Can't Get an IMAX Ticket? That's Kind of the Point.

0:04The biggest movie playing in theaters right now is The Odyssey. No one could stand between me and home. I need the gods. It's made by the superstar director Christopher Nolan, and it features a star-studded cast. But what might be getting more buzz than the film itself is how the film was made. It was filmed specifically for IMAX. IMAX is most famous for its huge screens. It has sharper picture quality and better sound. But what makes the Odyssey unique, even when compared to other IMAX films, is that Nolan used 70mm IMAX film cameras to shoot every frame. These cameras are relics. Many of them were built in the 1960s.

0:50And there's so few of them now that Nolan and IMAX actually had to create new camera hardware just to make the Odyssey possible. But if you're hoping to see the Odyssey in its full 70mm glory, good luck. There are around 1 ,800 IMAX screens in the world, but only about 40 of these locations have 70mm film projectors. A couple days ago, I spoke with IMAX CEO Rich Gelfand. He took over IMAX all the way back in the 1990s and transformed it from a niche technology into a heavy hitter in Hollywood. If you're listening on Spotify, by the way, you can also watch a video of this interview. When I spoke with Rich, I told him that I would like to pay to see his movie, but can't.

1:33And he said, that's kind of the point. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Thursday, July 23rd. Coming up on the show, a conversation with the CEO of IMAX on how this technology is taking over Hollywood.

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3:07All right, well, do you want to just start out by introducing yourself? I'm Rich Galfond, CEO of IMAX, and I've been here for about 33 years. So I want to talk about a little bit of the origin story of your company because you're sort of an unlikely pairing with IMAX. You had worked as a lawyer and then you ran a chain of dry cleaning stores and then you eventually became kind of investment banking and you had this investment firm. Can you tell me the story of how you first came across IMAX, which at the time in the 90s was like kind of a science project technology. It was in museums and science theaters and stuff like that, but it was not part of Hollywood.

3:43So when did you first come across this technology and what inspired it? In what ways did it inspire you? It's a great story that's very little known, so I'm glad you asked about it. So I did a few investments in different companies. I did like leverage finance, some LBOs and some other things and environmental testing business, like nothing that had a thread through it. And one President's Day weekend with my family, I went to the Smithsonian in Washington. And there was something called an IMAX theater. And I took my kids to it. And we saw it. And I thought it was really amazing. Do you remember what he was playing?

4:28Yeah, To Fly, which is one of the first IMAX movies ever made. And it was, I don't know, it was made 50 years ago. But it was really amazing. the uh um it was about vehicles that fly balloons and planes and i got the last seats which are in the front row so it was quite realistic and i thought just this is pretty cool and my kids liked it and then i went and went back to new york the next day and because i was sort of entrepreneurial um i'd get books from investment banks about different things that were for sale different kinds of companies. And right at the top of the pile was a book someone was selling IMAX.

5:10And I thought, boy, that's an interesting coincidence. I never heard of it until I went to it the day before. And now a book pops up and a very long story made very short. It was very interesting, the attributes. And we thought, gee, if this works so well in institutions like the Smithsonian and it works so well with kind of documentary content is this something that we could you know move out in a bigger way with Hollywood films and commercial multiplexes do you remember how much you bought it for yeah I do we bought IMAX and another company called Ride Film which did moving seats at the same time and the reason we did that we thought it might infused IMAX with a little more pizzazz than it had at that time.

5:59Remember, the movies were bears, whales, and seals, and the locations were mostly museums and science centers. So we planned to buy it and make it go more mainstream. And doing it with ride film, it put some sex appeal into it. So we bought it with fees and everything for around$100 million. And this was a technology that had these giant projectors, heavy, expensive film stock, and also the cameras to shoot on it were also very big and cumbersome. So what was your pitch to Hollywood about when you tried to set out and turn this into the business that you were envisioning? The pitch we had was that it does so well on a per-screen basis that think of how well it could do if we played Hollywood films.

6:46But you're absolutely right. The cameras weighed, they were like the size of a Volkswagen. They weighed hundreds of pounds, maybe more. One film print at one theater at that time cost$30 ,000,$40 ,000 and weighed about 500 or 600 pounds. And you had to lift it with a forklift to get it in. The theaters cost millions of dollars to build because they were all standalone buildings. And one of my favorite things is we went to Steven Spielberg and we said, would you do one of your movies with us? And he looked at us and he said, call me back when you have a thousand screens. And I think we had 55 at that time.

7:31So we decided we needed to rejigger the business model. So we said we can't build separate buildings and put these huge projectors in. We had to re-engineer it. So we came up with a strategy to put IMAX theaters inside multiplexes. And you not only save costs by doing that, but you also had shared services. So you didn't need a separate HVAC. You didn't need a separate concession stand. So it could be much more economical. It seems like the big breakthrough that IMAX seemed to have is once you developed this relationship with Christopher Nolan, who in 2008 released The Dark Knight. That's a big breakthrough.

8:15A big break. But there were two really big ones before that. What were those? One was we started doing joint ventures. We did a huge deal with AMC, first for a small one for about five theaters. The results were good. But we did one for 100 theaters. So that started to create a much bigger network. Then a very instrumental movie came along called Avatar. James Cameron. James Cameron. And he showed me the movie about three months before it came out on his own little slide projector. And when I saw that movie and it was in 3D and IMAX could do 2D or 3D, I immediately knew we had finally on to something that was going to work.

9:00And the movie in IMAX did$230 million at the time. That's a huge number. You know, the per screen numbers were unheard of. We were selling tickets weeks in advance, months in advance. It was transformative. And it really changed our whole business in a remarkable way. And those were really the two things that launched the modern-day IMAX. Christopher Nolanda was the first director to really start using the cameras, right? That's correct. And he had grown up in Chicago, and he loved the IMAX theater in Chicago. He went there as a kid, and he always dreamed of doing something. When he was just playing like the science movies and stuff like that.

9:41Yeah, exactly. What did you think? What was your reaction like when you heard that he was going to do this? Well, I mean, I was excited. I thought it was a way to move the medium forward. But remember, Chris had done one or two movies at that point. So it wasn't like today. Right, where he's a draw. His movies were very good, his early movies. But, you know, we were anxious to have somebody experiment with it. You know, we were excited about it. And so he now, with the Odyssey that's out now, it's like the most IMAX movie possible because the early movies that he was doing, he would shoot scenes in IMAX cameras.

10:16But this is every frame is shot with an IMAX camera. How hard is that of a thing to do with cameras of this size? I understand they're noisy. So remember it was iterative. And we've done films with Chris for decades. So he used it in small amounts. Then he used it in bigger amounts, and he used it creatively to change the aspect ratio. So he used lowering it, raising it. He really figured out a language around it. And then Oppenheimer was not shot at all with IMAX cameras, but a good deal of it was. And I think kind of the marriage between Chris and IMAX is something his fans over time really came to like and Chris really embraced.

11:03And then about in February 24, Chris called me up and he said, I'm thinking of making a whole film with IMAX film cameras. And I need a list of 10 to 15 things that I need you to do before I can do that. The most important one, I think, from his point of view was make it quieter. When you're doing the close ups, the camera goes in a blimp and a blimp is like a high tech box. that makes it even quieter than it is. Not a blimp in the sky, but like a kind of a container. No, the blimp in Matt Damon's face. So he can talk from two feet away and you could hear a pin drop. And, you know, Chris was really thrilled from the beginning.

11:48He was, you know, this will work. Let's do it. So there's not very many cameras, you know, that's one side of the fence. But then there's also not very many screens, particularly like the 70 millimeter film screens. There's only one in New York City. there's like less than 30 around the entire country. There's 41 in the world. 41 in the world. I've been trying to get a ticket to see The Odyssey in this way, and I'm like, this is maybe going to be impossible for me. Why are there so few screens? The answer is mostly based on economics. So in order to build a theater that big with the right aspect ratio, that's the ratio of the height to the width, it costs a lot of money and rarely does it fit in a multiplex.

12:34There are some, but most of them are standalone theaters. Also, the cost of operating that system is very expensive. So as I said, the one print of the Odyssey here at 68th Street is$50 ,000. So you have to amortize that over a fairly long time. So only special movies could really be filmed that way and make the payback. So if you did a documentary and you played it for two weeks, the numbers just are never going to work. So there's a lot of movies that want to be in IMAX, but you have so few screens that you have to make some tough choices. How do you choose between one movie over the other? We choose movies largely based on relationships.

13:20So you started this discussion about Nolan and obviously we have a great relationship with him. So a year or two before he's making a movie, He talks to us about when it would go and where it would go, similar with a lot of other filmmakers, Cody, Denis Villeneuve, who we're doing Dune with this December. We have great relationships with a lot of the studios. A good example is Amazon, MGM. We just did Hail Mary with them, and it broke out and did about$100 million in IMAX. So we're doing a lot of other things, including the Thomas Crown Affair and many other things. So they come into us via relationships.

14:01It's really a dance you have to do because you have to decide far in advance If you're gonna give them that date right and exclusivity What factors you look for in a movie? I mean the Nolan relationship is sort of separate but like it You know, you've got two movies that How do you choose between them? What are you looking for? You look at the scale and scope of the movie and you think about how it would look in IMAX You definitely look at the director and the studio and you look at how they would promote it You look how much time they want one week or two weeks the time of the year So a movie we might play in February might not be the same movie We'd play in the summer hotter box office season so kind of relationships timing and visual how often you have to say no Fairly often.

14:48It's really tough because when you say no to either a filmmaker you really like or a studio you really like, you know, they try to be understanding, but it's hard for them. It's disappointing for them, I'm sure, yeah. So we try and, sometimes we'll try and program two things at the same time, or we'll try and program something in a part of the world. So you have to try and accommodate people as best you can. We'll be right back.

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17:00It seems like there are a lot more people who want to buy tickets for IMAX movies, not just the Odyssey, than there are available seats in theaters to see them, which seems kind of like a problem for the business. I mean, I am a customer with money. I would like to give it to you to have this experience, and I'm not going to probably be able to do that. I don't think it's a problem for the business since we've sold out week seven and eight at the BFI in London already. And almost all of our film theaters are sold out for five weeks. So that's the answer. In order to amortize that cost in the print, you have to...

17:33You want to make sure that every seat is sold out at all times. For a very long period of time. And if you had, you know, a thousand of them, that wouldn't be the case. The model, the business model wouldn't work. One of the outcomes of this bottleneck, though, is that there are a lot of competitors that have been cropping up with their own brands that usually have the letter X in them, Dolby Cinema, AMC Prime, Regal, RPX, that are trying to compete with IMAX. Disney's now trying to sort of knit these brands all together under this Infinity Vision moniker. How do you feel about all these competitors that are trying to sop up this excess demand that IMAX is not able to meet?

18:12so good luck to them I think it's not a coincidence that they have X in them I think it's an effort to kind of convince the public that it's similar but I think the public is smarter than that now you asked about an infinity vision that's not a new technology in any way as you said what they did was they bundled some of these X theaters and they put it under one name and the reason they did that was IMAX was committed to Dune 3 at the time Avengers is coming out at the same. And Disney was understanding about it. They kind of said, you know, we understand if you can't do it. But I think they're trying to market in a way that attracts people to their, you know, sort of marketing format.

19:02And, you know, we'll see. You know, do I look upset about it to you? I mean, I think, you know, when you have a brand and you don't have strict brand standards like a Coke is a Coke is a Coke. You know, an IMAX is an IMAX is an IMAX. You know, some of these X things or Infinity Vision, they could be next door to each other and they're different experiences. So, you know... But they're also your potential customers and anybody that's buying something for Infinity Vision could be buying something for IMAX if the system was big enough to have all that capacity in it, I guess. No, we have a lot of questions.

19:39Or is it a feature? Because is exclusivity part of what makes the brand valuable? Absolutely. You answered your own question. It is. Because think of it like a licensee. And the answer is, if you contract with us to put up a theater, no one's going to build one across the street. And no one's going to build one within a certain radius. And the reason we do that is we want the theaters to be successful, you know, and so we won't sell across the street. So the competitor off this across the street, because he can't get IMAX is going to buy an X system. And, you know, that's a product and it's a market.

20:20But I just don't think it's particularly threatening to us. The market cap of IMAX is around$2 billion, which... A little more. A little more than that. How do you grow this company, given the constraints and what you were talking about with exclusivity? How can you get bigger? Do you want to get bigger? We definitely want to get bigger. We're a public company, and it's owned by shareholders, and enhancing shareholder value is a priority for us. But we've grown fairly rapidly. So when we bought the company, as I said, there were 55 theaters. Now there are almost 2 ,000 theaters. So the way you do it is, you know, more theaters.

21:02Content is a big deal. So last year we had 120 pieces of content. So that includes Hollywood films, foreign films, live events, documentaries, concert films. So we have a lot of content. So there are two ways to grow. You could build more theaters or you could pump more content through our network and we're doing both. And last year was a record year for IMAX. while the industry's kind of been regrouping since the pandemic, you know, we've been breaking records pretty much every year. It seems like the message from consumers is we're not going to go to the movies that much anymore. But when we do, we want to make sure that it's a really special experience.

21:48And IMAX is kind of the thing that delivers that. As a matter of fact, that we could almost quote that out of our business plan over two decades ago. We said when people wake up in the morning. We want them to say, let's go to the IMAX rather than what movie's playing and God, should we see it in XXX or X or X minus? And I think, you know, this is the film where that's really happening. I think the reason you can't get a ticket is people are waking up and saying, let's see it. So my colleagues at the Wall Street Journal reported that IMAX is exploring a sale. Why sell? Well, we don't comment on takeover rumors at all.

22:30And our policy is when there is something to talk about it, we'll talk about it. Is there anything in sort of the logic of just where does IMAX go from here? I mean, are there strategic partners that could take this brand and this company to another level? Yeah, I mean, sure. Look in China, that's a separate public company, we raised a lot of capital to help move it to another level and take a place like India, which is as big as China, but it has 30 theaters and China has 800. Is there a partner in India who could help us grow that area? Yes, there is. And we've been killing it in a good way.

23:11And, you know, I think it's an, when we did Avatar, we moved to a new level. And I think when we come out with when Odyssey people understand what's going on I think will again go to another level you have sort of you have been on an Odyssey yourself from the moment that you walked in that Smithsonian and to where IMAX is now and given what I was like saying earlier about how consumers seem to want to you know you can see the numbers they choose IMAX over other options it makes me wonder is there a future in which IMAX eats the rest of the theater industry in the sense that like why should any other theater screen exist if this experience is so much better and what's going to get me off the couch like why shouldn't IMAX just eventually slowly over time replace every screen in America so you know that's not what we intend to do or how the business model works I think there's room for us to grow significantly into the future but again it gets back to economics so if you take I don't know I don't want to badmouth anybody but if you take troy new york because odyssey is on my mind so troy is on my mind you know it's a very small city and the economics would probably be challenged to do an imax theater there so and and also you take opening weekends as you said there are limits to how many tickets we could sell so i think we'll exist side by side you know with with traditional exhibition unless they eat their own lunch with their X theaters.

24:41But, you know, I think they're going to try not to do that. Great. All right. Well, thanks so much for your time. I appreciate it. Thank you, Ryan. I appreciate it. We reached out to Disney for comment. The company referred us to a prior statement about Infinity Vision. It said its production quality standards are, quote, second to none. The company added that it offers films, quote, on a huge screen with the sharpest, clearest color and sound. That's all for today Thursday, July 23rd The Journal is a co-production of Spotify and The Wall Street Journal Additional reporting in this episode by Ben Fritz and Jessica Tunkel Thanks for listening See you tomorrow