Good morning, and good day, ladies and gentlemen, and welcome to the Cineplex Inc. Twenty fifteen Third Quarter Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Pat Marshall, Vice President of Communications and Investor Relations.
Please go ahead, Ms. Marshall.
Good morning. Before beginning the call, we would like to remind you that certain statements being made are forward looking to various risks and uncertainties. Such forward looking statements are based on management's beliefs and assumptions regarding the information currently available. Actual results could differ materially from those expressed in the forward looking statements. Factors that could cause results to vary include, among other things, adverse factors generally encountered in the film exhibition industry, risks associated with national and world events, discovery of undisclosed material liabilities and general economic conditions.
I'll now turn the call over to President and CEO, Ellis Jacob.
Thank you, Beth. Good morning and welcome to Cineplex Inc. Third quarter twenty fifteen conference call. We appreciate you joining us today. I will begin by providing a brief overview of our third quarter results as well as a summary of our key accomplishments during the period.
I will also highlight a few of the most anticipated films for the balance of 2015. At the conclusion of my remarks, our Chief Financial Officer, Gord Nelson, will provide an in-depth overview of our financials. As always, once Gord has concluded his remarks, we will hold a question and answer period. I'm pleased to report that Cineplex had another strong quarter setting third quarter records for total revenue, which increased 9.8% to $328,200,000 and adjusted EBITDA, which increased 23% to $59,000,000 We also established new third quarter records for all revenue sources, including box office revenue that increased 6.1% to $172,600,000 Foodservice revenue, which increased 14.5% to $105,500,000 and CPP of $5.43 which was up 6.3% versus the same period last year. Media revenue also increased 7.2% to $34,300,000 and other revenue increased 29.1% to 15,900,000.0 Attendance increased 7.6% to 19,400,000 guests.
Overall, it was a successful quarter and we are pleased with the results. Now let's take a look at our key accomplishments during the period. The expansion of our premium experiences remains a strategic priority for Cineplex. As a result of the mix of films that's skewed towards family product and a lower percentage of three d movies, our box office from premium offerings declined from 41.7% last year to 34.5% in 2015. During the quarter, we installed D Box Motion Seats into five theaters, bringing our total to 38 locations.
Six more systems are scheduled to be installed across the country throughout the fourth quarter. In December, we will add VIP cinemas to our Yonge Eglinton location, which will be renamed at that time to Cineplex Cinemas Yonge Eglinton and VIP. In early twenty sixteen, we will celebrate the opening of our newest theater in the Marine Gateway area in South Vancouver. Marine Gateway will feature seven traditional screens, Ultra AVX and three VIP cinemas. Switching to food service, we set new third quarter records for CPP and food service revenue.
CPP increased 6.3% to $5.43 versus $5.11 in the prior year. This is a new third quarter record and second to last quarter's all time record of $5.5 The growth was driven by the increase in transaction size, successful sign on promotional programs, expanded offerings outside of our core food service products and growth in our VIP business. We continue to focus on the expansion of our proprietary food service offerings during the quarter, opening six new locations for Yo Yo's Yogurt Cafe in our theaters. Throughout the remainder of 2015, we will continue to grow both our co concessions and proprietary offerings by refining and expanding our menu offering, implementing targeted marketing and promotional programs and leveraging the flexibility of our digital menu boards. Now on to our amusement and gaming business.
Earlier this year, we announced plans to launch a new social entertainment destination called The Rec Room. The first location will open in the 2016 in Edmonton, South Edmonton Common. During the quarter, we announced plans to open Cineplex's second location for The Rec Room in Calgary, Alberta. This will consist of a 50,000 square foot dining entertainment and amusement gaming complex, which is currently scheduled to open in December 2016 in Deerfoot City, formerly known as Deerfoot Mall. We have a number of additional locations under negotiation and expect to announce these in the weeks and months ahead.
We also added two new Xscape entertainment centers to our theaters at our Galaxy Cinemas in Peterborough and Lethbridge. Subsequent to the quarter end on October 1, we completed the acquisition of the remaining 50% of issued and outstanding equity of Cineplex Starburst Inc. This makes Cineplex the sole owner and one of the largest distributor and operator of arcade games to the amusement industry, supplying and servicing games for Cineplex theaters in Canada as well as amusement centers across North America. CSI also owns and operates Premier Amusements, a U. S.-based gaming supplier that services over 200 family entertainment and amusement venues across 24 states.
And Brady Starburst LLC, a U. S.-based distributor of amusement and vending equipment that provides a wide range of diversified services to the family entertainment centers throughout The United States. In September, we announced our plans to enter the world of esports and acquired an 80% interest in the operating assets of WG Limited, a leading online gaming platform. Together, we are creating a community that connects live online gaming with unique in theater gaming experiences, leagues, gaming ladders and tournaments for the competitive gaming community. We believe we will transform esports in Canada and expect to announce details of our first tournament soon.
We also believe this is an opportunity that we can export to our exhibitor peers in other parts of the world. Our media business also experienced excellent growth in the third quarter, increasing 7.2% compared to the prior year period. Cineplex media revenues increased 11.4% as a result of strong Showtime advertising sales, particularly from the automotive sector. Our top three advertising categories in the third quarter represented 37% of total spend led by automotive and then followed by the wireless telco and electronics technology sectors. Subsequent to quarter end, we were very pleased to learn that our Cineplex Magazine is the number one most read magazine for all demographics 50 years old and became the number two most read magazine in Canada according to new Viva Data Research.
Congratulations to the magazine team on this great news. In our theater lobbies, we have installed an additional eight interactive media zones this quarter, completing our circuit of 46 units across Canada as of September 30. Our digital poster case rollout is now complete and this is also adding to our overall media revenues. Subsequent to the quarter end, Cineplex Digital Networks announced that it has been selected by A and W Food Services of Canada to become the sole provider of digital menu boards for its over 800 corporately owned and franchised restaurants across Canada. Signage installations have already begun in some locations.
We continue to make strides in growing our digital media business both on the path to purchase and at the point of purchase and see this as a significant growth driver for the future. Overall, our media businesses continue to be strong both in theater and in the digital out of home space. Our digital commerce offerings maintained their momentum this quarter. Cineplex.com now reaches 16.9% of Canadians online. The site registered a 16% increase in unique visitors and a 28 increase in visits versus the prior year period.
The Cineplex mobile app has been downloaded more than 12,800,000 times as of September 3035, recording over seven zero eight million app sessions, making it one of Canada's most popular mobile brands with 11% penetration of the Canadian mobile market. At the Cineplex store, we grew unique visitors by 31% as compared to the 2014 and launched Cineplex store gift cards in Costco locations nationally. The Cineplex store supports the widest range of streaming devices in Canada to watch and enjoy content. Moving to SCENE. The SCENE loyalty program continued to grow its membership adding approximately 300,000 new members to finish the third quarter at more than 7,000,000 members.
During the quarter, we expanded SCENE loyalty program benefits, enabling members to now earn and redeem points at eight Cara operations limited restaurant brands. These include over 800 restaurants across Canada, such as Swiss Chalet, Eastside Mario's and Milestones to name a few. We also announced changes to the earn and retention rates for premium movie experiences which took effect November 4. Members will now earn and redeem Scene points based on the movie experience they choose with premium movies earning 50% more points and VIP movies earning 100% more points. Subsequent to quarter end, we announced a term extension to our agreement with Scotiabank for the SCENE program, which will now run for ten more years until 10/31/2025.
The extension also includes naming rights for two additional Scotiabank theaters, bringing our total to 10 theaters and to the Cineplex VIP cinemas presented by Scotiabank and to Scotiabank's annual commitment with Cineplex Media. We are delighted with our partnership with Scotiabank and are very pleased to continue to work together on this exciting and much loved loyalty program. Now let's take a look at some of the films we have coming for the balance of the year. The fourth quarter is off to a strong start with The Martian, Hotel Transylvania II and The Intern. Spectre, the latest film in the James Bond franchise and the Peanuts movie both opened strong this past weekend.
Looking ahead to the holiday season, a number of highly anticipated films are opening, including The Mockingjay Part two and three d, which is the much anticipated final installments in The Hunger Games series. On November 27 comes The Good Dinosaur, the latest three d adventure from Disney Pixar and Creed with Sylvester Stallone reprising his role as Rocky Balboa. On December 11, The Danish Girl opened starring Academy Award winner Eddie Redmayne in his most talked about role to date. Mark your calendars for December 18 as this is the day that three much anticipated movies hit the screen, including Alvin and the Chipmunks Road Chip, the newest adventure of the beloved Chipmunks, Sisters, a comedy from Pao Deo, Tina Fey and Amy Poehler. And of course, the most highly anticipated film in a year, Episode VII, The Force Awakens.
This film has generated one of the highest demands for advance tickets for an opening weekend that we've seen in our history with still five weeks remaining. Everyone expects it to be one of the highest grossing movies of all time. On Christmas Day, there's something for everyone including Joy, the latest from David O. Russell starring Jennifer Lawrence and Bradley Cooper, Daddy's Home starring Will Ferro and Concussion starring Will Smith. It's easy to see why the 2015 is expected to be one of the biggest quarters in our history.
We believe we are well positioned to amplify on the strength of the film slate with our premium experiences and also through our food service and media offerings. Outside of our theaters, we will continue to diversify Cineplex reducing our reliance on the cyclical nature of Hollywood film product, particularly through our digital media and amusement gaming businesses as well as the upcoming launches of The Rec Room and our first esports tournament. Now before I turn the call over to Gord, I thought I would comment on our test with Paramount Pictures for the film's paranormal activity, the Ghost Dimensions and Scout Guides to the Zombie Apocalypse. As you know, Cineplex took partner test to play both of these horror genre films. The objective was to work with our studio partners to see how a wide release film would do when released for sale digitally earlier than the traditional theatrical window.
In this case, the movies will be made available for sale seventeen days after the film dipped below 300 domestic theaters. In exchange for the shortened window, Cineplex and other participating exhibitors will receive a pent percentage of the studio's digital revenue for the period of film is available for sale digitally through ninety days from its initial theatrical release. Revenues would be shared in proportion to our theatrical gross market share. From a box office perspective, the films opened weaker than we would have liked. However, the Canadian box office percentage of North America was 14.5% for the first week of Paranormal and 19.1% for the first week of Scouts.
Because both movies are still in theater and the test is still in progress, it is too early to say what the outcome will be. However, I do want to say that we respect and appreciate the innovative and collaborative approach in
also available on our Investor Relations website at cineplex.com. As Ellis mentioned, Cineplex reported all time third quarter records for total revenue attendance, CPP and adjusted EBITDA. Cineplex's third quarter box office revenue was $172,600,000 compared to $162,600,000 in the prior year as a result of an attendance increase of 7.6%. Our premium product percentage decreased to 34.5% of box office revenue in 2015 from 41.7% in 2014. The impact of premium priced product on the average ticket price was $0.79 for this quarter as compared to $0.98 in the prior year, primarily due to a shift in film mix to children's product with a smaller percentage of premium product, particularly three d consumed.
Excluding premium product, our average ticket price increased 0.9% to $8.1 as compared to the prior year quarter. Foodservice revenue increased 14.5% to $105,500,000 as a result of the 6.3% increase in concession revenue per patron to $5.43 an all time third quarter record. The CPP growth was primarily a result of higher transaction values as a result of expanded offerings, including those from Cineplex's VIP cinemas. Total media revenue increased $2,300,000 or 7.2% to $34,300,000 for the quarter. Cineplex Media revenue, which is primarily theater based, increased 11.4%.
Cineplex Digital Media revenue decreased 2.7% due to lower project revenues as a result of the timing of project installations, partially offset by growth of new business opportunities, including the TIM's TV network deployment and the Oxford Property Group's digital installation. As we have noted in the past, new client agreements typically have a long lead time, and we were pleased to announce the recent agreement with A and W and are optimistic about our opportunities with other potential new clients. We were pleased to report our acquisition of 80% of the assets of World Gaming on September 17 and the acquisition of the remaining 50% of the equity of Cineplex Starburst Inc. On October 1. These esports and amusement gaming assets will provide ongoing opportunities for growth both within our theatres and beyond.
With respect to the CSI acquisition, the remaining 50% was acquired for approximately $21,000,000 and will be paid in the 2015. Turning briefly to our key expense line items. DIMM costs for the quarter came in at 53.1% of box office revenues compared to 52.6% reported in the prior year. Cost of food service for Q3 was 21.2% as compared to 21.6% in the prior year. Other costs of $156,700,000 increased 9,700,000 or 6.6%.
Other costs include theater occupancy expenses, other operating expenses and general and administrative expenses. Theater occupancy expenses were $51,200,000 for the quarter versus the prior year actual of 50.8 Other operating expenses were $89,800,000 for the quarter versus a prior year actual of $83,700,000 an increase of $6,100,000 Major reasons for the increase include an increase of $1,800,000 due to the impact of new and acquired theaters, net of disposed theaters, higher same store payroll of $2,900,000 due to higher business volumes, as well as minimum wage increases in certain provinces and higher marketing costs of $1,500,000 due to expenses incurred supporting film product for which Cineplex has distribution rights as well as the timing of campaigns. G and A expenses were $15,700,000 for the quarter, which was $3,200,000 higher than the prior year, primarily due to a $1,800,000 increase in long term and short term incentive program expenses and $1,400,000 increases in professional and payroll. Interest expense of $5,900,000 was $400,000 higher than the prior year amount of $5,500,000 Contributing
to
the increase was a $200,000 increase in cash interest as a result of higher average borrowings on the revolving facility. The company recorded tax expense of $8,500,000 during the 2015 comprised substantially of current tax expense. Our blended federal and provincial statutory tax rate currently is 26.5. The losses acquired on the AMC acquisition were fully utilized in 2014. Net CapEx for the third quarter was $25,600,000 as compared to $32,900,000 in the prior year.
We continue to estimate that net CapEx will be approximately $100,000,000 for 2015 and 2016. Record third quarter revenues contributed to our strong Q3 results. We continue to remain comfortable with where Cineplex Inc. Is positioned today. Our strong balance sheet and low leverage ratio allows us to continue to invest in future growth opportunities for the company and benefit from future strong film product.
That concludes our remarks for this morning. And we'd now like to turn the call over to the conference operator for questions.
Thank And we'll take our first question from Adam Shine of National Bank Financial. Please go ahead.
Thanks a lot. Good morning. Obviously, strong results. Maybe focusing on some of the new initiatives. Gord or Ellis, can you speak to, in particular, the World Gaming?
And Gord, maybe help us think about how we should be accounting for some of this, particularly as it relates to some of the incremental investments that you've committed to making?
Sure. And with respect to world gaming, we're excited to be probably one of the first globally to blend both online play and physical play in sort of a mid sized type location based strategy. As Ellis mentioned, we expect to announce our first tournament within the next several weeks. And what you'll see in terms of how how we generate revenue from from these opportunities is there will be an an online fee to enter the competition. There will be a ticket purchase to view the regional championships and national championships within the theaters.
But one of the big opportunities relates to sponsorship and media related revenue as brands, you know, console manufacturers, game publishers look to reach this the target demographic that is the gamer. So those are kind of the majority of the revenue sources. As Ed was also mentioned, this is an opportunity that we believe we can take globally, given that we are the only player that combines both kind of the location based side of things as well as the online component of it. And, with our ties to our global exhibitor peers and the interest that we've heard to date, this is something that we can take kind of globally as an opportunity.
Sorry, and the extra $5,000,000 is that something that's going to creep into other theater OpEx sort of context? Or will it flow through maybe CapEx?
Yes. Sorry, the additional $5,000,000 working capital contribution that we made is really to ensure that there's enough funding out there to promote the tournaments to do the remaining development that needs to be done to the online platform to ensure that we have a successful platform that we can take globally. So primarily, I would say, OpEx and a smaller amount of CapEx.
Okay. And just lastly then for Ellis. I mean, Ellis, we're heading into, obviously, as you alluded to, the anticipated excitement around Star Wars. In the past, we know that Lucas used to extract an incremental film cost stake, maybe something a little bit different within the Disney fold. But how should we look at film costs?
I know obviously we get the usual splits, but the presumption would be that we might see something a bit more elevated than usual here. Maybe I'm wrong there.
It all depends on the performance of the movie and based on how it's going, this could end up being the largest movie that we've had in the circuit. And then one would expect to look back at some of the film costs when we released movies similar to this, like Avatar and those other ones.
Mhmm.
So it depends on what percentage it forms of the total quarter, Adam, compared to the other movies and where it ends up grossing.
Okay. I'll leave it there and queue up again. Thank you.
Thank you. We'll move to our next question from Rob Goff of Europac. Please go ahead.
Good morning and thank you for taking my question. And it's another question on the World Gaming. If perhaps could you give us a bit more perspective on how you might see this unfolding in terms of it being a league play or event play and just perhaps a bit more in terms of your timeline to rolling this out globally?
Yeah. So sure. So, yeah, I mean, this will be primarily you know, a weak play, but the events will become, you know, extremely important. What I would expect that you would see is you would see, you know, a the the creation of sort of a Canadian championship series based on a number of gaming titles that would take place throughout the course of the year. There would be a period of time where contestants and players would ladder up on an online competition.
And then you would so so say two months of there may be two months of online play, and then laddering up into what would be regional and provincial championships,
which would then take place in
the theaters, culminating in a in a national championship. So that's the, you know, that's really the structure of, you know, how these tournaments would play. With respect to, you know, taking this globally, obviously, we'd like to perfect the first one. In Canada, our first tournament, but there is a lot of interest from other exhibitors about taking something similar to their jurisdiction.
Okay. That's great. Thank you very much.
Thank you.
Thank you. We'll move to our next question from Kenric Ty of Raymond James. Please go ahead.
Thank you. Good morning.
Good morning, Kenric.
Just I can't resist squeezing one more in here on the esports side. Looking at some of the stats out there, I've seen that League of Legends, I think it was in 2014 had some 32 odd million people watching it, which is in excess of the Stanley Cup finals if memory serves. And what I'm trying to is handicap the size of this opportunity. You see some discussion out there on it being a $0.02 $5,000,000,000 market today globally and expectations that inside of two years that market could more than double. I wonder if you could sort of speak to the sizing of the markets and sort of how you would look to index against that market growth.
Certainly, it's, I think, a bigger opportunity that perhaps a lot of us and our generation can appreciate.
Yes. Mean, Kenric, look, I think we see the explosion in this market, and we wanted to get in there early, and that's really why we invested in the company. But look, there's a lot of noise out there about what what we would call a professional series. So when you hear, you know, about 16,000, you know, fans filling Madison Square Gardens or the Staples Center in LA to to, you know, come together to watch these tournaments. And and where and and then you you quoted some stats about, you know, Twitch viewers, YouTube viewers, just viewing these games.
So and and sort of the explosion in the growth rates that we're seeing in both the online viewing and and online playing. So I mean that is really why we invested. I think as I said earlier, there are a few entities out there that are combining both the location based element as well as the online element. And so we've got we've staked our claim early and look to take advantage of, yeah, the fixed boiling market.
Great. Thank you. And then switching gears quickly, just in terms of pricing, looking at where premium content is as a percent of box office, how are you thinking about pricing going forward and perhaps the pricing model? Certainly, the core product, there hasn't been much pricing taken in as long as I can remember. How are you thinking about that going forward or rather how should we be thinking about that in terms of dynamic pricing or other opportunities you may have to maximize box office revenues or manage them rather than maximize them and keep that value proposition in play?
We've undertaken a detailed pricing study and we are looking at opportunities. As we've always said, we want to use pricing as our last resort unless we are offering that guest a premium experience of some kind. We've increased our AVX penetration, which is now one of the best in North America. We've got VIP, we've got three d, we've got DBOX. So there are a lot of different choices.
And what we're going to do is we're going to selectively and strategically look at where we can adjust the pricing on the base theaters. But at this point in time, we have been very cautious about that because if you look at our results for the quarter, our attendance increased more than any of our peers in The U. S. And our EBITDA was also a higher percentage increase even though the box office wasn't as high as some of the peers. So it's all important to make sure that we focus on growing this business right across the spectrum, not just looking to raise ticket prices.
Yeah. And just to add
to Elsa's point, we've spent probably the better part of the year with both, you know, obviously, internal scene data as well as customer behavior and actual ticket purchases.
Spent a
lot of time analyzing the elasticity your price location by location, category by category. And, you know, we're gonna do something that's kind of meaningful, disciplined, and kind of responsive to what we're seeing based on the data we've looked at over the past number of years.
Great, thanks very much. I'll get back in the queue.
Thank you.
Thank you. And we'll move to our next question from Aravinda Galappatthige of Canaccord Genuity. Please go ahead.
Good morning. Thanks for taking my questions. Ellis, I was wondering if you can comment on sort of a high level on the Canadian numbers so far, the box office numbers. Obviously, we came into the year with about a 10% that given the low base and we're up somewhere around this year, whereas New York is seeing stronger numbers. Just wanted to get your thoughts on that.
I think it's the plate didn't appeal as much to the Canadian pallet this year or were there factors that you can think of?
Well, Abrido, on a year to date basis, we are slightly below where The U. S. Is in the fourth quarter when you look at where we are today compared to The U. S, Canada as of this past weekend is flat, whereas The U. S.
Is down over close to 7%. And it all varies depending on the product. For example, a movie like Spectre from Bond does strongly in Canada. But there are certain movies like we had in the third quarter like Straight Out of Compton, did well, but not to the percentages compared to some of the other movies out there. There was a movie called War Room where Canada did less than 2% of North America.
And in the third quarter last year, we also had a number of Quebec features that did well, serial weddings in 1987, and we didn't have that same penetration in the 2015. However, for the fourth quarter, I'm pretty optimistic given the lineup of films that are coming. But again, we are ahead of the pack, but it all depends on how product sways depending on the genre and the demographics.
Thanks, Dallas. And just a quick one on VIP. I know that you guys are up to about 53 and it's helping your CPP numbers really nicely as well. I don't know if you put a number out there in terms of what you think is sort of the capacity for VIP. Any thoughts on that?
Thank you.
We have 14 locations at the moment and we feel that we can add a number to the major cities across the country, and we will be doing that over the next number of years. Plus when we do a new build in some of these theaters, we will include VIP and Ultra AVX as part of that offering. So it's something that we feel confident. We've built a great brand and people really love the experience and we'll continue to focus on it.
Great. Thank you. I'll pass the line.
Thank you. We'll move to our next question from Haran Posner of RBC Capital Markets. Please go ahead.
Thank you. Good morning. Maybe just going back to sort of Aravinda's big picture and Ellis back to you on Box Office. I guess when you look at some of the performance of films year to date, seems like there's been greater variability versus expectations, both positive and negative. I'm interested in your thoughts on sort of whether you think that social media and sort of the immediacy of reviews online could be having an impact there?
And more importantly, do you think that that may be sort of increases the bar for in terms of quality for a movie to do well at the cinema?
It's a great question because I think it works both ways When social media is there for you and the movie and the content is great, it really propels the box office. And the same is true when the movie is not good from a content perspective and then the social media
hurts you.
But overall, what it does do is it creates that buzz which really increases the want to see for certain films. And you're going to have this. We've had it for the last twenty years. There's going to be good movies and there's going to be not so great movies. And the people vote with their wallets when they come out to our theaters.
And we saw, like you said, in the summertime we had some really hit some records with the movies that were out there, all the way from Furious seven to the Minions, know, Avengers. We had a whole bunch of great films. But again, we also had films that didn't quite do it like Paper Town's Fantastic Four, Pixels was good but not as great as we expected, Terminator the same thing. So you're going to have a mix of great movies and movies that will perform. So it's the surprising ones that are great for us.
And when that happens, it's awesome.
That's great. I appreciate the color. And maybe just a related question. And Gord, you mentioned earlier just sort of the amount of analysis that you put into the SCENE data. And I would think that you guys have a pretty unique view of attendance trends by demographic.
Is there anything that sort of in the last year or two that you've noticed that is either a concern or an opportunity in terms of kind of changes in attendance trends?
I think Haran, one of the things that we continue to look at is the bottom line when you look at the scene data, it's very, very product driven. And we do see that the 50 demographic are looking for more films to watch. And a lot of times through the summer, there just aren't enough of those kinds of movies. That's why movies like The Intern end up doing really well because people are really yearning to watch those films. So I think as Hollywood continues to build out their portfolio of movies, it's not only all about the blockbusters, it's about appealing to the different demographics.
And I think that's really what we are finding out from our SCENE data.
Thanks very much for that, Ellis. Just if I may, just one last one, easier question. Gord, just with respect to EK3 and the earn out, if I remember correctly, I think there's sort of a maximum of $38,000,000 or so that you could pay early next year. Maybe just in terms of where we're tracking today, would you imagine that number is significantly lower than that?
Well, look, we obviously review that number at each quarter and because we are accruing that in the financial statements. So as of the end of the third quarter, that amount is fully accrued. As I said, you know, the sales process has a fairly long lead time. We're happy to announce, you know, the A and W agreement and that we're involved in a number of other discussions and we hope to share some good news in the near future, but we have fully accrued that earn out amount.
Thanks very much.
Thank you. We'll move to our next question from Rob Peters of Credit Suisse. Please go ahead.
Thanks very much for taking my question. I was just wondering, jumping back to the eSports for a second, correct me if I'm wrong, but I think in the NDA, I read that it hadn't really generated any revenue even if it had been acquired this year. And I was just wondering maybe what if there's a different approach that you're taking versus how it was operating before that we can kind of see how that's going to generate more revenue for you guys going forward?
Yes, absolutely. And when we looked at acquiring assets at WG, they were in the process of transitioning their business model away from what was more kind of selective small group competitions to looking to create what I've described as an online culminating in a location based tournament type play. So so they've been transitioning the business model, investing and developing in the R and D and and the software to run the the new model that I've described to you. And so that's really why you got this through this transition. It's not that what they've done historically is not really representative of the new business model that we're going to run.
Fantastic. And maybe just a follow-up. I think we've seen some great success in terms of kind of the draw that some of these online gaming events can have. And they do seem to be somewhat kind of genre specifically, so type of games that have a big draw. Is there any ones that WG specializes
You know, I think what you'll do is, like, let's start announcing some of
these events and you see what's going to happen in the near future.
Thank you. Thank you. And we'll move to our next question from Paul Steep of Scotia Capital. Please go ahead.
Great. Thanks. Good morning, Ellis. I guess maybe you could talk a little bit about the media trending in the quarter. It seems like the auto vertical drove back harder than might have been expected.
What are you seeing as we head into Q4 in terms of pacings and sort of the linearity over the quarter given the back end waiting with Star Wars?
Yeah. I mean, obviously, when you got titles that are as appealing as Star Wars and the expectation of the strength of the Q4 box office, that's going to help your media business. So it's been a strong year to date. Q3 was still strong. It wasn't as strong as the first half, but we have lots of confidence on where the business is going to be in the fourth quarter.
Okay, great. One final one for me. Maybe you could comment just a little bit. We've talked about VIP and the rollouts in the past. What's the utilization level looking like in VIP relative to the mainline theater?
And I guess where I'm thinking about this is, is there further opportunity for CPP to raise as utilization in VIP grows? Is it fairly comparable to the mainline theaters?
VIP utilization is extremely strong. For example, this past weekend with Bond opening, utilization was over 60%. So it has lots of traction. It is driven by certain movies, but people love it. They spend more time there and they enjoy the environment and also participating in the food offerings.
How much room do you think there is Ellis to lift that even further like that's already great number, but is there room to lift that even more?
Yeah, as we continue to refine the offering, I think we will continue to raise the bar and actually increase the total out of pocket spend by our guests that come to the theaters, especially in the area of the concession for patrons where we keep looking at the menu and our offerings and seeing what we can do to adjust it to make it better for
the guest and better overall from a return for Cineplex.
Perfect, thank you.
Thank you so much.
Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Jacob. We do have another question.
Our next question will come from the line of Derek Lessard of TD Securities. Please go ahead.
Yes, thanks and good morning everybody. I was just wondering if you could maybe add some color on the deployment of the A and W TV network, things like the rollout schedule. And maybe as a follow-up to that, do you have the ability or even the manpower have more than one of these big rollouts going at the same time?
Derek, it's Gord.
I think with respect to the AE and W rollout, we have been rolling out you know, typically involve as I mentioned, it's a long lead time. You know, as part of signing a final agreement, you're gonna do some pilot testing and some fairly, you know, extensive pilot testing. So we have been rolling out. And I look at certain clients, you know, have deployed extremely quickly across the country and we're able to handle that. We have not had issues in the past and, you know, we continuously look at sort of the infrastructure that we have and that we need to support new business going forward.
So we're comfortable. We've got the flexibility. We've got the infrastructure that can be put in place to handle large volumes of deployments.
Okay. So A and W, we expect it to be completed by?
You know, it'll take like I said, usually, large scale deployments take at least a year. So I would say you're gonna see over, you know, still over a two year period, they'll be deployed.
Okay. Thanks very much, guys.
Thank you.
Thank you. There are no further questions on the phone lines at this time. I'd like to turn the call over to Mr. Ellis Jacobs. Please go ahead.
Thank you all for joining us this morning. We look forward to speaking with you again in our year end conference call in early February. We hope to see you in our theaters over the holidays and may the force be with you.
Thank you. Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.