Sunday, July 28, 2013

IMAX Gives the Best Cinematic Experience

IMAX (IMAX) has started covering theater installation costs in exchange for a share of box-office revenues at multiplexes, where IMAX screens can generate three to four times the revenue of regular screens.

"They clearly deliver the best cinematic experience," says J.P. Morgan Securities analyst Townsend Buckles.

  IMAX's fastest-growing market. "Spending a few extra renminbi on something special is within the reach of the emerging Chinese middle class," says CEO Rich Gelfond. However, IMAX faces currency fluctuations and political risk in markets like China where the government has historically favored domestic films over Western imports. "China is a big part of their story, and risks come with that," says Aravinda Galappatthige, an equity analyst at Canaccord Genuity.

“The IMAX frame, I think, is really the best way to see a movie.” – JJ Abrams, Producer, Screenwriter, Director

 . In 2012 global film was a $34.7 billion market, growing by 6% over the 2011 levels. 37% of the growth in global box office totals came from China, which recently passed Japan as the second largest global markets. This is significant insofar as IMAX is concerned, for China allows advantageous terms for IMAX compared to the typical Hollywood film export arrangement. Assuming IMAX can capture just 3.5% of the global cinema market (in 2012 the company grossed just 0.45% of the global box office, double its prior year level), using the consensus estimate for 2013 revenues, 16% TTM ROE, 21% projected franchise ROE (we think this is very conservative), we get a derived P/E for IMAX of 46 on 2013’s analyst consensus $1 of earnings per share, or a price of $46.00.

~ Some of the quotes come from  IMAX Corporation: An Investment Case
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The IMAX Experience

As soon as you walk into an IMAX theater, the difference in this format is immediately obvious -- the screen is gigantic! There are two different types:

  • IMAX theaters - A standard IMAX theater has a huge rectangular screen. A typical IMAX screen is 16 meters high by 22 meters wide (approximately 52 by 72 feet), but they can be much larger. The largest IMAX screen is 30 meters (98 feet) high. Imagine standing next to an eight-story apartment building that is wider than it is tall. That's how big the screen is! It is many times larger than the screen at a normal movie theater.
  • IMAX domes - An IMAX dome provides a hemispherical screen that wraps the entire theater. Domes can be up to 30 meters in diameter.

Whether you are in a theater or a dome, the effect is amazing. The screen is large enough to fill your field of vision. By doing this, the screen gives you an incredible feeling of immersion (there is nothing outside the film to distract your attention), and it also enhances the feeling of motion. In fact, the feeling of motion is so strong that it makes some people ill.
In order to fill this gigantic screen with a clear picture, IMAX films are shot and printed on huge film stock that is completely unique in the industry.

IMAX film stock is about 10 times larger than 35mm film stock.
Most films that you see in a theater come in a 35-millimeter format. The frame is 35 millimeters wide, and nearly square. But movie screens are not square -- they are very wide for their height. So the wide image is compressed into the 35-millimeter frame and expanded by the projector to fill the screen.
Some theater films come in a 70-millimeter format. This format provides roughly double the resolution, and the frame is naturally the width of the screen so there is no compression.
IMAX film is called the 15/70 film format. Each frame is 70 millimeters high and 15 perforations wide. In other words, the film size is about 10 times bigger than standard 35-millimeter film. This film size gives an IMAX movie incredible clarity, even on the huge screens in IMAX theaters.
The 15/70 film size makes an IMAX projector a truly unique device. If you have read How Movie Projectors Work, you understand the basic mechanism of a 35mm projector:

  • The film feeds in from the top of the projector.
  • A claw or sprocket arrangement advances the film one frame and holds it steady in front of the light.
  • A shutter opens and lets light shine through the film and lens onto the screen for a fraction of a second.
In an IMAX projector, the film is so heavy and large that a projector cannot use a claw to move it, and it is hard to hold such a big film frame perfectly flat with respect to the lens. Therefore, an IMAX projector is completely different from a normal projector:

  • The film moves through it horizontally rather than vertically.
  • A vacuum system sucks each image onto a piece of glass in front of the lens so that the image is oriented perfectly in front of the lens.
  • The shutter opens for a longer period of time than on a normal projector in order to let more light through. The bulb for the projector is a 15,000-watt, water-cooled xenon unit.
All of this advanced technology means that an IMAX projector weighs over 2 tons (1,800 kilograms) -- the equivalent of a small car! That's what it takes to get such a bright, clear image onto such a tremendous screen.

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