(Toronto) Cineplex management is doubling its efforts in the arcade sector as the company seeks to increase revenues amid an unstable return of audiences to movie theaters.
Box office revenue for Canada’s largest theater owner rose 1% year over year to $125.1 million in the latest quarter, even as box office sales for the entire industry north- American countries fell by more than 5%.
To diversify the company’s revenue streams, President and CEO Ellis Jacob has targeted “location-based entertainment” (LBE) as a means, i.e. sites offering, for example, arcades and virtual reality attractions as well as dining and bowling options.
Cineplex operates 13 such theaters across the country through chains including Playdium, The Rec Room and Junxion, with three more expected to launch in the fourth quarter. A Playdium arcade center will open at Toronto’s Fairview Mall, next to a Cineplex location, and two new arcades will take root in downtown Vancouver and at the Royalmount shopping megacomplex in Montreal, Mr. Jacob.
“Given the success of our LBE business, we believe there is an opportunity to grow to 30 locations across Canada,” he told analysts during a conference call Thursday.
Such an expansion could double the adjusted annual profit of location-based entertainment to around 75 million, Mr. Jacob said.
“We have a strong runway to continue our growth in a highly accretive, high-margin business and strengthen our position as a leading entertainment destination for Canadians,” he said.
The company’s investment in arcades and other entertainment options comes despite the recent sale of arcade game distributor Player One Amusement Group.
Cineplex recorded a gain of 67.3 million on the transaction, bringing its profit to 5.2 million for the first quarter, compared to a loss of 30.2 million in the first three months of 2023.
Revenue in the location-based entertainment segment actually fell nearly 2% year over year to 34.5 million last quarter, but executives attributed that figure to bad weather earlier in the year that forced some locations to temporarily close.
Ticketing revenue
Box office, which remains Cineplex’s main source of revenue, has relied more on “premium experiences” and international films this year.
About 42% of box office sales came from IMAX and VIP screens, the company said. Another 13% came from foreign language films like Warning 2, one of the many Punjabi hits of the quarter.
But the biggest attraction for the public was Dune: Part Twofollowed by Kung Fu Panda 4leading to a 0.5% increase in cinema attendance.
The director of DuneDenis Villeneuve, organized a media tour in Quebec in February for the Canadian premiere of the film’s sequel.
“The theater where he did it – the Scotiabank in downtown Montreal with the IMAX experience – the first weekend of the film’s release, that theater was the most profitable in North America,” he said. underlined Mr. Jacob.
The windfall is welcome as Cineplex seeks to pay down $731.5 million in long-term debt, down 15% from a year earlier, thanks in part to the sale of the arcade game distributor.
Mr Jacob said he aimed to reduce the company’s net debt to adjusted earnings ratio to between 2.5 and 3, the usual range, from a ratio of around 4 as of December 31.
Revenue for the quarter ended March 31 totaled $294.8 million, up from $291.4 million for the same period last year.
Box office revenue per customer increased to $12.74, from $12.63 a year earlier, while concessions revenue per customer averaged $8.95, up from $8.85.