Cinemark CEO Sean Gamble said Hollywood strikes currently delaying the production, and promotion, of new films won’t affect “key fundamentals” of a revived exhibition business although they might extend the “recovery trajectory of theatrical film volume a bit.”
“We know that our studio partners are doing everything they can to minimize the disruption of content flow and avoid shifts to the extent possible” in the release schedule,” he said on a conference call Friday. That extent depends on how long strikes by actors and writers take to resolve. He’s hopeful at some movement on that as the WGA is set to sit down with the AMPTP today for the first time since the guild took to the picket lines on May 2.
Studios have started to tweak release dates but “it’s still hard to say for the end of the year with regard to any further shifts. There’s a lot of work and a lot of planning underway to try to limit the amount of impact they will be on that. A lot will depend on how long the conversations and negotiations continue and the availability of different resources that may be required in the form of writing and promotion to support” releases. “So we are going to have to see.”
But he stressed, as have other exhibitors, that after experimenting during Covid, studios now agree “the best way to maximize a film’s value is an exclusive theatrical release and do not plan to scale down film product.” The market will be bolstered by Amazon (eight to 10 releases a year) and Apple (“indications of a similar amount, maybe not that number”). The smash successes of Barbie and Oppenheimer, with the former becoming a global cultural phenomenon, made that argument eloquently.
“While the strikes are currently delaying the production of new films and they have the potential to shift certain movie releases, which could extend the recovery trajectory of theatrical film volume a bit, it’s important to recognize that there has been nothing to suggest that they will affect key fundamentals associated with consumer interest in moviegoing or studio intentions to rebuild overall theatrical film output over the coming years,” Gamble said.
Faith-based, multi-cultural, anime and concert films are bigger than ever (at 7% of the chain’s box office). The scale and quality of multicultural movies are helping them cross over to broader audiences, as RRR did last year. Sound of Freedom was a huge hit with faith-based audiences. Gamble also noted ongoing opportunities around strategic pricing of tickets and concessions.
There were lots of strike questions by financial analysts on the post-earnings call and Gamble acknowledged that the labor action is “top of mind for our investment community.”
“We believe box office performance witnessed year-to-date, and over the past two years, provides conclusive evidence that consumer enthusiasm to view compelling films in a shared, larger-than-life, cinematic environment is as strong as ever. We remain confident in the long-term fundamentals of theatrical exhibition, and Cinemark is well-positioned to capture an outsized portion of our industry’s ongoing recovery,” he said.
Today, Wall Street was happy with the numbers. The Plano, Texas based-chain, the third biggest in the U.S., swung to a net profit of $119 million for the three months ended in June from a loss of $73 million in last year’s Q2.
Revenue jumped 26% to $942 million. Admissions revenue increased 25% to $478 million and concession revenue rose 31% to $373 million, driven by a 24% increase in attendance.
Adjusted EBITDA of $232 million was Cinemark’s second-highest quarterly result ever. The company further strengthened its balance sheet with $215 million of free cash flow and paying down $100 million of debt in the quarter.
Shares are up about 2.5% at $17.75.