IMAX Suitors and Why Netflix Put Fincher in Theaters

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1:54But who wants to buy IMAX? That's a question I've been thinking about since Thursday when the Wall Street Journal reported that IMAX has been talking to potential suitors about an acquisition of the 60-year-old large format film company. IMAX is in a pretty interesting place because it's a technology company. It doesn't actually own or operate the IMAX theaters that you go to. It mostly licenses its proprietary format to exhibitors and programs the screens, about 1 ,700 of them worldwide, including about 800 in China. So it doesn't have a ton of infrastructure or employees or real estate, all factors that have dragged down traditional theater chains.

2:31And unlike the theater business, the premium large format movie attendance is actually growing. Last year, PLFs, as they're called, that's IMAX and rival formats, they accounted for 16 % of U.S. ticket sales, up from 13 % in 2021. Because of that growth, the IMAX share price hit$42 in late February. It's at around$39 today. It went up after news of the sale. And at the same time, IMAX is only worth about$2 billion, so it wouldn't saddle most acquirers with a ton of debt. Still, lots of issues with particular suitors. And now Netflix, one of those potential suitors, is putting David Fincher's upcoming sequel to Once Upon a Time in Hollywood in IMAX theaters.

3:11That's what we're getting into today with Lucas Schaar, Monday guy from Bloomberg. It's the IMAX auction, who the buyers might be and why it all matters. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

3:26Okay, we are here with Lucas Shaw from Bloomberg. Welcome back, Lucas. How was New York? Hot and rainy and glorious. Oh, nice. You know, you've never lived until you've sat in the rain during a college graduation. It's really the highlight of a weekend. And then the humidity is so bad that when the rain stops, you're still just as wet. Well, it was lovely here. I had a nice experience at the Dodger game last night. All right. So we're having a pretty decent summer at the box office so far. You've written about it. I've written about it. The movies are back, as they say. And boom, out of nowhere, we get a journal report last week that IMAX has decided to sell.

4:07Is this just a product of a hot time for box office? Their stock has been up. People are kind of bullish for once since the pandemic on the future of movies. Why is this happening now? Well, because of what you just outlined. This is a company that has been sort of formally or informally available or for sale for a few years now. It's not been a good time to sell yourself as a sort of a movie business when the larger business has been in crisis or uncertain. even if IMAX has done better than most because that's sort of the, those premium format screens are what people go to the theaters for. Now that the movie business is going to have its best year since 2019, why not see what the market will bear?

4:51Yeah, it seems like this was a trial balloon and their stock was pretty high. It was at 42. I think it's in the 30s at this point, but that's why they're doing this, I think, is because they don't know what the future will hold for movies. And can we take a step back? I'm just curious because you gave the introduction on sort of like the movies great summer where do you land on the like this is a great summer that portends years ahead and things are back versus this is sort of a one-off because we have so many big titles this year and i'm you're still worried about movies next year i think it is entirely title dependent but i think the pipeline is finally back to quote unquote normal and hollywood has figured out what the post marvel movie landscape looks like not post marvel but fewer marvel not dominated by marvel and if these video game adaptations and the nostalgia ip plays and all of this keeps working like it has been we're gonna have a big year next year shrek 5 is gonna be gigantic next year and there's a bunch of other titles that are up so i'm not prepared to say that it's going to be a upward into the right trajectory from now on but i do think it's sustainable do you look to your point uh the phrase title dependent anything depends on are they going to keep making good enough movies have they figured out what will work are people going to go to the movies enough because right the the issue is grosses are rebounding attendance is still down quite a bit um you know the big concern would be we already had the impact of the Fox Disney merger at the same time as the pandemic what will the impact be of the Warner Paramount merger I I guess I'd be cautiously encouraged because you see Amazon really committed to trying to make movies work you see Netflix starting to dab a little more I know we're going to talk about that later and if you can offset whatever declines we get from the Warner Paramount merger oh how dare you they're releasing 30 movies a year how many times does he have to say it?

6:50I think you could see Amazon and, to a lesser extent, Netflix offset some of that. So I'm cautiously optimistic that the business will settle at a somewhat diminished state, but not sort of be in any kind of tailspin. Listen, the best news for the movies right now is not necessarily that a Star Wars movie can get to 100 million, even though people don't understand why it's a movie and not a TV show. The best news is that these YouTube filmmakers are grossing big numbers for these horror movies like Markiplier, and then we saw it with Obsession. The fact that Obsession, we're going to talk about this in the call sheet, the fact that Obsession is going up in its second weekend and we've got Backrooms, another young filmmaker coming out this weekend.

7:35These are the kind of movies that Hollywood needs to sustain the kind of everyday, every weekend titles. Yeah, most importantly on those, I would say, is we had entered a period with horror where it was really oversaturated. And I think that meant that most of what was working was kind of was sequels. It was you were having a hard time getting new horror to break out. And what you're seeing is, yes, these sort of young filmmakers, many of them born on the Internet, on YouTube, are getting new and fresh horror ideas to work. And hopefully that can extend beyond horror, because horror has been one of the few bright spots in the movie business for the last two years.

8:14And honestly, the audience being there. I mean, I just published some new data in my newsletter about Gen Z audiences and movies, and they like going to the movie theater. And that was a big question for years coming out of the pandemic is that are young moviegoers who are trained on whatever movie they want on digital services even going to want to go to movies? And I think we have the answer to that, and it's yes. And specifically in IMAX, maybe. Yeah, well, then let's transition back. So that is the question is who is going to buy IMAX? It feels more like a private equity bet to me than a studio bet.

8:51I agree. If you look at the potential bidders, okay, so you've got, you know, it's a technology, you've got the exhibitors that, you know, the theater owners, most of them are still on pretty shaky financial footing. It seems hard to believe that they're going to pull off a deal like this. It would be, it would be pretty remarkable if, if AMC did. Many complications there because, yes, they have a large number of the IMAX theaters, but they don't have them all. And they would all of a sudden own a company that's programming their rival theaters. Like, that's weird. And we should be clear about this.

9:24IMAX does not own theaters. There's a misconception out there. When you go to an IMAX theater, IMAX is licensing the technology and programming the screens. They have the relationship with filmmakers. They have the proprietary tech. but they do not actually own the vast majority of their screens so it could potentially fall to one of these exhibitors but i agree with you i don't think that they are they are going to do it if amc were to do it just in this hypothetical scenario wouldn't they try to make wouldn't they try to make imax just an amc product if you want to go and see sure imax movies you have to go to an a it's part of this you know their loyalty program is we now are the only place to go see IMAX.

10:06Sure, but that's going to cost money that they don't have to convert all those theaters, and then you've got the rival theaters that could punish you. Who would then launch their own versions, and it would be interesting. Yeah. Yeah. Which they already have. I mean, a lot of them have these other formats that they use in theaters, and they would have their own version of this, and it would become a, you know, kind of proprietary thing for each chain, potentially. But keep in mind that AMC also has other formats as well. And that would potentially be complicating as well. But there are no rules prohibiting a studio like Disney from buying IMAX, correct?

10:41No. So let's get into that. The Paramount decrees, which prevented exhibition and distribution from being under the same roof, those are all gone. We saw Sony buy Alamo Drafthouse a couple of years ago. A studio could come in like a Disney. Also, would IMAX even count? Because it's not a theater. It's just a technology. I think they Yeah, it wouldn't even matter because you're right. It's just technology, but they do own a couple theaters. Yeah. And maybe there would be a problem there, but I don't think there would be anymore. Do you think that Sony, now that we've had a couple of years, do you think that Sony regrets buying Alamo Draft House?

11:18I don't know. Have we seen, we would have to ask them about that because. Has there been a clear benefit yet? They would probably say that they have been able to showcase their anime and their other, you know, crunchy roll titles and other things like that. And they would say that they're learning about the business. And, you know, the biggest thing that we've heard about Alamo Drafthouse is that they now allow you to order on your phone, which people are up in arms about because they don't want that in the theaters. But I don't know the answer to that. So a studio could come in and buy IMAX. Why would a place like Disney or Universal do this and why would they not?

11:52Well, I can't really come up with a compelling reason for why they would. Why do they need to own it? Okay, but think about how annoyed Disney is at not getting IMAX theaters for Avengers. They're creating their own fake infinity vision to promote the large format. And if you believe in the future of large format movies, and that's where the audience is going, why not own the biggest brand in that space? I just don't think that you're going to spend billions of dollars to buy a company because you miss out on one or two dates a year. That's just not a compelling reason for them. Disney, for the most part, tells IMAX and movie theaters, like, this is what we're going to do, and you take it or you leave it, right?

12:38And they usually get their way. They're the biggest, baddest movie studio. But not always. Listen, Nolan is getting the screens for his movie this summer at the expense of Spider-Man. Sure. Okay, so again, twice a year, they lose once to Universal. And you're talking about versus Spider-Man, which is not even technically, I mean, it's partially a Disney movie, but it's mostly a Sony movie. So they miss out once to Universal and once to Warner Brothers. And otherwise, they're just fine. And they're going to end this year as the highest grossing studio again. I just don't see the ups. If you haven't seen, other than Sony Alamo, which is sort of like a quirky, weird deal, If you haven't seen studios buy movie theaters, which actually makes a little more sense, at least for a company like Disney, if you think about them as an experiences company.

13:23Except it's a terrible business. You're going to really see them buy this technology that they can use without having to pay a bunch of money anyways. Yeah, they don't need it. If I were them, and I fully support the idea that these studios, much like record labels, should actually have been investing in technology, right? If you are an owner of cable networks, you should have been investing in streaming technology much earlier. If you're an owner of a movie studio, you should probably be investing in different AI filmmaking tools. Whether we think that the Ben Affleck company is real or not, the idea that Netflix is making a bet on we need to figure out AI filmmaking is the type of bet that a studio should be making.

14:08They are supposed to be at the front lines of technology when it comes to producing and distributing their movies. They are not, when it comes to movies, fundamentally exhibitors, and they haven't been in a long time. So why you'd spend a bunch of time or money buying a company that is like a technological layer of exhibition, I don't understand. It's just that that is where the growth is in theatrical moviegoing. You are the number one studio. You make the kinds of movies that do very well in IMAX. So why not own it and control that experience? the problem is you don't actually control it because you don't actually own the theaters where they're being exhibited so you kind of you half own it and I just don't think they would and the Netflix argument makes even less sense to me why would Netflix buy IMAX people are like oh well it would be great because they could put their movies in the Netflix theaters they're already experimenting with Narnia and the Fincher movie and they could just blow it out and have that be their theatrical component.

15:12But again, they would still be subject to the windowing policies of these chains because that's where these movies are played. So it doesn't really solve that problem that Netflix has. Yeah, Netflix has to be a little more committed to movie theaters before it contemplates buying a technology for movie theaters. That's why to me, something like Alive Nation makes a little more sense. It is an out-of-home entertainment company and maybe that would make a little bit more sense for them to kind of get into this premium movie experience. But I think most likely it will be private equity or some kind of technology partner that already has a relationship with IMAX that wants to come in and own it.

15:56Or nothing. Or nothing. Or like a rich guy. Honestly, you get instant access to top filmmakers. You want to be best friends with Christopher Nolan? Buy IMAX. He is best friends with Rich Gelfand, the CEO, because they give him something that he really, really wants. All these top filmmakers love IMAX. Would you say they are best friends or that they are professional friends? I said best friends in the metaphorical sense. They're not going to cookouts at one another's houses on Memorial Day weekend. No, in the same way that you are best friends with BTS. Right. Because you interview them a lot and you...

16:36I've interviewed them once, just so we're clear. Well, you, but their team, you interviewed a lot of people around them. Yes, the Hive team, sure. Yes, yes. Wait, Matt, can you explain, let's say Disney bought IMAX. Can they reserve IMAX only for Disney movies or no? They could, but it might jeopardize the relationship they have with the theaters that play their movies. They could prioritize their own movies, though. Yeah, that's the whole argument against these studios getting into exhibition in the first place is, Right. They want to be everywhere. So do you really just want to have your movies in Disney only experiences and limit the footprint?

17:09Or does that mean you have to open up a bunch more theaters? Yeah. And every movie is a negotiation with the theaters for what your split is going to be. And if you are a theater owned by a studio, it might complicate the relationship with rival studios. Yeah. And they might start screwing you and you might have the incentive to screw them. so it's it's worked this way for a reason but again the studios don't like that they don't control the end experience for their customers and if disney owned a theater chain maybe that experience would be a lot better for their movies you said live nation i'm i'm struggling to see live nation buying an imax i could i would almost see live nation be more likely to buy something like Cosm than IMAX.

17:56Yeah, I mean, they're similar, though. Well, but IMAX is just a technology player. Again, unless they wanted to open a bunch of IMAX theaters, why does Live Nation suddenly want to be a tech supplier to AMC and Regal and all? It doesn't seem right. Yeah, I mean, and the concert films that they're making now with artists, like, not a big enough business. To say nothing of the fact that, like, does Live Nation want to be attempting a major deal while they're in the middle of this antitrust. Oh, well, that's a whole separate thing. Like, I don't think they would risk it for IMAX. This episode is brought to you by Marvel Television, presenting Wonder Man, starring Yahya Abdul-Mateen II and Ben Kingsley.

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19:15The Lowdown is available for your Emmy consideration on Hulu and Disney Plus for bundle subscribers. This episode is brought to you by LinkedIn Ads. Ever invest in something that seemed incredible at first but didn't live up to the hype? Marketers know that feeling. They optimize for the numbers that look great, impressions, reach, and reacts. But when they don't show revenue, well, that's a not-so-great conversation with the CFO. LinkedIn has a word for that, bull spend. Instead, why not invest in what looks good to your CFO? LinkedIn ads generates the highest ROAS of all major ad networks. Reach the right buyers with LinkedIn ads.

19:53You can target by company, industry, job title, and more. So cut the bull spend. Advertise on LinkedIn, the network that works for you. Spend$250 on your first campaign on LinkedIn ads and get a$250 credit for the next one. Just go to linkedin.com slash the town. That's linkedin.com slash the town. Terms and conditions apply. All right. Speaking of IMAX, let's talk about the David Fincher move here a little bit, because this is something that Fincher did not ask for. You and I both reported that they Netflix decided that they would like to slot the Cliff Booth movie still untitled the sequel to Once Upon a Time in Hollywood into that Thanksgiving slot that was reserved for Greta Gerwig.

20:42Her Narnia movie is moving to February. So they had these theaters reserved. AMC was like, go for it. Bring that movie into theaters. Adam Aaron, like, cannot say enough nice things about Ted Sarandos, who, by the way, that, you know, you know that that relationship started because Ted listened to Adam on the town in our interview with him. And then they started chatting about what they could do together. It's amazing. then they're going to give it two weeks hold it for another two weeks put it on the service Christmas Day or the 23rd and everybody seems to be okay with it except Regal which has not said whether they would play this movie.

21:23Why do you think Regal is the holdout? Well because they don't want to smash their window policy for Netflix that was the whole problem in the first place is that the Narnia movie they did a deal with AMC Right but why is AMC okay with it and regal not that is the question because amc has decided tactically that getting into bed with netflix and having a relationship there will ultimately be better for amc and the difference this time around is when netflix did the deal for narnia imax guaranteed that they would give them a thousand theaters that they would give them a full wide release there are 1800 theaters around the world that have imax 800 of them are in china and they basically said we will give you at least a thousand that put them in a tough spot because that requires the involvement of regal which has many of these theaters not all and amc has way more but this time around for the fincher movie there is no requirement and they did that on purpose so that amc could agree to this and regal would have no leverage over it if regal doesn't want to show the movie fine they don't have to show the movie in their imax screens but they can do the release without Regal.

22:35So it puts Regal in a really interesting spot. They can say, we believe in our windows, we're not playing this, and leave millions of dollars on the table. Or they can go along with this and potentially harm their windowing policy that's going to hurt them in the future. Yeah. What would you do? If I were Regal? Yeah. I guess I'd probably show it, but I don't think that this, we're not talking about a huge blockbuster here. I don't know. The last one did$400 million, and the Fincher nerds are going to show up. But see, that's a huge difference. Tarantino is one of the—on that short list of filmmakers that people go to the theaters to see.

23:14David Fincher is not, partly because David Fincher has spent the last decade mostly in business with Netflix. And so the idea of a spinoff to this movie— Written by Tarantino. I'm excited to see it, and I hope it does well, but I don't think we're talking— Starring Brad Pitt. I don't think we're talking about a movie that if we're given a proper theatrical release would be a guaranteed hit. I think you're wrong. I think it's going to be big. And I think the Super Bowl spot and the marketing that's going to be associated with it will create demand here. And I think that they are going to do it.

23:47I can't be wrong because I'm just saying it's not a guaranteed hit. I think it could be, but it's not like... But bottom line, so let's say it gets a thousand screens in IMAX. gets the 10 million 15 million yeah like best case and regal gets a share of that it's only a few million they're leaving on the table yeah is that worth blowing up your windows or do you believe it's blowing up your windows oh meaning yeah it's just such a small stunt that no one really cares yeah i don't know it's gonna get a lot of marketing this doesn't feel like you know the the narnia thing is like officially a big deal because it's a 49 day window and it's a proper theatrical release This feels more stunty.

24:32It's two weeks. But this was the original Greta Gerwig deal that we talked at length about. And this is what seems to be a template for Netflix. If they can do this every Thanksgiving with one of their big movies, maybe this becomes an annual event. If they can do it with an awards-y movie that they want to give some extra shine and run. And more importantly, they want to lure the kinds of filmmakers they want to work with and won't work with Netflix because of the theatrical issue. Right. So, and I guess Regal's argument would be, we don't want to help facilitate this. We'll show Narnia because it's a real window, but we don't want to.

25:10No, it's not because of the Netflix relationship. It's because of their relationship with everybody else. Why would the other studios not ask for the same treatment on certain movies? Well, because most of the other studios have committed now to this 45-day construct. Yeah. I mean, that's the answer to that. But I don't know. they could use it as leverage you're giving netflix things that you're not giving us so what else are you giving us right possible i don't know you don't seem too convinced no i it's fine to draw a line in the sand and i'm i'm probably underestimating the ways in which other studios will use it because i know that other studios were were pissed about the narnia thing because at imax why are you giving netflix you know this this treatment when they still don't have any interest in your business and if the fincher movie is really good maybe it becomes a bigger awards play because it got theaters.

26:01I still don't believe Netflix is going to win best picture without giving a meaningful theatrical release to the movie. Right. So this one would have no shot. Well, this one would have a better shot than most of their movies. Well, they've had, they've been, I don't know, they've been runner up two or three times. I think you're mostly right, but they have runner up. They should have won for Roma. If Roma was a real wide theatrical release, netflix would have won best picture in my opinion no disrespect to the green book apologists uh that year but i think roma would have won if it had gotten a real theatrical release you should have seen the look on people's faces at that oscars when green book won there was a screw netflix feeling throughout that that room well i don't think spike lee was very happy about it no he wasn't alone so lucas in a year is imax owned by someone else i would still bet no um but you know reserve the right to be wrong as always i think they will sell you think they will yeah i think they have waited for this moment and there will be enough interest and the it will be a boring private equity or, you know, technology partner.

27:12It will not be a major studio and it will change hands, maybe be taken private. Well, it would have to be taken private. And I guess unless you're saying another public company buys it. Yeah. Either way, it would cease to exist as a standalone public company. Yes. Do you think it will change how many IMAX theaters exist if it goes private equity? Will we see a boom in IMAX theaters? I mean, that's the other issue is they should be growing. they should be adding more theaters because clearly the demand is there and most of these theater chains would love it if their percentage of imax and large format screens went up yeah i mean people want no i don't i don't have a i don't know there of course yes the people want there to be more yeah but they just don't want to pay for it they don't want to they don't want to have to expend the money to build out the theaters yeah i mean look the people that should own this technology are the are the theater owners much as i said that movie studios should be on the front lines of sort of investing in filmmaking technology and um and sort of new talent exhibition technology should be what amc regal and cinemark are the best at and instead they have this other company that they are have sort of this large kind of friendly but occasionally contentious relationship with yeah i agree uh but obviously one of them buying it would create other problems all right lucas thanks very much thanks man today's call sheet is brought to you by holiday inn by ihg the global icon you love but with a whole new energy and comfort that hits different than before craig before we start on the call sheet some accountability corner from last week a pretty brutal week for me i took the under on 85 million for the four day on mandalorian and grogu final number 98 million sure i'm surprised you usually have your finger on the pulse for movies that kids will like i know and so i'm surprised even having taken your son that you didn't think this would overperform with families i don't know what i would say i regretted that call the second i made it and you were right and 85 was just way too low the nrg number like they just didn't get what kids were into and the numbers on this show that it was kids that powered it.

29:25So bad on me. I also whiffed on Colbert, the finale. I predicted it would be between 4 million and 5 million live plus same day viewers. The Nielsen preliminary number was 6.74 million. We don't have the final number yet, but it's not going to go below five. So I whiffed on that one too. A lot of people watch Colbert. A lot of people watch Colbert late night. Maybe they shouldn't have canceled it. I don't know. There was a whole thing where, you know, people wondered if they would just watch the clips and i thought that they would just watch the clips and turns out his fans showed up it was the number one weekday episode of the show ever so i don't know how sustainable that would be yeah the boomers still tune in when they need to yeah bad week for me let's move on craig you and i have not seen obsession yet yet will you see it no i'm not but honestly i expect you to see it this is a young person thing i know i don't love horror but i have been texting my friends who love horror and ask them how scary it is and it they said it's right on the fringe so i i might watch this movie yeah it's like fatal attraction but with some gore right sure i think a lot of gore but yes and made for less than a million dollars unbelievable this filmmaker curry barker and bought at the toronto film festival by focus features for 15 million dollars he before that got jason blum of blumhouse to come on board as a producer and unbelievable success here opened to 17 million second weekend it goes up by 40 to 32 million for the weekend that never happens horror movies in particular tend to drop off after the first weekend we haven't had a movie that's gone up like this since 2023 and that was Sound of Freedom, which was the QAnon-associated movie that opened on 4th of July and then went up.

31:20I mean, this thing is an absolute phenomenon at 60-plus million domestic. My prediction today is that this is going to blow past 100 million domestic. The word of mouth is tremendous. Horror is in such a fantastic—these are the glory days of horror. We're going to look back on this era. We were talking about it as being oversaturated a year ago. And, you know, Megan, too, missed the mark and to blum's credit he completely recalibrated and is now going after these young filmmakers with more grassroots kind of digital first ethos and he's succeeding he's got back rooms coming this weekend that's going to be huge also that's through 824 yes i think that what is starting to work more it's not the ip sequelization of horror films it's it's like these young creators coming off youtube i mean back in 2022 it kind of started with that movie Talk to Me, which was created by two Australian YouTubers.

32:13That movie did like$100 million on a$4 million budget. And now we're seeing Backrooms with Kane Parsons. We have this movie with Curry Barker. Long Legs was sort of a grassroots thing as well. Yes, but people are starting to attach themselves, you know, Zach Craig with Weapons, to these young horror filmmakers who are making original horror movies. And we are really in, I mean, I agree. I mean, it is like every couple of months now, there is another huge horror movie that everybody needs to go see. It's pretty remarkable. What a windfall too for Focus. I mean, I saw that$15 million price tag that they paid at Toronto.