Imax Rides High on 3D Films in China

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The latest superhero film from Marvel and its parent Walt Disney Company (NYSE: DIS), The Avengers, broke records this past weekend when its US opening earned an estimated $200 million. This huge box office only added to the money Disney has already raked in on the movie worldwide, an estimated $642 million after 12 days on release. 

The Avengers movie is only the first of a number of blockbusters expected this year including another superhero film, a Batman film called The Dark Knight Rises produced by Warner Brothers, a division of media giant Time Warner (NYSE: TWX). What ties all of these projected box office hits together are two interesting facts – an increasing proportion of the revenues earned by these films comes from Imax (NYSE: IMAX) 3D screens and from movie goers in China. Only 275 Imax screens, for instance, in the US contributed more than $15 million toward the Avengers movie total revenue.  

As discussed in a previous article on Hollywood and China, the United States continues to be the largest global cinema market but China is the film industry's biggest source of new growth. Within a few years China will have more than 20,000 screens overall which is triple the current total. Most in the film industry believe that by 2015, revenues coming from China will be in the $7 billion range and that the country will indeed be the largest cinema market by the end of this decade. 

That fact has not been lost on Imax, which was mentioned in the article as a great way for investors to invest in this new trend in the movie industry. China has quickly become the second largest global market for Imax, trailing only the United States. The Avengers movie, for example, generated $1.1 million for the company on its first day of release alone. This broke the previous record for Imax, set by the 3D version of the Titanic. And importantly for Imax investors, the per-screen revenue average in China is the best in the world for the company. 

Imax has continued to invest heavily into China, particularly in the smaller cities, and putting up new screens in order to meet the soaring demand. The company currently has 91 screens in China, with an additional 129 in the pipeline to come online in the next year. Back in 2009, it had only 13 screens. 

The company is also hoping to benefit from exporting Chinese films to the US and Imax theaters. It recently announced the release of a blockbuster Chinese film scheduled for September. The movie is produced by Bona Film Group (NASDAQ: BONA) and is titled Flying Swords of Dragon Gate. It stars Jet Li and is the fourth highest grossing Chinese-language film of all time.  

What is the bottom line from all this for investors? The trend towards increased viewing of imported films in China looks likely to continue in the years ahead. China recently increased the quota of US-made films it would release in its cinemas each year. This should be good news for both the Hollywood studios like Warner and Disney along with Imax. 

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