IMAX Corporation CEO Richard Gelfond joins Yahoo Finance Live to discuss the ‘Doctor Strange’ box office opening.

Video Transcript

JULIE HYMAN: And, Rich, it's good to see you. I guess, first up, I would just ask if this was a relief, this opening, considering its size and considering that it was sort of a test here of the early blockbuster season for the summer.

RICHARD GELFOND: Julie, I wouldn't use the word relief, but I would say, it was certainly unexpected how big it was. I mean, we always knew that this season would be really terrific. When you look at the slate going forward, we go from Doctor Strange over the next couple of weeks into Top Gun Maverick, which is tracking extremely well, into Jurassic world, which is also highly anticipated into Light Year, into Thor, into Nope. And it goes throughout the year, which ends on Avatar, which, as you know, is the biggest movie of all time.

So we did our earnings call two weeks ago, and we said, we've never seen this good a slate going forward. And we thought this would be the kickoff, and it was. But it certainly was a kick off in a bigger way than we expected.

- Rich, are you surprised that the economic models of the streaming giants are now being questioned by the market?

RICHARD GELFOND: I'm not at all. As a matter of fact, I hate to beat my chest on this, but during the whole pandemic, I was one of the few people who went on a lot of media outlets, including yours, several times. And I kept saying, the numbers don't work, the numbers don't work.

You're selling a film traditionally across three or four windows, and you just released it in one. And it's not going to make more money, and even my good friends and my family are saying, Rich, you sure you know what you're talking about? I mean, it doesn't make any sense.

But ultimately, the streaming model made no sense. The theatrical window, particularly IMAX, builds buzz around a property. It creates a cultural event on a global scale, and thinking you could do that and create that kind of excitement without a theatrical release was just silly. And as a matter of fact, one of the major streamers just told me-- and this is a really interesting point. --that on streaming, things do better with an exclusive theatrical release. So forget about the money that you're making from the theatrical window, just on streaming, more subscribers, more attention, all things like that, because the theatrical experience really creates an event, and particularly, the IMAX experience.

- Going overseas, Rich, China has been a long time important market for IMAX. I believe more than 40% of your annual sales, more than 40% of the backlog for IMAX is related to China. What are you seeing in that market, and has Shanghai opened yet?

RICHARD GELFOND: Shanghai has not opened yet, but that's about one of the few places that haven't. So if you go back about a month, I'd say, around 50% of the IMAX's were opened in the country in the country. As of a few weeks ago, it was 66%, and now, 75% of the theaters are open in China. Shanghai being the notable exception.

I mean, I think the Chinese have dealt with this in a very kind of conservative way, complete shutdowns, but the shutdowns have been very short. So places, like Shenzhen, we have 27 IMAX's there. It had been closed, but they're all open now, and people are coming back. And I think the issues in China are a short term issue.

I mean, obviously, in the US, Omnicron went through very quickly, as well as it did in other places. So if you're betting on tomorrow's box office, it has an impact. But I think longer term, just like in the rest of the world, it's going to resolve itself. But to relate that to Dr. Strange's box office, this was our biggest opening May ever in the over 50 year history of the company, and that did not include China. So that just gives you a sense of the magnitude of what's going on with the pent up demand around the rest of the world.

- Rich, I want to come back to something that you mentioned. You said, it creates an event specifically for IMAX, and when we think about event pricing, that can fluctuate based on the type of event when you also look across the titles that are coming forward in the theater experience and in that event that you're describing here. Do you believe that we'll see more title specific kind of pricing and that fluctuation, and what do you expect from the consumer response in those instances?

RICHARD GELFOND: You know, theatrical experience has pretty much been on the low end of pricing. So you look at the price of a concert, or you look at the price of a sporting event. A ticket to IMAX typically is around $15, which is a fraction of the cost of other types of events. So I think the kinds of movies that we do, which is blockbusters, and again, exhibitors play smaller movies, they play blockbusters as part of it, as well as other movies. But IMAX is pretty much a blockbuster medium. So talk about pricing, where we are for this type of global event. I think it's historically been pretty low.

Again, we don't set the pricing. We license our technology to the exhibitors, and the exhibitors set the pricing. And I think, when they look at how that compares to other types of events to go to, there's room to increase it, and I think you'll probably see some of that during this period, particularly with the inflationary pressures.