MBA: Should IMAX expand to BRIC Economies?

BRIC = Brazil, Russia, India and China

2013 Richard Gelford CRO of IMAX wanted declared the only way to becoming a billion dollar company was to grow outside of the US.

  • flat five year box office trend in North America versus double digit growth in Asia Pacific and Latin America
  • China had 221 IMAX screens in 2014 (2nd to US)
  • Prior to 2001 IMAX was an expensive capital investment
    • Came up with Digital remastering to convert firms relatively cheaply and quickly

Business Model

  • Revenue Sharing
    • IMAX would provide free equipment in return for 1/3 of box office receipts – 10-13 years. Also licensed its technology through leases and sales.
    • 2009 Avatar grossed $250 million on IMAX
    • 1 in 5 selected to shoot with IMAX cameras
StrengthsUnique and enhanced theatre experiencePartnerships4% Increasing movie attendanceLarge patent portfolioTechnologyDebt Free, Cash Positive (good financial position)
WeaknessesDependency on Studios to produce good filmsDependency on licensing renewalsHigh Costs
ThreatsCompetitionDecreasing people in theaters (Home, Netflix, etc.)
Competitive AdvantagePartnershipsR&D
RarePatents, R&DLicensing
Imperfectly Imitable“Costly to imitate”
Social/Cultural7000 movies released (India #1)Increase in technology in homes theaters (TV size/Blueray’s etc.)India:50% of population was poor and were not literate.India is very diverse (lots of spoken languages)China:1.35 billion peoplePopulous and fast growing economyGrowing at 10 new screens per dayLoved Hollywood films
Political/LegalRussiaGrowth in Russia was strong, but there was some hint of protectionism and quotas on Hollywood films.ChinaProtectionism, government urged theatre owners to reduce screen time for Hollywood movies
EconomicGrowing GDP in BRIC countries.
GlobalStrong GDP growth in BRIC (4x growth of G7)Foreign tickets were strong
Demographic18 – 59The key drivers of such economic growth were large urban populations, a high proportion of young people, and increased consumption by a fast-rising middle and upper class (see Exhibits 1, 6, and 11). The rise of the middle classes in BRIC countries, with their willingness and ability to spend, had transformed consumer markets
TechnologicalPLF nonproprietaryMobile devices becoming common for media consumption
Bargaining Power of BuyerHigh – they have options, can watch the movie in regular format?
Bargaining Power of SupplierLow – they had choices, although they wanted o be IMAX films, they were not reuiqred. DMR format to quickly convert films, nothing special needed 
Threat of new EntrantsLow – Capital intensive, patents
Threat of Product SubstitutesHigh – cheaper alternatives and still watch the same move
Inter firm RivalryHigh
CompetitorsPLF = Premium Large Format Screens72 brands!Other PLF Screens (1/3 more screens)
Company StrategyDifferentiation Strategy 
Posted in MBA