Dent in fourth quarter Cineplex profits doesn’t deter CEO
Canadian movie theatre giant Cineplex Inc.’s earnings fell nearly 70 per cent in the fourth quarter of 2016 and 42 per cent for the full year as the chain struggled to keep pace with a record breaking 2015 that included the release of the third-highest grossing film of all time, Star Wars: The Force Awakens.
The declines came despite the release in December 2016 of the first standalone film in the space opera franchise, Rogue One: A Star Wars Story.
Though Rogue One has earned more than $1 billion US at the box office, Cineplex’s overall fourth quarter revenue nevertheless declined 5.4 per cent to $385.4 million. Attendance also fell 12 per cent year-over-year in the fourth quarter, which many analysts predicted due to the one-off boost provided by The Force Awakens. That led to a 9.6 per cent year-overyear decrease in box office revenue in the fourth quarter to $177.5 million.
Lower attendance at Cineplex theatres in the fourth quarter also pushed the company’s food-service revenue down 7.3 per cent to $105.5 million. However, the per customer revenue on food-service transactions increased 3 per cent to $5.75.
Cineplex CEO Ellis Jacob said that the natural up-and-down cycle of box office revenues was the primary cause for the declines, in particular the performance of films outside the Star Wars franchise.
“We don’t have the same demographics in Canada as in the United States,” Jacob said, in an interview with the Financial Post. He noted that four major films in particular — Boo: A Madea Halloween, Almost Christmas, Kevin Hart: What Now and Birth of Nation — earned a combined $145 million in the US but only $1.8 million in Canada.
On the other hand, Ellis pointed to per customer box office revenue, which increased 2.8 per cent to $9.90 in the fourth quarter and 3.5 per cent to $9.55 for the 2016 fiscal year – both high points for the cinema operator.
“We have more choices for customers, and we are trying to make the cinema an experience that you can’t replicate in your home” Jacob said, noting that the company’s premium movie offerings — including 3-D screenings, IMAX theatres and immersive “4DX” venues equipped with motion-controlled seats, strobe lights and wind and fog effects — were major contributors to per customer income growth, making up a record 48 per cent of box office revenues in the fourth quarter, up from 46.8 per cent yearover-year.
“Our percentage of box-office revenue from premium offerings is nearly double that of our U.S. peers,” Jacob added.
Star Wars fans ready for the latest entry in the movie series at an Edmonton Cineplex theatre in 2015. The company took a hit in its fourth quarter profits for 2016, but CEO Ellis Jacob isn’t worried.