Cineplex CEO sees ‘pivotal change’ after Hollywood strikes trigger a Q2 loss

TORONTO — Cineplex Inc. continued to feel the impacts of twin Hollywood strikes in its second quarter, but the end of the period marked a turning point.

Ellis Jacob, the Toronto-based cinema chain’s chief executive, said Friday that the box office picked up in June and July as “Inside Out 2,” “Deadpool & Wolverine,” “Twisters,” and “Despicable Me 4” hit theatres.

But the lead up to the summer blockbusters was hampered by a depleted film slate — the fallout of the months-long job action by the Writers Guild of America and Screen Actors Guild-American Federation of Television and Radio Artists’. The strikes pushed back the release of much-anticipated movies including “Avatar 3″ and Dune: Part Two”

The writers’ strike wrapped in September and the actors left picket lines in November.

“Having been in this industry for over 35 years, I’ve seen the ebbs and flows of the film slate, but what always rings true is when compelling content is there, moviegoers head to their local theatre to escape and immerse themselves in films of all genres,” Jacob told a conference call with financial analysts.

Cineplex said Friday that it lost $21.4 million or 33 cents per diluted share for the quarter spanning April 1 to June 30. That second-quarter result compared with a profit of $176.5 million or $1.99 per diluted share a year earlier.

Revenue for the quarter totalled $277.3 million, down from $367.9 million in the same quarter last year, as theatre attendance amounted to 8.7 million people for the quarter, down from 12.8 million a year ago.

The performance mirrored results of other global theatre chains like AMC Entertainment, which similarly reported a loss and revenue drop in its most recent quarter.

“We all felt the extended impact of the Hollywood strikes in the first half of 2024,” Jacob said, conceding that the industry always felt the business would have a “slow start” to the quarter.

But he also detected “a pivotal change” during the quarter, when more big film releases made their way to cinemas and Cineplex pushed a roster of event programming including the Metropolitan Opera’s Madama Butterfly and the Twenty20 International cricket tournament.

Madama Butterfly was the strongest opera title Cineplex has seen since 2019 and the India-Pakistan cricket match was the most attended sporting event it has hosted since 2016, Jacob said.

Cineplex has long used such alternative programming to counter swings in the box office and it could play a role in helping the company navigate a future where some feel studios will be more selective about the movies they make, potentially leading to less content.

Asked about these predictions, Jacob said in an interview, “I am not as worried as I would have been because we have really filled a big gap with international content and that has helped us tremendously.”

In the second quarter, his company screened Punjabi films Jatt & Juliet 3,” “Shinda Shinda No Papa” and “Shayar” with Cineplex making up 75 per cent of their total North American box office.

When it comes to international films, Cineplex often uses artificial intelligence to scour social media to determine how parts of the country are reacting to a film’s impending release. The company uses the findings to select where the movie will play and in what language. The technology also helps Cineplex predict how the film will perform.

“It’s been very accurate in getting those things done,” Jacob said.

Cineplex will carry on using the technology, which contributed to it posting its highest monthly attendance of the year in July, when 5.5 million guests flocked to the chain.

Such numbers pushed up Cineplex’s share price by 69 cents, or almost eight per cent, to $9.66 by the time markets closed Friday.

Though overall attendance was down in the second quarter, those who visited the movies spent more. Cineplex’s box office revenue per patron was $13.11 in the quarter, up from $12.84 a year ago, while concession revenue per person was $9.56, up from $9.21 in the same quarter last year.

The increases stand in contrast to several retailers which have watched consumer spending fall as Canadians continue to grapple with high interest, inflation and mortgage rates.

During seven of the last nine recessionary periods, Cineplex’s chief financial officer has seen the box office rise.

“(Customers) are looking to indulge and downsize their out of home entertainment experiences from things like concerts and professional sporting events to movie going,” Gord Nelson said on the analyst call.

Cineplex is preparing to meet the demands of these downsizers by opening two Rec Room arcade and dining venues in Montreal and Vancouver and a Playdium in Toronto adjacent to its Fairview Mall location.

A new theatre will also open at Montreal’s Royalmount shopping complex in Montreal. All of the venues are expected to open in the fourth quarter of 2024.

By the time the year ends, “Beetlejuice Beetlejuice,” “Wicked,” “Moana 2,” “Mufasa: The Lion King,” and “Joker 2” will all have hit theatres.

Next year, will also bring sequels to the Jurassic World, Mission Impossible, Captain America, Avatar and Wicked franchises, and Jacob feels the slate beyond 2025 looks even brighter.

“The pipeline of blockbusters over the next several years is truly remarkable,” he said.

This report by The Canadian Press was first published Aug. 9, 2024.

Companies in this story: (TSX:CGX)

Tara Deschamps, The Canadian Press