I've been a big fan of IMAX (NYSE: IMAX ) for quite some time now, because I love the company's business model and growth plans. Few other companies can leverage fixed costs the way IMAX does at an extremely high margin by just expanding its network around the world.
The one problem I've had with IMAX is the company's apparently slow grasp of what makes a successful IMAX movie. When The Avengers reached its second weekend, after a sold-out start in IMAX, it was due to be pushed off IMAX screens by Time Warner (NYSE: TWX ) subsidiary Warner Brothers' Dark Shadows, hardly a blockbuster like The Avengers or a perfect fit for IMAX. IMAX, Disney (NYSE: DIS ) , and Time Warner scrambled to an agreement that would keep about half of the weekend screenings for The Avengers, but IMAX still left money on the table by taking on Dark Shadows.
By now it is painfully obvious which films are built for IMAX. Children's movies, comedies, and dramas should be left to the regular-size screen, but action films have been a success at IMAX. Here's a sampling of the contrast between action flicks and other films in IMAX:
Opening Weekend Domestic IMAX Box Office
Total Domestic Box Office
Percent of Total
|The Avengers||$15.3 million||$200 million||7.7%|
|Transformers: Dark of the Moon||$14 million||$180.7 million||7.8%|
|TRON: Legacy||$10.5 million||$44 million||23.9%|
|Cars 2||$2 million||$66.1 million||3%|
|Puss in Boots||$2.2 million||$34.1 million||6.5%|
Source: IMAX company releases.
Not only do action films generate a higher percentage of the overall box office, but they also generate far more in terms of revenue to IMAX, something the company should leverage.
IMAX has tried to remedy the mistakes, bringing The Hunger Games and Transformers back for return engagements, but by then it's too late to cash in on the success. The hope is that the company is slowly learning its lesson.
This summer set itself up perfectly for IMAX, and investors can hope the company will keep blockbusters on longer than one week. Sony (NYSE: SNE ) releases Men in Black III this week, followed by The Amazing Spider-Man, The Dark Knight Rises, and Skyfall. Each are set up to be successes. But Frankenweenie, Rock of Ages, and Madagascar 3 (international only) will be thrown in, possibly complicating matters.
If there's one advantage to the strategy RealD (NYSE: RLD ) has deployed of getting its product into as many theaters as possible, it's that operators have the flexibility to cash in on what's hot at the box office. IMAX has limited screens, and existing agreements with studios has put the company in a corner when it wants to extend a blockbuster's run.
The Avengers helped bring IMAX's advantages and challenges to light, and let's hope we can see successful IMAX movies extend their runs in the future. It's never good to leave money on the table, especially when it's because you choose to show Dark Shadows over The Avengers.
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