Okay, great. I think we'll get started. I'm pleased to welcome Patrick McClymont, CFO of IMAX, to the JP Morgan TMC Conference. Patrick has been the CFO of IMAX since August 2016. Thanks so much for being here today, Patrick.
Thanks for having me.
So let's start with the announcement IMAX made a few weeks ago for the launch of IMAX with Laser commercial theater system. What makes this system different from your current theaters, and how does it differentiate IMAX from its competitors?
The Laser system, the technological difference is the illumination comes from laser, which allows us to have a much brighter light, and the way that we've designed the system, the experience that the consumer will have, you end up with whiter whites and blacker blacks, a broader color gamut, a crisper, sharper picture. We're also deploying it with our 12-channel sound system, which is sort of the state of the art and best possible sound experience. Even before we launched it, we had systems running in our Los Angeles office and in Canada, and we've had a number of filmmakers in. We've had studios execs, we've had exhibitors come in, and the feedback has been remarkably positive.
We know that this is now going to be the best-in-class product out there, and as we deploy it in the network, we expect that our exhibitor partners are going to be quite pleased and ultimately end consumers as well.
So when you announced this deal, you signed for this IMAX with Laser. You simultaneously announced deals with AMC and Cineworld, two of your major partners. What's the expected rollout for these screens? And since they're such big partners for you, both in the U.S. and Europe, do you expect that this will influence or has it even already influenced your Laser signings with other partners?
Yeah, we're really pleased. When we six months ago, if you would have asked me what would have been a successful launch, I think we would have been pleased to launch with one customer and 25 or 30 theaters. To have two customers, AMC and Regal, launching in size. So AMC is doing 87 upgrades to their existing XENON Systems, they're converting those to Laser, and then Regal signed up for 55, some of which are new, some of which are upgrades. And those are, when you think about Regal being now owned by Cineworld, those are two of our most important global clients. So we're really pleased to have both, and as you'd expect, they both wanted to be the launch customer and aggressively pursued that with us. So we felt great about that.
We've got a handful of other contracts that we've also signed that are onesies and twosies with different exhibitors. We formally announced the product at CinemaCon back in April, and we're now in discussions with a number of different exhibitors. As I mentioned, we've got the demos that are up and people are coming through and seeing those. We've actually started deploying what we call pilot systems, actually in revenue service with some of our partners, so that we can iron out any bugs and test how the product is going, so we're off to a great start. We anticipate that we'll be having conversations about new theater deals with Laser, and then also we've got 540 screens in our backlog right now, and some of our clients are going to look to convert those backlogs from XENON Systems to Laser as well.
These deals are also structured with higher take rates from the exhibitors, and the costs for IMAX, I believe, are only modestly more expensive than XENON, so obviously great from an economic perspective for you guys. How is IMAX able to negotiate these higher take rates, and how important is it to you to get higher take rates for these new systems?
The value proposition for the client, what we've been able to explain is that this is going to be the best-in-class product, the best consumer experience, and we and our exhibitor partners expect that it'll drive incremental attendance, and so they'll be making more money with these systems, and we also explained that from a cost of goods sold standpoint, these are modestly more expensive. Some people may know that we've got what we call a GT Laser, and that's a product that's been out in the marketplace for about three years. That's a much more expensive system, and it's really only designed for the very biggest IMAX screens, and it's actually a dual projector system. We took our time in launching this system. We wanted to make sure that from a cost standpoint, it was going to be broadly deployable in our network and with our exhibitor partners.
And so there is somewhat of a premium in terms of the cost of it. We get compensated for that in terms of an incremental take rate. The deals that we launched with two big customers, and we feel very good about, we are getting incremental participation in the box office. And as we roll that out further, we expect to be able to maintain that pricing. In fact, as we do smaller deals, we should be able to achieve even better pricing. So again, off to a good start, it seems like the economic model will work quite well with us.
These new theaters also come with new 10 to 13-year leases, which obviously extend your leases for AMC and Cineworld. What does the lease profile of your remaining portfolio of theaters look like?
We actually don't really see meaningful renewals until sort of the 2021 timetable. Between now and then, it's handfuls of theaters per year. In 2021, it starts to ramp up a little bit. A number of those renewals we actually solved with the deals that we just struck with AMC and Regal. As we get closer to that period, 2021 and beyond, we'd expect that we'll have the same kind of conversations about renewing people but doing it with an upgrade to Laser. The renewal curve is still a little ways off, and now we've got a new product that will help us manage through that.
Assuming that you guys do get a lot of conversions in your backlog or more signings for Laser, and there's just more demand over the next couple of years, is there a maximum number of theaters that you could upgrade or install each year?
Right now, for this year, we've communicated that we'll do 180 systems, and that's 155 new installations and then 25 upgrades. We could do a bit more than that. There are physical constraints, and it's also very dependent upon the schedule of the exhibitor partners and when they want to open up their theaters. But certainly, we can accommodate the 180, and that's going to be a mix of XENON and Laser. If we need to go meaningfully beyond that, we'd have to install some new manufacturing capacity. But we think something that when I think about the longer-term model, the next three to five years, it's probably going to be around that number.
Got it. And there's also a big branding component and rocker seating for the AMC and Cineworld deals. Is this something that IMAX is also looking to implement in any of these new Laser systems?
That's actually the whole concept. When we went to AMC and Regal and talked to them about the product, we also talked to them about the need to reinvest in the IMAX experience in their theaters. So the ones that we're upgrading, these are some of the older XENON Systems. And so when it comes to seating and signage and carpeting, the theaters were in need of a refresh. And so both AMC and Regal are investing heavily in all those elements. They'll be reseating all of these boxes. They'll be installing new signage, new portals. They're going to create something that feels much more like a modern premium experience. And so they'll be investing in that. We'll be investing in deploying the new systems in our partnership model with them.
This is actually think about the Laser screen, Laser projector, new 12-channel sound systems, and all the things the exhibitor is doing. It's really creating almost a new IMAX product in those theaters.
Great, and it seems like the commercial Laser systems could have a positive impact on the box office, as you mentioned, but of course, there'll be a small percentage of the total installed base at least for the next few years. How do you think about your broader box office growth over the next few years?
For us, box office growth is really all about network growth. So currently, we have just short of 1,400 screens around the world, and we're in more than 75 countries. We have 540 screens in backlog, and we continue to sign up new theater deals as well. When we look at the world right now, we think there's something like 2,800 or 2,900, what we call zones, that could accommodate an IMAX system. That number typically goes up over time. But between our installed base and the backlog, we're at, call it, 1,900 or so. So we've got another seven,800 zones to go out and sign the contracts and win the business. That's the real key to us. When we open up these new systems in these new markets, and if we do it the right way with the right partners, that's how we're driving long-term box office growth.
In the short- term, it's all about our expertise in picking the movies, and the period we're in right now, first quarter of this year, second quarter of this year, obviously very robust in terms of Hollywood blockbuster. This is a period that is really the sweet spot for IMAX. When you think about films like Black Panther and currently Avengers and the movies that are coming up in the next few weeks, we've got Deadpool, Jurassic. It's really the kind of movies that people want to see in IMAX. Internationally, those movies do quite well, and we're also now doing a much better job picking local language films in places like China, and we've got a growing business in India, and so we're starting to develop the talent and the expertise in picking the right local language films as well that are now doing better in IMAX.
Great. And obviously, content plays a huge part in your business. Do you have any concerns about studio consolidation impacting the amount of Hollywood content that's being released?
The trends in Hollywood moving towards more blockbusters and these big tentpole films, that's actually to our benefit. So you look at Disney, where they're now doing 10 movies per year, and each of those movies is designed to do $1 billion plus of global box office. That's right in our sweet spot. When you look at Warner Bros.' strategy, presumably when Fox gets acquired by Disney, they're heading in the direction of really focusing on these big blockbusters. So we're not in the exhibition business. We don't have 10 or 15 screens that we need to fill up with content. We have one screen in the multiplex, adds up to 1,400 around the world. And we're typically showing movies for opening weekend, maybe the second weekend. For a big hit like Avengers, maybe we do a three-week run. But we're moving through the movies more quickly.
We're about that opening weekend when the demand is at the highest and helping people launch these big global franchises. So the direction Hollywood is going is actually beneficial to us.
Right. IMAX also just announced a deal with the General Cultural Authority of Saudi Arabia to jointly seek opportunities to identify and develop local IMAX format films, and I think yesterday, or maybe it was this morning, another multi-year theater deal with VOX Cinemas. What do these deals mean for IMAX, and what are your thoughts on the potential of the film industry in that market?
Well, we're really excited about what's going on in Saudi Arabia. Before they opened up cinema a month or two ago, there was actually one cinema in Saudi, and it's an IMAX. It's at an institution, a museum there, and it plays documentary content. So we've got a presence there. We've got a brand there. We knew this was coming. We've been talking to our exhibitor partners. We announced a deal with VOX, which is a four-theater deal, and we're in discussions with them about additional opportunities. We're also in discussions with AMC. AMC announced they've opened up one theater in Saudi Arabia, and they've announced that they're targeting, I think they said, 100 additional markets that they think they can open theaters. So we're in discussions with them as well.
We've got a presence on the ground in Saudi, sort of sorting through these issues, trying to pick the right partners. We think that it can be a very interesting market for us in terms of deploying IMAX screens. Not clear how many of those 100 multiplexes are going to have IMAXes, but we think it's a meaningful opportunity, and then also, they're very focused on building a new filmmaking community in Saudi Arabia, so what we announced and what we're talking to them about is, how can we help do in Saudi Arabia some of the same things we do here in the United States, where we have symposiums for young directors? We help people understand how to use the IMAX Cameras, how to use the IMAX system. We make investments in relationships to help people learn how to be better filmmakers.
We'll be doing those things as well as they develop that market.
How do you think about the film content in that region? What might play well, or if there's local content that you guys might play?
We'll see. It's a great question. For us, obviously, the Hollywood content will be very important, and we think initially, for a market that's been closed to cinema for 35 years, when we've seen other markets open up, and China's a good example, typically, initially, the Hollywood content does extremely well, and so we think we're well positioned for that, and then we'll just have to see how the local filmmaking community evolves, but we want to put ourselves on the front end of that and help people think about ways to create movies that work in IMAX.
The domestic market subscription services have been a really key topic in the industry over the past year with MoviePass, Cinemark's Movie Club, and the potential for other services to come. As these services evolve and more exhibitors experiment, potentially launch their own services, do you think it makes sense for IMAX to be included if it were at the right price point?
So we are included, and we're talking to most of our major exhibitor partners about these kinds of programs. It's clear to us that subscription services are here to stay. Just the way consumers are consuming a variety of products, people are much more comfortable these days with subscription programs. For the movie business in Europe, they've been in place for quite some time. So we've got good data from our exhibitor partners that we can look at and understand what works and what doesn't work. Our approach to this is very similar to our core business, where we have relationships with many different exhibitors, and we're nimble and flexible. So when we sell systems, sometimes we sell them outright. Sometimes we do partnership deals. Sometimes we do what we call a hybrid. We're willing to be creative and flexible to set something up that works for the client.
And we think about subscription programs the same way. So one example would be Cinemark. They launched their program. And what they decided to do is people can go see IMAX. They just need to pay an upcharge. So on the basic subscription, you pay $8.99 per month. You get to see one movie per month. If you want to see that in IMAX, you just pay an upcharge. And they came to us, and that's what they're doing. And so there's no difference to us. We're still making exactly the same economics. There's other exhibitors who are talking about doing different types of subscription programs. And so they're talking to us about what that means for our business and how to think about the economics, how to think about the incrementality that it'll drive. And so we're open to those discussions. We want to be flexible.
We also, and our partners, recognize that this is evolving pretty quickly, and so we're going to try things out. We'll agree to one approach with a client and give it a year to see how it works, and maybe we'll do something different with somebody else, and over time, I guess, as the program sort of evolved to be generally similar, so we're in a good spot. We think that it will drive incremental traffic in theaters. We think that will drive incremental awareness and trial of IMAX, and those are good things for us.
Then more broadly, all these subscription services have kind of brought about the conversations about how to target those more value-oriented customers. The exhibitors decide the ticket prices, but what are your thoughts on just more varied ticket prices in general for mornings or specific movies?
We're open to that, and we're having some conversations with our exhibitor partners as they're thinking through what generally people call this dynamic pricing. It exists in China. In China, they look at what they think a movie will do and what the demand will be, and they'll adjust the pricing. And then over the length of run, they'll typically adjust the pricing to try to drive more demand. We're not seeing that kind of activity yet in other markets, but people are certainly talking about it. And so, again, we're open to it, and we're open to the fact that different exhibitors will try different things. And so we've got the kind of relationships where we have a seat at the table. We can influence the outcome. And the goal is obviously to get more people showing up at the movies.
Again, we think we've got a great product, so that can only be a long-term good thing for us.
The domestic industry also has a significant shift towards recliner seating over the past few years, and IMAX has its rockers that are being rolled out in more theaters. What percentage of your theaters have rockers now, and what impact do you think that they've had on your market share?
The seating issue is really a domestic issue. Most of our theaters internationally, certainly China and other international markets, are relatively new, and they already have high-end, very comfortable, consumer-friendly seating. Domestically, I think we're up to now 70 IMAX theaters domestically have been converted to a new form of seating. We've tried three different flavors. One is full recliners in a limited number of locations. The other is what's called a partial recliner, and then what we call the plush rockers. We are in the opening weekend blockbuster high-demand business. For us, it seems like the plush rocker is the best product because when you convert to that, you only lose 15% of the seats in the theater. If you go to full recliners, you can lose close to 50% of the seats.
And so there's too much spill for us the way our business works on opening weekend. So that's the product that we think works the best. The consumer feedback has been very positive. It is a high-quality, good experience. And our exhibitor partners who are using those are quite pleased with them. So it seems like that's the direction we'll go. You lose about 15% of the seats, and so there can be some spill on the opening weekend when we're seeing more sellouts. But the consumer experience is much better, so we think in the long run, we end up in a better spot.
Great. China, of course, remains a major area of focus for IMAX. It seems like the box office has picked up there year to date, including a really strong Chinese New Year and the recent success of Avengers. What are you seeing in that market right now?
It's all about the quality of the content and what resonates in IMAX. And so this year, Ready Player One was a film that did pretty well globally. It did extremely well in China, and it did really well for IMAX. The story resonated, and then the nature of it being a virtual reality story, people wanted to see it in IMAX. Avengers is another great example. Avengers opening weekend, it did $200 million in China, and $20 million of that was in IMAX. So we did a little bit more than 10% market share on only 500-plus screens in the whole market, which is a phenomenal performance. And actually, since opening weekend this week, it's been slightly ticking up. We're doing more like 11% or 12% on a daily basis.
That was a movie that was filmed with IMAX cameras, and we pounded away at that in the marketing, and we got a lot of help from the directors, the Russo Brothers, who talked about it and the cast, and so that was a movie that really resonated for people in IMAX, so when we have those opportunities where it's clearly IMAX-centric, we do quite well. What we're trying to do is figure out ways to also apply that in local language films, so Chinese New Year, we have a strategy where now we have multiple films available in the marketplace going into big weekends. That way, we're not making one bet, and we may miss something that's a surprise hit, so we actually did three films for Chinese New Year, and that strategy worked really well. One of the films opened up very strong, and then it tailed off.
One of them opened up quite solid and did solid throughout. One of them actually opened up a little bit softer, and then it started having more showings, and that actually became the ultimate winner, a movie called Operation Red Sea. We had all three. And so our exhibitor partners could sort of turn down the dial on the ones that weren't working as well and turn up the ones that were working well. And so we ended up in a better spot overall. So we're doing different things, programming, and then we're trying to spend more time embedding ourselves in the local filmmaking community to help people understand that they should think about IMAX when they're conceiving their films. They should consider using our cameras, the same tactics that we use here to create that ecosystem effect.
It seems like the local films in China have really gotten a lot better the past few years. Are you seeing these local films evolve in terms of quality or popularity there?
Certainly popularity. Quality, you've got much higher production values, better special effects, all of which is helpful for IMAX. When you went back a couple of years, it was hard to make an argument that you needed to see a local language film in IMAX because the quality just wasn't there. But now we are starting to see more of that, and it'll just keep getting better and better over time.
Do you have any read on the local language content for this summer yet?
There's two films that we're excited about coming out in July. One is Detective Dee 3, and the first two did well, and it's sort of an action/comedy adventure, big kind of popcorn movie, we'd call it here. And so we're excited about that. The other one?
Dying to Survive.
Dying to Survive, which I haven't seen, but our team in China has seen it, and they think that one could be quite a big hit in China in general, and we should do well with that also.
Great. And as you roll out more into tier three and four cities in China, are there any particular considerations you have to take into account, such as content preferences or ticket prices?
So the first issue that we've noticed in China, as you get to those cities, they don't have the same familiarity with IMAX. And so we're going to spend more time and effort trying to educate people on why it is different and what the value proposition is. So there's an awareness issue and a marketing issue that we're very focused on. And then we also have ticket pricing. These markets just don't have the same demand characteristics. And so it's not an IMAX issue. It's a general issue. They just don't have the same pricing power. And therefore, they're willing to pay a premium for IMAX, but you're off of a lower base. So that certainly is an issue.
And then, content. What we've seen is that the local language films and typically comedies and dramas that don't necessarily lend themselves to IMAX. Right now, those can be more popular in tier three through five cities. And so that's a challenge for us because we're much more focused on the action adventure films. We think over time, just like in the tier one and two cities, that will evolve, and content preferences will change. But it has created some pressure on the unit economics as we grow into these lower-tier cities. We've spent a lot of time over the last year thinking through these issues, and we think we're headed in a good direction, but it will take some time for those markets to mature.
With that difference in content preference, like the comedies in these lower-tier cities, would you consider, as part of your multi-film DMR strategy, DMRing those films as well, or is that not quite enough of a return at this point, and then also, how do you keep the costs about the same on your DMRs when you're DMRing so many more films?
We'll consider doing different types of content. We used to always get this question on family movies and animated titles, and the reality is we can do quite well with those. We're doing The Incredibles. That's coming up shortly, and it'll be interesting to see how we do on that, so yeah, we'll consider different types of content, and then on the DMR, DMR is a process that there's a lot of technology in it, but there's also a lot of sort of human value add, and it really depends upon the film and what the filmmaker wants to do, so at one end of the extreme, you've got something like Dunkirk, which was filmed with IMAX cameras, and we did a lot of the post-production work, and Christopher Nolan was extremely hands-on, and so we spent a ton of money on the DMR process for that.
There's other movies where we can do a much more sort of technology-focused as opposed to human intervention, and what you're really doing is cleaning up some of the obvious flaws, but spending less time with the director, the filmmaker, doing a lot of correcting work, and so it really depends, and when we look at films that we just don't think it'll do huge box office, we're going to err to the side of spending less on it. We're still adding value. We're still creating something that's differentiated, but we don't have to spend quite as much time and money.
Great. And is there any update on the WTO agreement or your expectations, I guess, on film splits or the number of releases and how that may be impacted?
No, it's pretty quiet. There's apparently some activity going on, but no clear timetable in terms of when there'll be a resolution. As we've consistently said, it can only go in a good direction. So whether that means more films, it will mean bigger take rates. We're confident we'll only end up in a better spot, but it's really hard to predict. And obviously, there's much bigger and broader trade issues going on with China, and so a lot of the overall time will be determined by that. So there's no evidence that it'll get resolved anytime soon.
Right. IMAX is also focused on more marketing initiatives this year. What is the company doing in terms of marketing, and what results do you hope to see?
We have new leadership of our marketing department, largely a new team. We've also engaged new outside sort of agencies and help. We'll be launching sort of a reinvigorated brand in the July timetable. The key mission is we're trying to help people understand the answer to the question, why IMAX? Why should they consider seeing an IMAX? What is truly different about it? The team is working hard to come up with a very hopefully clear and simple consumer value proposition that we'll then leverage across all of our different marketing activity. We're also trying to spend time working more closely with the studios. Historically, IMAX marketing has been essentially drafting behind the film marketing.
And what we want to do, we'll continue to do that, and we need to support the specific films, but we need to use that to create a broader understanding of IMAX. And the most recent example, the first example for Avengers, we actually created a piece that you can take a look at it online where we used Disney's IP, which is the glove of Thanos, who's the villain in the movie, the gauntlet, and in his hand is the word IMAX. Nowhere on it does it say Avengers. It doesn't specifically market the film. It's much more about how IMAX lives within that ecosystem. And that was getting Disney comfortable that we were going to use their IP and work with them on a very collaborative basis was a big step forward.
And so we're trying to figure out ways to not just market a movie, to market IMAX using partnerships with the studios. And so you'll see more of that kind of activity. We're also spending more time thinking about how do we, we don't have a point of sale relationship with our customers, right? That's handled by our exhibitor partners. But there are ways that we can get to the customer when they're actually making the decision how to see a movie. And so that can be through social media. That can be through partnering with the exhibitors on their subscription programs or on their loyalty programs. So there's things that we can do to get more access to the data and closer to the customers. So those are all the things we're focused on now.
Great. I have a few more questions, but just want to see if there's any questions from the audience first.
Two questions. First, in terms of that backlog, the 540, how geographically dispersed is that? And then with a little more detail, in terms of your China backlog, how are competitive technologies entering into the adoption rate of IMAX in China?
The backlog, still, the biggest chunk of it is in China. Then beyond that, we've got other reasonable-sized backlog in places like, actually, in Western Europe, there's a number of markets where we didn't have theaters, but with the consolidation activity there, we've signed up new deals. We've got places like India. We currently have, I think, 28 theaters in backlog in India and 12 installed. That's a market that's growing quickly. It's generally international with a skew towards China. Then beyond that, it's a handful of different markets. Then in terms of competitive dynamics in China, there are other competitive products. Dolby has a bit of a business in China, although it's slow-growing. China Giant Screen is a large-screen competitor.
Nobody has a true ecosystem in the way that we do, where they're working with filmmakers and sort of from start to finish are part of the process. And nobody has the brand that we do. And now that we've launched our new laser product, we also know that we've got clearly the best-in-class consumer experience. So we think we're in a very good position competitively. It's a market that's just growing really quickly, right? They're adding 10,000 screens per year. And so that, to me, is the bigger competitive dynamic. There's just so many additional screens, and oftentimes that means new multiplexes that are clean and fresh and new, and that can be competitive. So we're more focused on the broader market dynamics and making sure that we're figuring out a way to really drive home differentiation.
When we do that, like Avengers, where we did 10% of the Chinese box office, it really works, and so that's the key for us, is landing that question, why should I see this movie in IMAX?
Quick second question, which would be, so I look at your earnings, bottom-line earnings the last seven years or so. It seems like they've ranged, give or take, between $0.80 and $1. And relative to my perception of your growth opportunities and sort of how fast you've been growing the installed base, etc., what's the high-level explanation why you essentially have had flat-ish-type earnings growth for seven years?
There's a few things that are going on. One is, over the last handful of years prior to this year, we've actually decided to pursue a variety of new business opportunities. And I think the rationale for that was quite clear. We wanted to add additional legs to the stool. We've got a wonderful brand. We've got some expertise. Unfortunately, for a company of our size, even relatively small initiatives can consume a lot of capital. They can result in meaningful OpEx, and they consume a lot of human capital and can create distractions. And so when you look at our last five years, we took almost all of our free cash flow and reinvested it in new businesses that ultimately have not panned out. And so that's been a drag on our earnings. In 2018, we've significantly scaled that back.
We're not looking for any of those new opportunities. The ones that are still in the works, we're reducing our expenditure on. So I think last year we spent something like $31 million. On an EBIT level, that's what it cost us for these new initiatives. And this year, we've guided to $6 or $7 or $8 million. So we want to have our core business shine and produce the kind of bottom-line earnings that it can without sort of the dilution from these new initiatives. The other challenge that we've seen is the network has been growing, but if you look at the total box office, it's been kind of stubbornly stuck right below $1 billion for the last four years. We had a very good performance in 2015, a big ramp-up. And then since then, it's been right about that level.
And a lot of that has to do with the slate and whether the movie's working IMAX or not. And a lot of it has to do with the questions on China, where as you grow into these new marketplaces that don't have the same pricing power, you're just not producing the same unit economics. So that's been a challenge as well. We're at a place right now where it does appear that the slate this year and the slate next year are going to be quite strong. And so we think we've got a good box office opportunity. And then what we did last year is we did a restructuring. We took a fair bit of cost out of the system to make sure that we'd have that operating leverage. And so we're starting to benefit from that.
So we think we're headed in a path where, as the network grows, the network will grow at sort of 10%-15% per year. The box office is going to kind of bounce around a little bit, but the overall trend, we're going to be in a much better spot.
I think we had a question from.
I have a very non-financial question. In terms of leveraging IMAX, because you're working with Marvel, you're working with Disney, and sort of they're going through this sort of trend of like, "We're going to sort of build off that one idea where either we're going to do a prequel, we're going to do a sequel." Are you planning? Is IMAX thinking, "We're going to ride that wave"? Or do you see yourself riding that wave while sort of exploring sort of independent documentary films at the same time? I mean, what drives you? Is it technology? Is it the brand? Is it the opportunity, the convenience? What is it that IMAX is sort of going for at this point?
So our core business, we sit in the middle of an ecosystem. On one end are the studios and the filmmakers. At the other end are the exhibitors. Our core mission is to create value for both of those and then extract a little bit for ourselves. We create value for studios by helping them launch these global franchises. Hollywood is going in the blockbuster direction because they recognize that the movies that people will come out to see are these big blockbusters. And these big blockbusters are typically franchises where there's multiple downstream opportunities to monetize, right? So Disney is the best example where there's theme park rides and consumer goods and all sorts of different ways that they can monetize it. The way that you launch a franchise like that is through the theatrical release with that big burst of marketing.
And the way that you tell the world that it's the most important movie that weekend is you do it in IMAX. And so that's why we have deals in place with each of the major studios, and they want to launch these big movies with us. And they're willing to share in their box office, give us a share of their box office to do that. On the other end of the spectrum, the exhibitors, certainly in mature markets like the United States, they're constantly looking for ways to create a differentiated premium experience that gets people away from their phone, away from their iPad, and show up in a movie theater and see something on the big screen. And our brand and our consumer value proposition for these big blockbusters does exactly that.
The exhibitors know that having an IMAX in their complex gives them incremental traffic, and it gets people to show up for these big movies, and so that's our mission, so right now, what we're doing is we're trying to figure out ways to push that advantage, so laser is a great example, creating an even better product that our exhibitors can use. With the filmmakers, we call it DNA, so Avengers, both Avengers 1 and 2, it'll come out next year. Those were filmed with IMAX cameras, so from inception, the Russo Brothers thought about that movie in IMAX. Dunkirk, last year, another example is our film cameras. Black Panther, that was filmed in the aspect ratio, and I believe that Ryan Coogler is the next great IMAX director. He's a huge fan of the format.
Later this year, we've got First Man coming out, which is Damien Chazelle, who did La La Land, and this is about Neil Armstrong. He's using IMAX cameras to film certain scenes of that when it's up on the moon because he understands that's the way to capture that grand scale, so that's how we think about things. How do we get closer to these key relationships? How do we add more value for them so that we're continuing to push the IMAX brand?
And one last second part to that. How are you considering VR within the spectrum? Because, I mean, there are some VR opportunities for someone to just sit at home and feel like they're in a movie theater and get almost the same, not the same experience, but almost the same experience as an IMAX without disclosing too many secrets.
We spent a lot of time and effort on VR. We actually launched our own VR business last year, and we've got seven centers. We've communicated that we'll continue to operate those. We'll continue to experiment. We don't think that that's a location-based VR right now. It doesn't seem like a business that we'll be able to scale and see it in a way that we can make good money. We do think it's interesting, and we're continuing to learn. It's given us a lot of access to content creators, how people are thinking about distribution, insights into the competitive landscape. In terms of a substitute for our product, we're not so concerned about that because, again, it goes back to the launching of these franchises where you're still going to see Jurassic World: Fallen Kingdom on an IMAX screen.
And there will be a VR experience for that. And we actually, we've been in communication with them. We're going to have it in our centers, and we'll help them monetize that. But that's not a substitute for, and this starts to sound sort of, I don't know, a little creative. But one of the filmmakers that we've talked to said, "Look, for a thousand years or 10,000 years, human beings have sat around a fire telling stories. And there's something communal about it, about going out and experiencing things together. And now, to do it in the best possible format with the best, there's magic to that. And we don't think that that's going away.
Perfect. I think we're out of time. Thanks so much for being here again, Patrick.
My pleasure. Thanks, everybody.