It’s RoboCop versus the con man.
That’s the storyline for Cineplex Inc. this quarter, as the theatre company hopes the movie about the crime-fighting robot will help it forget about American Hustle and other films that drew less-than-stellar audiences as 2013 wound down.
The Toronto-based company said on Tuesday ticket sales at theatres open more than a year fell by almost 6 per cent in the three months ending Dec. 31, and 1.6 per cent for all of 2013.
Combined with higher expenses due to two acquisitions, the lower ticket sales helped send down Cineplex’s net profit by 38 per cent in the fourth quarter to $20-million, or 32 cents a share. Analysts had been expecting a per-share profit of 48 cents.
The costs of integrating the acquisitions, 24 Empire theatres in Atlantic Canada and digital sign company EK3 Technologies Inc., will help Cineplex boost profits in the coming quarters, Ellis Jacob, Cineplex chief executive officer, said in an interview.
But the company’s fortunes are most dependent on Hollywood and its ability to make blockbusters that people flock to see. In the fourth quarter of 2012, Cineplex screens were showing such hits as Life of Pi, Argo and Silver Linings Playbook. Fast-forward to the fourth quarter of 2013, and it was 12 Years a Slave and American Hustle, both of which disappointed at the box office, Mr. Jacob said.
The Hunger Games, The Hobbit, Gravity, Frozen and Thor, respectively, were the biggest draws for the latest quarter, comprising about 55 per cent of total ticket sales in a weak period.
“They just didn’t do the same kind of business,” said Mr. Jacob, who is optimistic new movies Need For Speed and RoboCop will drive sales higher.
If ticket sales of the Lego Movie are any sign, he could be right. Lego brought in $69-million (U.S.) globally its first weekend, a number Mr. Jacob described as “awesome.”
“It could be another Frozen,” he said, referring to the animated film that has brought in more than $900-million (U.S.) in worldwide ticket sales since its release in November.
Cineplex runs 161 theatres across Canada under such brands as Cineplex Odeon, SilverCity, Galaxy Cinemas and Scotiabank Theatres. For the full year, net profit was $83.6-million, or $1.33 a share, a drop of 30 per cent from 2012. Full-year revenue rose by 7 per cent to $1.17-billion, thanks to the Empire deal. On top of the acquisition expenses, Cineplex paid more for films, theatre rent and operating costs.
A ticket for a seat in a regular cinema was $9.42, a figure that has not changed much in years, Mr. Jacob said.
Instead of raising ticket prices, Cineplex is trying to increase revenue by selling premium-priced tickets for adults-only lounges, offering alcohol, poutine and yogurt, and keeping concession lines small to encourage people to buy snacks to take back to their seats.
The company is bundling ticket sales with digital downloads to fight the advance of Netflix and other digital rivals. Mr. Jacob said these efforts, including a ticket app that has been downloaded 8.5 million times, will help Cineplex compete with the rise of the home theatre.
“I always use the example, you have food in your refrigerator, do you stop going out to eat?” he said.
Cineplex is using its $40-million takeover of sign company EK3 to diversify its revenue stream and become less dependent on Hollywood. The deal lets it expand agreements with retailers including Wal-Mart and Tim Hortons to display in-store televisions that air advertisements. It also operates interactive menu boards at fast-food outlets such as McDonald’s.
“This is an [area] we got into a couple of years ago and by doing the acquisition we have grown the business quite significantly, and we think there is a lot of upside potential as we become the main player in Canada and the U.S.” Mr. Jacob said.