarter last year.

Revenue crept up slightly to $299-million, a 0.2-per-cent increase from the third quarter of 2013, due largely to the addition of 24 Empire theatres in Atlantic Canada and the acquisition of digital-signage firm EK3 Technologies Inc.

A late-summer surge, thanks to Guardians of the Galaxy which grossed $330-million (U.S.), was not enough to salvage the season. But the fall slate is off to a more impressive start with the release of Gone Girl, based on a popular novel, which had grossed $147.6-million as of Wednesday, according to Boxofficemojo.com.

Film industry watchers also broadly agree that 2015 could be a banner year, and perhaps even break records. New films from series that have been surefire draws such as James Bond, Star Wars, Mission Impossible, and Terminator are all set to premiere, as are 50 Shades of Grey, Disney’s Cinderella and the resurrected dinosaurs of Jurassic World.

“Cineplex will be hard pressed not to look better through [2015] than in [2014],” said Kenric Tyghe, an analyst at Raymond James Ltd.

Mr. Jacob also brushed aside fears of competitive headwinds from streaming services such as Netflix and a similar, newly launched Canadian service called shomi. He said such services are still focused mostly on television shows, and even original film titles promised by Netflix, such as a sequel to Crouching Tiger, Hidden Dragon, are still “small, niche opportunities” that will be shut out of large theatre chains.

“I don’t think it’s going to be as concerning as one would imagine,” he said, noting Cineplex has partnered with the streaming provider Roku.

Mr. Tyghe agreed, saying there has yet to be a “major innovation” from streaming services. “To the extent I worry about any sort of dislocation of Cineplex’s model, it’s that next major disruption, whatever that is,” he said.

The company has now opened 11 VIP theatres, which offer more comfortable, reserved seats and bigger screens at a higher price, with more to follow. Tickets to premium theatres made up 41.7 per cent of box-office revenues in the quarter, up from 37 per cent a year earlier.

And average revenue from concessions per patron, at $5.11, set a record for the third straight quarter, driven mostly by the popularity of specialty food kiosks such as YoYo’s Yogurt Cafe and Poptopia, which serves flavoured popcorn.

To cushion the blow when future box-office returns go sour, Cineplex continues to build out other businesses in advertising, signage and customer loyalty. Its media division boosted revenue by 15.4 per cent year-over-year, thanks in part to the installation of TimsTV digital signs in 2,200 Tim Hortons locations.

Within three years, Mr. Jacob expects the media business will be “one of our largest contributors” to revenue.

“If this [box office downturn] happened three years from now and all of these businesses that we are investing in were running at speed, we wouldn’t be having as tough a conversation,” he said.

 

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Movies that didn’t move in the summer of 2014

The Comic Book Movie

The Amazing Spider-Man 2: Domestic gross: $202,853,933 (U.S.)

Sony’s decision to “reboot” the Spider-Man franchise with a $255-million budget for Amazing Spider-Man 2 proved costly. The decision to retell the Green Goblin story made it seem warmed over and cynical, resulting in mixed reviews and one of the lowest box offices for the franchise. The setback wasn’t fatal: Two more Spidey sequels are in the works.

The R-Rated Comedy

Sex Tape:$38,543,473

Not every year can produce a Hangover, but where was this year’s breakout raunchy comedy? There were high expectations for Sex Tape, director Jake Kasdan’s follow-up to his $100-million Bad Teacher, also starring Cameron Diaz and Jason Segel. But harsh reviews – and a possibly off-putting title for a generally sweet marriage comedy – kept audiences away in droves.

The Star Vehicle

Edge of Tomorrow: $100,206,256

With director Doug Liman (The Bourne Identity), and star Tom Cruise, this science-fiction fantasy about a soldier who gets killed every day received positive reviews for its clever script and performances. The postmortems found several reasons for weaknesses: A boring title(the original Japanese novel was called All You Need Is Kill), a marketing campaign that emphasized the video-game-inspired plot but not the humour and Tom Cruise’s waning box-office clout.

The Children’s Film

How to Train Your Dragon 2: $176,826,974

Although it’s one of the year’s biggest animated films and a likely Oscar nominee, this sequel seriously underperformed, earning $45-million less than the first filmin the series, a huge disappointment for DreamWorks Animation. Explanations for the disappointing showing focused on the dark, epic story line, which played better overseas than to North American audiences.

The Action Flick

The Expendables 3: $39,322,544

The two previous Sylvester Stallone-produced movies about a rag-tag group of aging mercenaries, featuring a past their prime cast (Wesley Snipes, Arnold Schwarzenegger, Harrison Ford, Mel Gibson), had done surprisingly well. This time the domestic audience didn’t bite. Blame it on franchise fatigue from three films in four years, piracy (the film was leaked online three weeks before it hit theatres) and, perhaps, just too much testosterone. This was the summer that movie audiences, especially women, embraced female-centric movies: Maleficent with Angelina Jolie, Lucy with Scarlett Johansson and The Fault in Our Stars with Shailene Woodley.

Liam Lacey

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Follow on Twitter: @jembradshaw

 

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