May 19th, 2024

Cineplex banks on arcades as industry box office sales sag

By Christopher Reynolds, The Canadian Press on May 9, 2024.

Cineplex Inc. reported a profit in its latest quarter compared with a loss a year ago as its results were boosted by the sale of its arcade game business. Theatre seats are shown at Cineplex Junxion Erin Mills in Mississauga, Ont., on Monday, April 24, 2023. THE CANADIAN PRESS/Nathan Denette

The head of Cineplex Inc. is doubling down on arcades as he looks to top up revenues amid the unsteady return of audiences to theatres.

Box office revenue at the country’s largest cinema owner rose one per cent year over year to $125.1 million in its latest quarter, even as industry-wide North American box office sales dropped by more than five per cent.

CEO Ellis Jacob has targeted “location-based entertainment” (LBE) – on-site experiences such as arcades and virtual reality attractions as well as old-fashioned bowling and restaurant options – as a way to diversify the company’s income stream.

Cineplex runs 13 such venues across the country via chains such as Playdium, The Rec Room and Junxion, with three more slated to launch in the fourth quarter. A Playdium arcade centre will open at Toronto’s Fairview Mall adjacent to a Cineplex location, and two new Rec Rooms will take root in downtown Vancouver and Montreal’s Royalmount mega-mall complex, Jacob said.

“Given the success of our LBE business, we believe there is an opportunity to grow to 30 locations across Canada,” he told analysts on a conference call Thursday.

Such an expansion could double annual adjusted earnings from location-based entertainment to about $75 million, Jacob said.

“We have good runway to further grow in a highly accretive, high-margin business and strengthen our position as a leading entertainment destination for Canadians.”

The company’s investment in arcades and other entertainment options comes despite its recent sale of arcade game distributor Player One Amusement Group.

Cineplex recorded a $67.3 million gain on the deal, swinging its profit to $5.2 million for the first quarter compared with a loss of $30.2 million in the first three months of 2023.

Revenue from the location-based entertainment segment actually dipped by nearly two per cent year over year to $34.5 million last quarter, but executives attributed the figure to bad weather earlier in the year that forced some stores to close temporarily.

The box office – still Cineplex’s core revenue driver – relied more heavily on “premium experiences” and international films this year.

Some 42 per cent of box office sales came from IMAX and VIP screens, the company said. Another 13 per cent derived from foreign-language movies such as Warning 2, one of several Punjabi hits in the quarter.

But the biggest lure for audiences was Dune: Part Two followed by Kung Fu Panda 4, resulting in a 0.5 per cent uptick in theatre attendance.

Revenue for the quarter ended March 31 totalled $294.8 million, up from $291.4 million in the same quarter last year.

Box office revenue per patron rose to $12.74 compared with $12.63 a year earlier, while concession revenue per patron averaged $8.95, up from $8.85 in the same quarter last year.

This report by The Canadian Press was first published May 9, 2024.

Companies in this story: (TSX:CGX)

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