Shares of IMAX (NYSE: IMAX ) are moving higher today after a favorable ruling from China over the weekend.
A trade deal struck between the United States and China is increasing the number of foreign movies that can be introduced into China as well as boosting the box office cut that the studios are entitled to take.
Instead of 20 -- largely American -- films screening in China every year, exhibitors will now be able to introduce 34 new movies. The companies will also be entitled to a 25% piece of the action, far more generous than the current 13% to 17% take.
This is obviously a big move for studios, but why is IMAX leading the charge today? Well, China's sticking to its stipulation that only enhanced movies will be allowed into the country. In other words, just IMAX and 3-D movies -- formats that China isn't producing in great numbers at the moment -- will be allowed in.
The timing couldn't be any better for IMAX. There are now 217 IMAX theater systems either open or contracted to open in Greater China.
"We've spent the last 15 years on the ground building relationships and expanding IMAX's presence in China and we believe this significant development will help us further our network expansion efforts and enable IMAX to continue providing Chinese consumers with great films from both Hollywood and China," IMAX CEO Rich Gelfond said in a statement on Saturday. "We are also committed to bringing Chinese films presented in our format to the U.S."
Ah, yes. The celluloid should move both ways, especially as Chinese moviemakers embrace the supersize platform. Six weeks into 2012, the fourth most popular movie screening on IMAX worldwide is China's Flying Swords of Dragon Gate, taking in $3.7 million of the $55 million that has been collected so far in IMAX tickets.
There will be other winners. DreamWorks Animation (NYSE: DWA ) -- whose Kung-Fu Panda franchise is so popular in China that it scored an online distribution deal with leading video streaming website Youku.com (NYSE: YOKU ) last summer -- will have an easier time making more money on its computer-rendered 3-D releases in the world's most populous nation.
China may not be changing quickly enough for some investors, but the opportunities are there for those who can recognize that the potent nation is gradually opening up to more than just a night at the movies.
I've been a believer in IMAX for years. It's been a market beater both times that I have recommended it as an investment to Rule Breakers newsletter subscribers. As part of the CAPScall initiative for accountability, I've also had a bullish IMAX call on Motley Fool CAPS for some time.
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