This time last year, the silver screen was looking a bit tarnished. The tepid appeal of Hollywood’s spring releases led to weaker-than-expected box office returns for Cineplex Inc. This time around, however, it appears that even a batch of recycled superheroes are still capable of providing some polish.
On Friday, Cineplex reported record quarterly revenue of $409.1-million. The latest instalments in the Deadpool and Avengers franchises, and the end of a 14-year hiatus for the Incredibles clan were major contributors in drawing 17.3 million people to Cineplex’s movie theatres in the quarter ended June 30. Box office revenues rose 4.4 per cent a patron, compared to the same time last year, and concession spending was up 9.3 per cent a visitor. In-show advertising also rose 12.3 per cent to $26.9-million.
“When the pictures are there, people come,” Cineplex chief executive Ellis Jacob said. “They love the theatrical experience. We like rain. But even with the great weather we’ve had, we’ve still done extremely well.”
Mr. Jacob is also optimistic about continued strong performance for Mission: Impossible - Fallout and upcoming releases, particularly Crazy Rich Asians, a movie based on the bestselling novel, which he expects to do particularly well in Canada. However, that does not change the fact that, long term, the movie exhibition business is somewhat uncertain. Cineplex’s strategy continues to be to diversify its business so that when the box office dips, its bottom line is shored up with other entertainment offerings.
By the end of next year, the company will have nine Rec Room locations across Canada, complexes that offer gaming experiences along with bar and restaurant services. Cineplex will soon announce its first location for Topgolf, an entertainment complex offering virtual golf games as well as food and drink.
The Rec Room business brought in $15.7-million in revenue in the second quarter, which was lower than expected. The Edmonton location did not perform as well it was forecast to, Mr. Jacob said, and the company did not react quickly enough to control costs. He reiterated, however, that the company will continue to look for new opportunities for the entertainment side of its business.
Last month, Cineplex announced an expansion of its agreement with The Void LLC to open at least five more of its virtual-reality attractions, both in Cineplex-owned properties and elsewhere. Unlike virtual-reality games that function via goggles that participants wear, The Void operates in a space people can walk through, using a combination of virtual reality and other effects such as sound and smell to provide attractions based on popular movie franchises, such as Ghostbusters and Star Wars.
As mall owners face a challenge in attracting shoppers to brick-and-mortar locations, for example, Mr. Jacob said that he sees an opportunity to potentially strike deals to augment those spaces with these types of entertainment offerings, which Cineplex could operate.
“We’ll continue to look at opportunities beyond theatres and Rec Rooms,” he said.
The company is also looking at controlling costs, and forecasts $25-million in annualized cost savings this year.
Cineplex’s net income rose 1,670 per cent to $24.4-million or 38 cents a share, in the second quarter, compared to $1.4-million or 2 cents a share during the same period last year.
While growing competition from digital services makes the home entertainment environment more attractive than ever, Mr. Jacob said he does not believe Netflix is a mortal threat to movie theatres and other entertainment offerings in which the company is investing.
“People want to get out of their homes,” he said.