China's IMAX Rival Aiming for No. 1 Spot With Government Backing

(Bloomberg) -- China's state-backed provider of jumbo-screen cinemas said it is aiming to be the top brand in a market dominated by Canada-based IMAX Corp. as it focuses on expanding with a business model that lets theater operators retain a bigger share of ticket sales.

“We have a government mandate to become the largest premium large format brand in China's film market and we are confident to achieve that target in 2019,” Lin Minjie, chairman of China Film Digital Giant Screen (Beijing) Co., said in an interview in Beijing last week. “Our top priority is expansion, not profitability.”

Theater operators in China and around the world are adding premium services like giant screen formats to stem a loss of viewers to digital platforms. China Giant Screen, also known as CGS, will have a network of 288 screens in the country at the end of this year, compared with 430 as of June for IMAX, which counts the country as its largest market.

CGS entered the market five years ago, compared with IMAX which has been in China for a more than a decade. Lin said CGS has been able to grow its theater network because it has a a flexible business model that offers a more diversified film pipeline and that charges only a flat-fee for each installation.

Most IMAX screen operators must share ticket revenue with the company. Also, IMAX usually has a narrower range of films on offer at theaters than does CGS. A representative for IMAX in China declined to comment.

China Film Digital Giant Screen is a subsidiary of state-owned China Film Co., the importer and distributor of Hollywood films in China. CGS also plans to expand overseas as part of the country's broader push to promote its soft power globally. The company has already established footholds with cinemas outside mainland China in Hong Kong, Las Vegas and Indonesia.

“The government also demands that we take the brand global with Chinese films,” Lin said.

Cinema operators in Kazakhstan, Russia, and Southeast Asia have expressed interest in adding CGS screens and the company is in talks with major theater operators in North America, said Lin.

IMAX entered China in 2004 and garnered traction for the brand with the release of “Avatar” in 2010, which set box-office sales records at the time.

As of the first half of 2017, China had more than 46,000 movie theater screens, the most in the world. It is also projected to overtake the U.S. in box office revenue by 2020, according to estimates by the Chinese government.

To contact Bloomberg News staff for this story: Jing Yang de Morel in Shanghai at jyang543@bloomberg.net.

To contact the editors responsible for this story: Dave McCombs at dmccombs@bloomberg.net, Sam Nagarajan

©2017 Bloomberg L.P.

With assistance from Jing Yang de Morel