Great. We'll go ahead and get started. My name is Mike Ng. I cover movie theaters and toys here at Goldman, and I have the privilege of introducing IMAX's CEO, Rich Gelfond, and CFO, Mr. Patrick McClymont. You know, welcome and thank you both for making it out here for another year. Just to level set, you know, IMAX's global network continues to grow. I think you guys have a lot of momentum in the business. You're on track to install about 155 screens this year. Box office is doing well. You know, what are you most excited about, and where do you see the biggest opportunities over the next several years?
So, Mike, we sit in the sweet spot of the destination entertainment industry on a global basis. First of all, we're a global company. We operate in 80 countries today, about 1,300 screens and about 600 in backlog. And, as you know, worldwide, box office is expanding at a great pace. Second of all, we're not in the theatrical exhibition business. We show blockbuster movies. And blockbuster movies are very much on the increase. You think about the Disney merger with Fox. You think about the direction of a lot of the studios themselves. Content, kind of the mid-level movies is going streaming. So what's making the theatrical experience so popular today is really these blockbusters. So, the global blockbuster business is thriving. So that excites us. And then also our position in the global blockbuster business, we're right in the middle of the ecosystem.
So if you're a name director, you want your movie done in IMAX. If you're a studio, you wanna event-size your movie 'cause that gets people off the couch, and that's where they're going. And, if you're an exhibitor, you wanna make yourself relevant by putting an IMAX in. So I think we're at the center of a lot of things at a time, and that's exciting.
That's a great overview, and I really wanna hit on a lot of those things. You know, one thing you mentioned was the backlog, so you have about 600 screens in the backlog. How should investors think about how and when that backlog actually translates revenue, and what's the risk to the backlog? Is there a historical cancellation rate that you've seen?
Just to quickly clarify, so we have about 500 screens in backlog that are new screens.
Yep.
And then when you include our recently announced laser system, where a number of our customers have decided to upgrade, that gets you to a little bit north of 600. So there's a split between the two.
So the risk historically has been close to zero. First, I have to underline, the backlog is customers who wanna be in the IMAX business. North of 80% of our backlog is existing theater operators around the world who've had a great experience with IMAX, and they understand that premium is the way the world is going. So that is just an environmental overview. In terms of how fast it runs off, it's an average of around three years. But if you go back, over the last five years, even though we're installing more and more theaters each year, you know, in time period, the backlog has continued to go up. And that's 'cause our signings are so robust. So I think it's a good indicator that we have a lot of growth going forward, but the exact timing is hard to predict.
I'd like to get your thoughts on an industry-related topic. With companies like Disney and Apple planning to launch their own streaming services, and Amazon and Netflix already doing a lot from the original movie perspective, how do you see this landscape evolving, and what impact do you think this will have on the entertainment industry and on IMAX specifically? Do you see any opportunities to work with any of these streaming services as it relates to their films or?
I do. I think it's a real positive for IMAX about the development of streaming, particularly streaming of blockbusters by several of them. Because the directors, content talent, they don't want films to only go out on a small screen. And you saw Netflix did the Will Smith movie. You don't really know what the gross is. There's not an opening day for it. There's not a whole staged rollout of it. And everyone in the streaming business recognizes that they need to event-size. And the number one way to event-size is in IMAX. And you know, this is not a pipe dream, Mike. In fact, we're in active discussions with all of the streaming about an IMAX release. Now, under those discussions, we're not, we're gonna respect the windows in the streaming services. Know that.
But over time, to me, it's inevitable that these big blockbusters that people are spending all this money on are gonna have theatrical release, and I think almost certainly an IMAX release. A lot of these discussions are driven by talent who are saying, you know, we don't wanna make a movie for streaming unless there's a theatrical release. They're also being driven, I think, by the economics. 'Cause if you look at the economics of a blockbuster, I mean, Disney doesn't recoup from its theatrical run only. They're creating a franchise. They're creating ancillaries. And I think when you look at the economics, short-term for the streaming service, they're looking at subscriber growth. So that's how they could rationalize spending so much. But as their models roll out, they're gonna have to amortize that content in some way. And I think a natural way is through IMAX.
Just shifting gears a little bit, AMC launched a new subscription service, A-List, where customers can see up to three movies per week in any format, including IMAX, for a monthly fee of $20. Could you talk a little bit about how this, subscription service, A-List, affects IMAX, and what does the economic relationship between you and AMC look like for the service?
It's unequivocally good for us. AMC announced on their earnings call they had over 300,000 subscribers. I know from offline discussions that that's still going well. There's a significant amount of people signing up each week. Basically, their plan works, so if someone's a member of their plan, they can see the film in a regular 2D theater, a regular 3D theater, or an IMAX, and you know, the closest analogy I have is if an airline said to you, you know, you could sit in first class and drink champagne, or you could sit in the back row, you know, so where are people gonna go, and you know, I know this from informal discussions, you know, a lot of them are going to IMAX, so in general, that's a great thing for our brand and our company.
So the economics of it, which you also asked, Mike, was the deal we did with AMC is they guarantee us the same level, financial level, as we had last year adjusted for certain things, upward. On the other hand, so if it's better than it was last year, we get all that incremental revenue. If it's worse than last year, they make us whole. On the movie side, where we also have a revenue stream from the studios, there is no fee reduction on our part. I should just back up. In exchange for that, with AMC, we agreed to lower the take rate for those members under the plan. We still get the same take rate from the studios.
So again, not to belabor it, but to use a simple example, you know, if we bring in only one new person, we're made whole by AMC, and we make more because we get still paid on the studio side. If we bring in a lot of new business, we get the upside on both sides.
You know, at the end of the second quarter, IMAX had 98 laser signings, of which I think 25 were expected to be installed this year. Can you talk about what you see as the commercial laser opportunity, you know, what those economics look like, particularly when compared to a traditional Xenon product, and whether or not you see laser as a opportunity across your entire circuit or just a select few?
So now we're up to about 200 signings. The 98 you referred to were upgrades to existing systems, but they're also signings for new systems. Eventually, laser will replace Xenon all over the world. Now, I don't know whether that's three years or five years, but it's just a better product and a better consumer experience. So we built laser to increase the differentiation for IMAX. So if you go back 10 years pre-digital, there was 35-millimeter film, and there was IMAX. And 35-millimeter film, you know, would sometimes look grainy, or there'd be artifacts. And IMAX was just a much better experience. In digital, they really lifted the 35-millimeter experience, and we lifted the IMAX experience with IMAX digital. But we couldn't lift it as much as they lifted the 35-millimeter experience. But now with laser, we've super-boosted the IMAX experience.
So the blacks are blacker, the resolution is higher, the image is brighter. So you feel more like you're inside the movie. So this will increase the differentiation similar to where it was in the film world and ensure IMAX is placed at the top of the food chain.
Just as a follow-up to that, and that segues into my next question, but, you know, as it relates to laser, how does the consumer understand what it is? And, you know, I think that that ties into my next question, which is about the new brand campaign. You know, why do you see the need for that new campaign? You know, what does success look like there?
So we're not gonna go out under a different consumer brand. We're gonna, you know, keep it IMAX. But you don't have to be Chris Nolan to tell the difference. Like, if you went in the theater, you would see the difference immediately. I mean, the blacks are noticeably black. It's a brighter image. Whether it's 2D or 3D, it's quite obvious. And I think when people are asked to pay a premium price for IMAX, they need a premium experience. And I think that'll be clear to consumers. And you're right, Mike. It does tie into the next question because that's part of the theory behind the branding campaign. It's all about differentiation. It's about differentiating the consumer experience, and it's about differentiation, so we need to tell the public what the differentiation is. And you do that through a marketing campaign and a branding campaign.
I think you can see it on the screen. It's in the upper right corner is this blue frame, which is gonna serve as the basis for our brand campaign. And we'll talk about different experiences. There are generic ones around IMAX, but there are also ones specific to the film. So Disney let us put a shot from, Ant-Man and the Wasp into that blue frame. And before, if you saw IMAX's marketing with Disney, it was mostly on the posters. It said, "See it in IMAX," where you needed a magnifying glass to see it. They had separate ads created with that frame that had imagery from the film. And we're in the midst of doing some more of those right now.
So the brand campaign will get us out from the clutter, and we'll enable audiences to understand why they're paying a premium price before they go into the theater. Our goal with the brand campaign, and this is not a short-term goal. Short-term is to increase revenues and increase profits. Longer-term, right now, people will say, "Oh, you know, I wanna go see Star Wars. Is it in IMAX?" But what we want is people to say, "We wanna go to the IMAX." You know, what's playing in the IMAX now? So we think really building that brand side up is a very important strategic thing for us. And, it's not easy. We're in 80 countries, and I don't remember. The team will kill me. But there are like 55 language versions. You know, as we grow, we wanna make sure we're consistent on a global basis.
You've spoken a lot about how IMAX differentiates the movie-going experience, particularly for blockbusters that use, you know, what you guys have described as IMAX DNA, the IMAX cameras, the exclusive aspect ratio. You also mentioned that one of the films that you guys were excited about was First Man, which was filmed with IMAX cameras. Can you talk a little bit about the IMAX DNA, you know, how IMAX sets apart films like First Man from, you know, typical films, and any early buzz or indications on First Man today?
IMAX DNA means either filmed with IMAX cameras, or IMAX has a different aspect ratio. It's less letterbox and more vertical. Some of the films, like Avengers, were made with our cameras. Some are made with the aspect ratio. It's what how you can make it different and better in an IMAX theater. When you look at the numbers, IMAX films that have IMAX DNA perform better. In you know, to use one kinda more extreme example, Chris Nolan shot the whole of Dunkirk with IMAX cameras, and we did over 20% of the worldwide box office. Whereas more typically, if it's not IMAX and that's, you know, that's the high side. If you use more typically for a, you know, we would do around 10% of the box office in the countries it's showing in.
So we're always working with filmmakers, and they love it 'cause, frankly, it's like painting on the biggest canvas in the world, and they love IMAX's ability to help them do that. So First Man was the perfect movie for this. For those of you who don't know, it's Damien Chazelle, who directed La La Land, and Ryan Gosling starred in La La Land. And, Damien also did Whiplash, a very talented young filmmaker. He won the Academy Award for Best Director for La La Land. And, the way they've used it is he shot a lot of the movie in 16-millimeter 'cause he wanted to make it look a little bit like a documentary style. But, when Armstrong lands on the moon, so you're watching, you know, the capsule, you're watching him get ready to land, when he lands and steps out, it's full-screen IMAX.
I literally still get my hair stands up a little, thinking about it 'cause it's so incredible 'cause he's using that IMAX screen to transform the audience and also make a point of it. The movie opened in TIFF. It was one of the opening films at the Toronto Film Festival, and it got, you know, fantastic raves. It's an early favorite. People are saying for the Academy Award on some of the websites that do that. But I think this is like Dunkirk. You, to see it the right way, you're gonna have to see it in IMAX. And it's not gonna look that way in PLFs. It's not gonna look that way. But one of the reasons I get excited is that you have to combine that with the AMC subs program.
So now when you wanna go to AMC, you can see that film if you're a member of their subscriber at the same price in any theater. Why wouldn't you go to IMAX? An analogy: why wouldn't you do? Now, you know, as with any movie, I have no idea what the box office is gonna, but I know the movie's great, and I know the IMAX of it all. And we're using that. As you go into next year, the next Avengers is gonna be completely filmed with IMAX cameras. A number of the films have been shot to IMAX DNA. It's, again, going back to one of the keys I hope to get across. It's more differentiation. It's not just on the hardware side and the branding side, but it's on the software side.
Just as a follow-up to that, from an indexing perspective, do you expect First Man to play more like a, Dunkirk, for example, rather than your typical film release?
I think it will index better in IMAX, but, you know, it's for certain a higher percentage of people will go to IMAX to see it. Out about that. But you know how it plays, you know, men a lot smarter than I do have failed predicting that.
You know, IMAX has been pursuing a lot of programming strategy changes in the last couple of years, including more 2D films instead of 3D films, more screen sharing domestically, which is something that you traditionally haven't done. You know, I think shorter runs, more one-week runs, and more local language content. Can you talk about some of the rationale behind these changes and whether or not you would consider them to be successful?
So as the world changes, you have to be nimble enough to change with it. Otherwise, you fail. And you know, some of these, we were following the trends. So audiences didn't like 3D the last year as much as they liked it years ago. And when you looked at the data, you know, I think people decided not to go to IMAX 'cause we were showing it in 3D instead of in 2D. So that's why we kinda followed where the audience was going, and that's created much better indexing for us. In China, it was very difficult to pick out the blockbusters. So you know, we saw them, but it's hard to know Chinese tastes. And you know, the names are amusing. So there was, like, "Goodbye Mr. Tumor," and "Hello Mr. Billionaire."
And despite the fact we have a team in China who, you know, analyzes these, it's hard to know on opening weekend which was better. So we decided it was better to DMR a number of those movies and then see how they perform. And in fact, it's interesting 'cause this past holiday season, Chinese New Year, the film that opened really strong actually did this. And the film that opened kinda weak did this. And then in the middle, the third one played the same. So the exhibitors had the flexibility to switch back and forth, and we really maximized box office doing that. Speaking of China, as the market becomes more mature, there's a divergence in taste. So the tier 3 and 4 and 5 cities like local content more, and they like certain kinds of films more.
And the 1 and 2 tiers may like Hollywood a little bit more. So we're able to, you know, program different theaters in different ways and pull things out that aren't working and put things in. In general, it's working very well. As you know, you know, our box office is up nicely this year. In China, the July and August, we're up 70% from last July and August. Through our second quarter, we're up, I think, 16% year- over- year. So I think, I think it's working. And I don't think they'll be the last things. But I think as we learn more, we'll do more.
Obviously, to your point, really good box office growth in China, but globally, you're up about 20% year to date. You know, what do you think is driving some of that box office strength this year? And do you think those factors will continue to contribute for the rest of the year and into 2019?
First, to state the obvious, you know, the movies. They're movies people wanna go on a global, a global basis. You know, I haven't seen all the movies in the fourth quarter, so you never know. Patrick sometimes says to me, "Predicting movies like predicting the weather for farmers." It's a pretty dangerous business. But I think, you know, the diversity of our film slate and what, you know, what we're showing, I think, is pretty good. One of the other things building off what we were talking about, international releases, so in October, we have a big Indian film called The Thugs of Hindostan, starring Aamir Khan, who's one of the biggest actors in the world. So while October might be a slow month in North America, it's gonna, that's the biggest box office time of the year in India.
And we won't only play that film in India. We'll play that film, you know, in, in Canada, where there's a big expat population, or we'll play it in England. So our slate, you know, we, we have Russian films. We mention Chinese films. We just had very good success with a film in Korea. So we try and really curate global content and mix it and match it. And that's why, you know, that's, that's another reason, I think, that we were up so well this year. And I also think the movie theater business is a lot about momentum. So when you have more people go to the movies and they see trailers for other movies, the success begets more success.
I think, you know, as you know, we were all very pleasantly surprised by The Nun and Meg, you know, the kinda last month or two, the end of the summer really came nicely.
Let's shift gears to China. You know, in China, you have about 42% of your global screens there. You know, the network grew about 120 screens last year. It continues to grow. You know, what's your outlook for network expansion in China, you know, particularly given the economic backdrop there? And how does moving more deeply into China beyond tier 1 and tier 2 markets affect unit economics there?
So I think China is a rapidly growing film market. They now have about 55,000 screens. As I said a minute ago, tastes are shifting in China. And I think you just have to be nimble, which is what we're trying to do. I think you just can't be closed-minded and say, you know, "I have Hollywood films, and I release them, you know, for two-week runs, and this is what it's going to be." I think, Patrick actually went over with a number of our senior executives and put together a whole plan, for China. So what we do differently in some of the lower-tier markets, you know, how we think about not only film choice, but do we work with ticketing services or not? Then how do you market?
You know, a tremendous percentage of tickets went online in China, way more than in the United States or, you know, I think any other country in the world. So how do you shift marketing dollars? So, you know, I feel good about it. I think that we had growing pains in China one and two years ago. I think this year it's been stabilized. As you go to lower-tier cities, I think you're going to have lower PSAs. But that's not the question. The question is, is it profitable for you? And, you know, generally, most of our theaters, vast majority, are profitable, and you just have to continue to evolve with the environment changing.
What are your latest thoughts on the China film trade agreement? When do you think we'll see a new agreement? What's your expectation for what happens to import quota, film splits, and the blackout periods?
By way of background, the World Trade Organization found China to have violated its rules in the way it distributes movies. They, both sides, the U.S. and China, agreed to negotiate how to change the business, how it's done in China, in order to come in compliance. At different five-year periods, it's evolved. It's gotten better for Hollywood and better for us. The film rates, I think they were 9%, and they went up to 13%. And, just all the number of films in, allowed into China went up. What we're talking about is the next phase is how does it continue to get better for Hollywood? Under no scenario, no rational scenario, could it get worse? 'Cause that's not the context that all this is in. It did get a little caught up in the U.S.-China trade issues, and the negotiations were delayed.
So I think the timing of when it gets better will be tied to the resolution of some of the, you know, bigger trade issues going on right now. We have 150 employees in China. You know, we have over 500 theaters. We deal with all the studios. We have extensive dealings with the government. You know, people have led me to believe that the divide on the trade issues overall is not as big as the rhetoric is, and that things are moving in the right direction, and that this could all happen sooner rather than later. You know, with that, obviously, predicting politics in either Washington or Beijing is even more dangerous than predicting the weather. So I'm gonna not predict the timing on that, but I think it will go in the right direction, probably sooner rather than later.
IMAX is clearly the market leader for premium large-format screens in China, but, you know, there certainly is a lot of competition. You had China Film Screen Giant making some bold statements earlier in the year. You know, who do you see as your key competitors in China, and what do you see as IMAX's competitive advantage?
I really don't think there is a key competitor 'cause I don't think we're in the PLF business. I think there's IMAX, and then there are kind of copycats. And, you know, the copycats don't work with directors and CEOs, and, they don't have cameras. They don't film with cameras. They don't have a brand. I think it's a different market. And our, our per-screen average is about double, you know, what the other competitors do. But, you know, maybe the biggest proof in the pudding is yesterday we announced a deal with China Resources. China Resources is one of the largest mall developers in China. They're kind of like a Wanda in terms of building really high-end, terrific malls. And it happens to be owned by the Chinese government. Wanda's a public company.
You know, they scoured the competition, and they came to us, and they decided to do it to us rather than the competition 'cause I think they know that the IMAX brand and the IMAX experience brings people in. One thing about China also, it's economy in the home, it's not very brand conscious. So I'm, you know, making this up, but Tide or brand X, people really don't care. But outside the home, they really do care. And I think going on a date and taking your date to an IMAX or taking your date to a brand X is a big deal. So we've done phenomenally well in China. Our network, you know, when we're doing a movie, typically does about 10% of all Chinese box office. Our brand is fantastic there. So I think the competition is, you know, really a sideshow over there.
What other international markets do you see meaningful growth opportunities, and where has IMAX gained traction so far?
So, Japan has been really recently going very well. We didn't have very many theaters at all there a few years ago. Now I think we have something like 25 open and another 20 in backlog. India, which is, I think, maybe at this conference, Michael, many years ago, I said, you know, I was very skeptical about that market. It just wasn't developing. Our number of theaters open or in backlog, like, doubled in the last couple months. And the secret of success of IMAX is typically to have, you know, a theater open in a country that's a reference theater and have more than one potential client who's interested in being in the IMAX business. So, like, in England 10 years ago, we had eight theaters. And then the competitor came in, and now we have, I think, 60 theaters.
That dynamic is happening now in India. We have deals with multiple clients, and I think, I, I think we're really starting to see that come together. Germany, we only had one theater. We opened two earlier this year, and we have two more opening later this year. And, the per-screen averages are doing very well. I didn't mention that about India also, but the per-screen averages are very high in India. So I think, you know, I feel very good about those territories. Not to take away, you know, from other places like Russia, where we have 50 theaters, doing really well. Korea, we have 20 theaters, but our performance is maybe the best in the world in Korea. So though you know, those would be the main ones.
Seems to me that local language content has become a bigger driver, particularly in recent years. Importantly, I think this is not just in China but in other regions as well. Can you talk a little bit about how local language content plays into IMAX's programming strategy? And do you see local language box office becoming a larger part of the IMAX box office equation going forward?
I definitely see it becoming a larger part of our box office. We're doing more local language films. So we used to do, you know, the vast majority of them in China. I think this year it'll be between 10 and 20 films. There's more outreach from potential partners in different markets. So in India, where we've done it and it worked, they're reaching out to us. In China, we're very much a part of the ecosystem. We know many of the directors, know the studios well. When they're conceiving of a film, you know, they'll bring it to us fairly early on. As I said before, we're moving our cameras, some cameras over there to get more local DNA. And, you know, I think that there's no question in my mind that as worldwide box office increases, local language content's gonna, the more content's gonna come.
Using China as an example, when it was a sub-billion-dollar market, there wasn't a lot of money to make Chinese content. But you know, as it starts to move towards $10 billion, which is not long away, and then eventually approach the U.S. and probably pass it, there are budgets to make that kind of film, and there are budgets to make blockbusters. I think that's the global trend fueling it. I think we're really one of the few companies in the world that sees content on a global base, certainly in the exhibition business. You know, I think we'd like to become even more of a curator of that global content.
You know, IMAX has been managing costs really tightly across P&L, particularly in R&D and DMR costs. Could you talk a little bit about IMAX's cost savings programs and whether you see any incremental opportunities to manage the cost base, whether that's in real estate or sales commissions or elsewhere?
Sure. So last year, we actually went through a restructuring process that we announced in June of 2017. And we ended up taking out about 14% of the headcount. We changed and eliminated a number of different processes. And that was the first and the largest step in the process. What we've been doing since is really looking at the business and trying to think about ways that we can find efficiencies, change process. And a few examples, you brought up, commissions. We actually have changed our commission program. The way that our business gets done now, it's oftentimes bigger, chunkier signings. And so it was appropriate to rethink how commissions worked. That won't show up in the numbers until those theaters are actually installed because that's how the payouts are made. So that'll take some time, but it will be a meaningful savings.
Our DMR process is another really good example. And this is when we take the content from the Hollywood studio and we add value to it so that it looks great and sounds great on the IMAX screen. That's a, that's a complicated process. It's comprised of technology but also a lot of human intervention. And we've spent a lot of time trying to rework the process flow and trying to introduce new technology. So this year, we actually took our guidance for DMR costs down, partway through the year to reflect the fact that we're, we're achieving some of those benefits. R&D is another area that we've talked about. We launched our new laser platform this year. As Rich said, we're up to 200 signings in backlog with our customers. So it's off to a great start.
There's still work that we were doing in 2018 on the R&D side, and it's now being launched. And so next year, we don't have to reinvent the platform again. We took R&D spending down this year. We'd expect it to go down again. That'll be for some period of time. We will continue to look at opportunities to take down the cost curve on our products. There's sustaining engineering, and we will have a team dedicated to looking at future opportunities. But we'd expect to spend a lot more in the near term, or a lot less, I should say, in the near term as we're figuring out where we wanna place additional resources.
So what we've tried to do coming out of the restructuring is make this an ongoing part of the process, that we're constantly looking for ways to drive more efficiency and take costs out of the system. And, you know, I think we're in pretty good shape. The guidance that we gave this year, and that so far we've been able to keep to shows that discipline works. And importantly, when you have a year like this year so far, and certainly in the second quarter, the evidence is there. There's tremendous operating leverage when you've got a strong box office, and that's how we want the business set up.
You know, the business should continue to generate more cash as you grow the network. Could you talk a little bit about your priorities regards to capital allocation and how you expect to deploy some of that excess cash flow?
Sure. So it's very straightforward. As we've talked to our shareholders, 2018 is the year to focus on the core business. And so, we're no longer pursuing some of the new projects that we were looking at. And so right now, the best use of our capital is to invest it in driving our network growth. And so where we have opportunities to invest in the joint venture transactions, that's the best use of our capital. And so you'll continue to see us do that as we continue to grow the network. And this year, we've guided to installing 155 new systems plus another 25 upgrades. So the network is growing at a rapid pace. Beyond that, as we have excess capital, what you've seen is we return that capital to shareholders typically via, or exclusively via share repurchases.
So this year, we've bought back right around $40 million, just short of $40 million worth of stock. And that's under a new $200 million program, finished off a previous $200 million program in 2017. So as we have excess capital, that would be the plan is to turn it to shareholders.
You know, there's been a lot of theater consolidation in the last couple of years, including AMC Odeon Nordic, Carmike, as well as Regal Cineworld. How is exhibitor consolidation affecting IMAX?
It's great for us 'cause, you know, it's kind of obvious. The bigger ones are swallowing the smaller ones, and the bigger ones have a better capital structure. And they also tend to be more forward-looking and almost certainly their existing IMAX clients. So when Cineworld bought Regal, you know, shortly thereafter, we did a theater laser deal with them. When AMC bought Odeon, we did a deal with Odeon. When CJ in Korea bought Mars in Turkey, we did another deal with them. So in terms of expansion, that's very good for us. But it also, in terms of brand implementation, it's really a great thing 'cause you can manage your network a lot better.
You spoke briefly before about competitive intensity in China. We haven't really spoken about it in the U.S. But Dolby is making strides, particularly with AMC. You know, Cinemark is really emphasizing their private label brand. You know, what are you seeing there, and what are you doing to maintain market leadership?
A lot of what I talked about today was maintaining market leadership. So it all comes down to differentiation. So we're constantly evolving our technology. I don't think people know this, but we've been in business for over 50 years. So, IMAX invented stadium seating, and IMAX invented the current generation of 3D and the laser. And the level the laser is at is a product of ours. So, you know, a lot of these people come and go, but IMAX has been here and will be here. And in fact, you know, the brand is a huge part of it. I mean, you know, I don't know anyone, and I don't want to defame any particular company. But, you know, a lot of these, they just have an X in their name.
I don't know anyone who woke up in the morning and said, you know, as a kid, I went to an X theater. You know, I mean, didn't see First Man in X. You know, they don't have a differentiated image. They don't have the quality we have. They don't have the support of filmmakers, which is a huge thing. So one reason Dunkirk was so successful was Chris Nolan, you know, said, "I made this for IMAX," and people went to see it in IMAX. And, you know, we'll see. But I think a lot of film, well, our DNA in Avengers. You know, Avengers was huge for us, and it was also huge for Disney 'cause the filmmakers, the Russos, went around and said, "You gotta see it this way." So it's a different, it's a different offering.
We're an integrated solution from image capture to projection to the end, and the other guys show movies on a big screen.
I do wanna leave some time for questions. But before I open it up, maybe I can sneak one more in. You know, last week, IMAX announced a new in-home licensing partnership with DTS, Sony, and a few other launch partners. Could you give us a little bit of an overview of this initiative and talk about how new business initiatives more generally fit into IMAX's strategy these days?
So this is a licensing arrangement where we license our name and certain algorithms to Sony, and hopefully there'll be others over time joining in. And then, the content is DMR'd that goes into that, you know, that enhanced algorithm. And the TV looks a lot better. So again, this isn't like you need to put on, you know, special glasses, and you need to walk up to your TV with a magnifying glass. It looks better. I mean, you would think it looks better. My kids would think it looks better. It just looks better. And Sony is incorporating it into their TVs over 55 inches. We really like the idea, and DTS is partnering with us 'cause it not only does it not require capital, but even from the beginning, we'll make money on it.
We did a similar thing with licensing our name to Huawei in China for VR glasses. I think you'll see that be our direction now is rather than use capital to start new business, look at ways to lever off our core business.
You said it, it doesn't require any additional capital, and you'll make money on it. Does that imply that you guys have some sort of minimum guarantee?
It does.
Okay. Great.
That requires very little incremental OpEx to execute the business because, as Rich said, it's licensing, and it's leveraging our existing technology. We're not deploying it in a different way, but this one is very light in terms of impact on the organization.
Why don't I see if there's any questions from the audience we got? Well, why don't we wait for the mic for the pod, for the webcast?
Hi, thanks. So just on the latest point, should we view that as sort of a competing standard against a 4K, like sort of the Blu-ray, battles of before? And, if not, is there a way for you to leverage that into some of the streaming services who have made a big use or adoption of 4K as another way to showcase, like, you know, their content in a superior way?
So yes, it is applicable to the streaming services. Apropos what I said before, we've discussed it with some of the streaming already, and it, you know, it'll make their image look better. In terms of competing with 4K.
Think of this as our process is creating a very clean version. So the DMR process eliminates artifacts and noise. And so we can work with HDR. We can work with the different formats. It's a different value add similar to what we do theatrically. So it can work sort of hand-in-glove with the other formats. We're not creating something new that's trying to displace an existing format.
Quick follow-up. Like, I pay a premium for the 4K tier on Netflix. Could you envision a future, if not Netflix or someone else, that, you know, there's a premium tier with your technology embedded in it?
I, that's what it is right now.
It's Sony.
That's what the project is. But could I see one of the streaming companies, as they go head-to-head with each other and they try and come up with a competitive edge, say, you know, "We're gonna include, we're gonna embed IMAX technology"? Yeah, I could see that.
Okay. Great. I think we're just out of time. Thank you both, Rich and Patrick. It was absolutely a pleasure.
Thank you, Mike. We appreciate it.