So we're thrilled to have IMAX here. We have IMAX's CEO, Rich Gelfond, and Megan Colligan, President of IMAX Entertainment, and Brian Goldberg's up here with me. So we will get started. Rich, let's start with you. IMAX has evolved over time and has become highly integrated into the fabric of the entertainment ecosystem. How do you think about the positioning of IMAX today in the overall global landscape?
So I think one of the interesting things is more and more content is being created on a worldwide basis. It's obvious in North America where it comes from, but obviously countries like China and India are creating a lot of content. And I think as that content gets created, people want to know what they should spend their time watching and how or listening to. And I think in a way IMAX has become part of as one of the global curators of content. So I think when people go to a movie and they want to sort out what's the movie I should see this weekend or, you know, IMAX creates events on a worldwide basis. So the best example of that would be this year where Avengers: Endgame came out, and I think that was filmed entirely with IMAX cameras.
And I think the consumer would say, you know, the fact that it's at IMAX means it's a special event and I should go to that. So the way we integrate that in the ecosystem is for studios, we help eventicize their movies and make them special. For exhibitors, we help create events at their multiplexes. For the world's top filmmakers, we help make their films special and show their vision in, I like to say, painting on the biggest canvas in the world and make it special. And for consumers, they're willing to pay more for a better experience. So it works for everyone. And the last point I'd make is just people pay more for an IMAX ticket. It's usually about 40%-50% more than a regular ticket.
So out of that excess ticket price, there's a lot to go around to the exhibitor and the studio and the filmmaker that makes it all work for everyone.
I was hoping we could get your perspective on the current state of the U.S. box office before we spread across the rest of the world. It's off year to date, not a huge surprise given that you're comping a record 2018. Most people in the industry are expecting a better fourth quarter. I was curious if you're in agreement with that statement, what your outlook for the remainder of the year is, and then how's 2020 shaping up?
So happy to answer it, but I always have to remind everybody, as you know, Brian, because we've done it, is that we're not a North American exhibitor. We're in 82 countries. Two-thirds of our box office comes outside of the United States. And for us, our box office this year is up 10%, while the U.S. box office is down 6%. So with that as a preface, you know, I think if you look at the U.S. box office since 1980, so over a long period of time, it's only been down year- over- year seven times in that period of time. And the average decrease has been about 3%. So I think investors get kind of crazy in the world about box office on a one-year basis.
But also during that period of time, actually in the last 15 years, there have been seven record box offices in North America. So the trend is definitely on an upward slope at the best and more or less flat in the worst. I do think the fourth quarter is going to be, you know, pretty strong. I think that Frozen 2, Jumanji, and I think mostly Star Wars, which I've heard good things about, you know, kind of around town, are really going to perform well. And I think people forget because this year in particular, we had Avengers: Endgame and Lion King and a lot of successful movies. I think they forget that this Star Wars is the end of the series.
I think, and you know, I don't know, I haven't seen the script or the movie, but from what I understand, it really is the end. It does wrap it up. So if you haven't sat there and you haven't seen all of them, so I really think that that's going to be a very successful franchise, not just in the U.S., on a global basis. In terms of 2020, I think the, you know, the slate will have a little bit of a different skew. So whereas in 2019, Disney really dominated the slate and, you know, companies like Warner, which had an amazing 2018, were a little slower in 2019. I think you'll see more diversity in the slate.
And I know for IMAX, we have five films that were shot with IMAX cameras, three with film cameras, and they're Wonder Woman 2, Bond, and the new Chris Nolan movie, Tenet, and two shot with our digital camera, one being Top Gun and the other one Dune at the end of the year. So I think for us, it's going to be a pretty good year. But again, Dune and Wonder Woman are Disney movies, are Warner movies. Tenet is a Warner movie. Bond is an MGM movie. And with Top Gun is a Paramount movie. So I think you'll see more diversity. And Disney, of course, has some great offerings next year. There are two Marvel movies being released by Disney next year. And I think the film slate has to play out. And again, as I said, I think it'll be a little less family-oriented.
I think, you know, for us at IMAX, we're more targeted towards the fanboy. You know, that'll be fine. It hasn't filled out yet. In general, I think it's going to be within the parameters of what I said earlier, which is, you know, more or less consistent with the box office we've seen in the past.
So let's move on to the similar question, but the rest of the world. Like, how do you see the rest of the world shaping up for the balance of this year and into next year? And then can you talk a little bit about what kind of films resonate outside of the U.S. and what films really don't? What are the genres that don't work?
So I think the, you know, the strength of the slate, and remember the rest of the world, despite a lot of changes, is still powered by the Hollywood releases and the Hollywood box office. So I think the trends that are going to hold here are also going to hold in the rest of the world. Again, you know, for us, because we're in the blockbuster business, I'm less concerned about what the total box office is than what the box office is for blockbusters for the kinds of films that we show. I also think in the rest of the world, there's really been an uptake in the quality of local language films. So in China this year, there were two significant blockbusters that we were part of. One is Wandering Earth, and the other was Ne Zha.
And those movies did, you know, I don't remember, over $500 million in local markets. India's been producing more. Korea's been producing more. So I think in North America, as we start to analyze the box office globally, we're going to have to transition from just how the U.S. films do over there to what, you know, what's additive from the local studios. And, you know, I'm fairly positive about that.
I just wanted to talk quickly about, get your view on consolidation. It's been a major theme among the studios, obviously, the last 24 months, most recently with Disney closing on Fox. Now that most parties are focused on synergies, do you see any major shifts in terms of the supply of product available to IMAX or market share shifts?
I don't IMAX because I think that, if anything, the consolidation will cause studios to double down on blockbusters. And if you look at the percentage of the box office that's been filled by blockbusters over the last five years, it's been going up steadily. And I think, you know, taking Disney/Fox as an example, I think Disney's probably over time going to invest even more in blockbusters. And probably, you know, the simplest example would be in the Marvel area. I think probably Marvel will take back control of a lot of those franchises. So I think that's a really good thing for us. I think blockbuster franchises will increase because of consolidation.
In terms of mid-level movies, and we'll see, as you know, the streaming services have been taking much more of an interest in those kinds of movies, the movie, you know, the $40 million-$50 million production budget movies. And I think probably because of the consolidation, there'll be somewhat less of those made.
On the streaming entities, you know, just films going direct to streaming companies is an ongoing concern among exhibition investors. The next one coming up is actually a big budget one, which is unusual. It's the $200 million Irishman. How do you see the theatrical window evolving with respect to the product you run on your film circuit? Will it ever go? I mean, it seems like it's event films. How is IMAX different in that regard from the broader marketplace?
So I'll start with IMAX, which is we create events around movies and we create out-of-home experiences. And, you know, you just look at the worldwide phenomena that came out of Endgame. Now, most of it was because the Marvel team and Disney made an amazing movie. But also, I think the fact it was an event that people wanted to go to, you know, made it really special. I don't think anyone wanted to say, "I saw it, you know, two months later in my home," or, "I saw it on an airplane." It just didn't come down that way. So I think for kind of blockbuster movies, it's going to be, you know, I think it's in their interest to have windowing and to have longer times in the theaters.
And if you look at Disney, which is one of the studios that's really very strongly feels about protecting the windows, it's because, you know, their business isn't just in the movie. It's creating franchises. So they want to, you know, seed for sequels. They want to seed for theme park rides. They think about their merchandising. They think about it in a different way. The streaming services, obviously, are selling subscriptions. So they think about it in a different way.
But with Disney+, I mean, do you think that that window will get shorter? Will they put their own movies out of theaters, which play three, four weeks? Will they put it sooner into a streaming window? Will that affect?
So before I get there specifically, from IMAX's point of view, you know, we're not that hung up on whether, you know, what the exact windows are. Although since we're housed in multiplexes with exhibition partners, you know, we're going to support wherever they end up on it. So, you know, we don't have a strong pony in it, but they have to work it out, not us. In terms of changes in the windows, I do think it's inevitable over time that the windows get shorter in some way. I, you know, I just think, and frankly, you know, around town, although people don't talk about it a lot, there are a lot of discussions going on. I think Netflix even said that they talked to a bunch of the exhibitors about shorter windows. So I think at some point they're going to reach an accommodation.
But if you are an exhibitor, you're not going to give, or I'll turn this around. If you're a studio, you're not going to take a shorter window than Netflix is getting, right? If Netflix is getting a six-week window and you go to Sony and you say, "Oh, you have a 90-day window," especially because Netflix isn't supplying as many movies as the studios are. Like, I don't think that compromise is going to come about where there's a separate movie window for streaming services and a separate window for theatrical. But I do think over time that will happen. So Megan worked at Paramount for a long time, ultimately heading marketing and distribution, and then also spent the year before she came to IMAX consulting for some of the streaming services. So, I mean, what do you think?
I tend to agree with you. I think that we'll see a change at some point. I think change is probably inevitable. And I think all parties are trying to just figure out what the right change is because I think the belief that's commonly held is that, you know, you can't put the toothpaste back in the tube. And so they want to make sure that when they make this change, that it's a change that is best for the economic system that will benefit everybody. And, you know, Netflix aside, there's a much bigger, you know, industry that's supported by ancillary revenue that comes and supports pay television and a lot of other ancillary windows that the studios live off of. And so it's not just a singular question about what's best for Netflix. I think it's a bigger question than that.
No, of course. But just sort of a follow-up. So instead of the windows, just the question about window shortening, will a new window be created in PVOD? Will that happen or not?
You know, that's a different question, right? Because that will be a very high price point and it would be undiscussed. You know, I think momentum behind that has kind of really slowed, Jessica, and I think the combination of Disney and Fox has really slowed it because, you know, Fox was more in favor of that kind of thing, and, you know, I don't have a strong opinion, but my guess is that would be longer term out than some kind of agreement on the other windows.
Right. So one of the things your exhibition partners have been doing to, you know, stimulate more attendance, more frequent attendance, smooth out some of the peaks and the valleys in the business is subscription models, consumer prepaid movie pass models. And I'm curious, you know, how is this impacting your business as adoption rises? How, where do you see this going over time? How big can it be? And then, you know, another recent initiative is dynamic ticket pricing. I was wondering if you could get your thoughts on.
So I think in North America, subscription is a new concept. But again, we're in 82 countries and have been global for 50 years. So subscription is not so new, as I'm sure you know, Brian. In Europe, it's been going on a long time and different models in some cases for almost two decades. So I think there's no doubt subscription is going to play a bigger role in the landscape. And I think it'll, you know, most of it will follow the Regal Cinemark model. I think AMC tried a different model. And for those of you who don't know, they have one price and you can see a regular movie, you can see IMAX, you can see 3D, you know, different kinds of experiences. I think AMC did that largely because MoviePass came in the landscape.
I think it was partly a defensive move on their part. I think it's, at least in the IMAX business, it's worked. I mean, we are doing really well with AMC under that plan. I think whether sort of the Regal Cinemark plan wins out at the end of the day or the AMC more disruptive plan wins out, I think we have to wait more data. You know, the Regal plan has only been in effect for a month. Based on what we've seen in Europe, I think consumers like it. I think in terms of how it impacts IMAX, there's an upcharge, like a $5 upcharge to see an IMAX presentation. I think most people, the cost of the subscription is kind of a sunk cost. They'll say, "Well, it's only $5 extra.
I'll do that." So I think all of it is probably good for us, but we'll figure out over time which is better.
On dynamic ticket pricing, I know AMC has made some recent announcements about a test.
So that's a really complicated issue because you also have the studio involved in dynamic pricing, right? So, you know, the studios are going to have a strong point of view of whether they want to charge different prices for different movies or different prices at different times of the day. And I know historically the studios have been opposed because they think if one movie costs less than another movie, that you're signaling to the public that it's not as good a movie. However, going the other way, in China, dynamic pricing has been amazing. And they have dynamic pricing during the run of a movie. So when we played Endgame, if you compare that to the last Avengers movie we did, our ticket price was double in China. And our box office was pretty much double. And a lot of that was just because of ticket price.
And they have the flexibility, if the demand is really high, to raise the ticket price. And empirically, as part of that ecosystem, it really works. It makes more money for the studio. It makes more money for the exhibitor. It makes more money for us. It makes more money for everyone. But my guess would be if dynamic pricing comes in, it would be more in that mode where you can upcharge for busy times and opening weekends. Then it would be in the mode of different pricing for different movies.
Beyond subscription models, another way to smooth out the seasonality of the business is to drive utilization through alternative content. You've tried this. I know you've experimented with it. But can you talk about where you are today in terms of your efforts for alternative programming? Is there an opportunity? How big an opportunity?
So Megan's been leading our charge in that area. So why don't you talk about it?
I think there's a big opportunity here because I think, you know, there's no doubt that what we represent to an audience is we are an event space. We are a place where people come to experience event content. And within many verticals, whether you take, you know, music or you look at sports brands, there's an opportunity there to create a world in which you can utilize our theaters in 82 countries and 1,600 theaters. And for any single event, there's 550,000 seats. And so we're starting to explore and think about how could we utilize our underutilized time to create events that will satisfy audiences in various ways. We've had small experiments over the summer. One of the experiments was with a piece called Anima that we did with Netflix. We worked with Paul Thomas Anderson, who directed the piece.
It had Thom Yorke's new music in it. It was only 15 minutes long. The question we were asking was, for 15 minutes of content, would audience members get in their cars and drive to an IMAX theater to experience event content? And the answer was resoundingly yes. There was, you know, hundreds of people that turned out in places like St. Petersburg, Russia, and in New York City, and people waited in line for two hours in Los Angeles. And it was a wonderful thing to experience. And it was at 10:00 P.M. on a Wednesday night, knowing that it was going to be on Netflix the next day. And so it was a really interesting thing to experience and to take a look at. We also did something with Soundgarden.
Chris Cornell's widow and the band wanted to commemorate this concert that The Artists Den had done six years ago with the band and remember him by, it was his favorite concert. So we DMR'd this concert. It was a wonderful concert, two-hour and 35-minute concert. We put it in 189 theaters around the world. You know, we sold out the show five times over in Chile. It was sold out in minutes in Bulgaria. Again, there was no paid media. It was an organic experience to allow fans to experience something they had never experienced before. Again, at an underutilized time, it was on a Monday night before we opened Spider-Man on a Tuesday night. We're exploring these kinds of opportunities.
We're taking a look at how to tap into franchises all over the world and thinking about how to utilize our theaters to the best of their ability.
Do you think you'll have to invest either in content over time or in marketing?
No, I think at this point what we're looking at is, you know, a really minimal investment. You know, and what we're talking about is really minimal investment and really just great opportunities that exist, and our brand is quite strong, and the opportunities are, these conversations are relatively simple as we speak to people like Netflix and as we talk to people like Artists Den. These are opportunities for brand extensions.
What can you say about Spike Jonze's mandate?
Yeah, Spike Jonze has been an unbelievable experience because we brought him in as an artist in residence as we're thinking about expanding and thinking about how to utilize our theaters. We're talking to Spike Jonze, who lies at the center of music and brands and filmmaking. And he's such a creative mind. And so, you know, we were with him this morning and just, you know, talking to him about so many different opportunities and just thinking through. He loves the IMAX brand. And he has a lot of really creative ideas. He also has access to a lot of different artists, a lot of different brands. And, you know, we're just really at this point in the very early stages of talking about what might be possible. And it's been a really exciting opportunity for us and I think an exciting opportunity for him. He's really enjoyed it.
If we could, can we talk a little bit about China and some of the international opportunities for you? You know, you guys are a huge player in that market. You were early. You're still seeing robust growth. I think you recently achieved your eighth consecutive quarter of box office growth. You know, today, what is about that market that makes it still so attractive right now for IMAX? And has it become more or less reliant on foreign products, just given the current macro climate?
So it hasn't become more reliant on foreign products. As a matter of fact, it's become much more diversified. And two films this year, as I mentioned before, did huge box office numbers. And our biggest film in China this year was Avengers: Endgame. But the next two were local language films. I mean, I think if you just back up and take a look at China, you're betting on the Chinese consumer and the growth of their spending power and the growth of more people entering the middle class and want to go and look at entertainment. And, you know, there's a lot of noise around China now. But if you ask me, global bets, one of the best bets in the world to me would be to bet on the growth of the buying power of the Chinese consumer. And that's the bet.
IMAX's brand is phenomenal in China. The reason for that is in the rest of the world, when we built IMAXes, there was already an established pattern of going to regular theaters. IMAX, you had to say, you know, don't go there, go here. In China, our growth was parallel to the growth of cinema in the market. They learned there were like two ways to go to the movies. You could go to a regular theater or you could go to IMAX. It was like you could go coach or you could go business class. To go business class is kind of a status symbol in China. It's an affordable luxury, even though it costs more. It's not like a vacation or a dinner. It's been a great market for it.
And also, we approached it as an insider in the market. So we have a Chinese CEO of that business. We have 100 people in China. We have a subsidiary listed on the Hong Kong Stock Exchange. So we, you know, we weren't colonialists who went in and said, well, how can we suck money out of China? We very much align our interests with our Chinese partners. We have 650 theaters open now. On Endgame, we had less than 1% of the theaters in China. And we did 13% of the Chinese box office on local language films on less than 1%. We did like 8% of Wandering Earth in the box office. And, you know, just kind of step back and think about that. You're not a Chinese company. You went in there. And I think our brand and our management team there have carried us.
I, you know, you didn't ask me this, Brian, but I think investors are getting distracted by Chinese noise. I think anything that has China, you know, as part of it, but we don't manufacture in China. We don't export from China. We just cater to the Chinese consumer. We're listed on a Chinese exchange. I couldn't be more positive about that market.
Just to follow up on that, I don't want to put words in your mouth, but it sounds like there is no discernible impact on IMAX China from the trade war. Do you see any discernible impact just from the performance of foreign films in the Chinese marketplace from the trade war?
No. As a matter of fact, it's a little odd this year, but usually it's 50/50 local content and Hollywood content, and this year, Hollywood content is outperforming Chinese content. There are a lot of reasons that would take a long time to go into for that, but also the Chinese, this is a fact that will surprise many of you, is the Chinese have actually let in U.S. films much earlier this year than in previous years, so Endgame opened earlier in China than it opened in the U.S., Spider-Man opened earlier in China than it opened in the U.S., so, you know, whatever's gone on in the trade war hasn't really bled into this sector.
Do you have a point of view as to when some of the sort of long negotiated hopeful improvements in either economic splits, dating, you know, audit? Do you see any visibility for resolution on any of that in the current environment?
The background to what Brian's asking about is under the WTO agreement. The MPA and China negotiate every five years new terms of doing business together. It was supposed to be negotiated last year. It's kind of been delayed. My understanding, Brian, is that there's been some progress made quietly, but that, you know, nobody's going to come public with it until the bigger trade dispute is finalized. I think it is moving somewhat in the right direction.
And then just, you know, one last one on China. What can you tell us right now about your backlog in the market, the opportunities to drive further penetration in the market? And could you kind of weave in how your strategic relationship with Maoyan plays into this, if I pronounce that correctly?
You didn't, but it was close.
Okay.
Better than I thought. We have 658 theaters open in China. We have about 300 theaters in our backlog in China. You know, this year, the interest in opening new theaters is still very strong. We signed a 40-theater deal with CGV, the Korean company in China. We have lots of activity going on. You know, we're so much less penetrated on a per capita basis in China than we are in North America. That market looks really good for us going forward in terms of Maoyan. I've just said it more than you, which is why I can pronounce it now. They're a ticketing platform in China. In China, 85% of the tickets are sold online. There's really two big players. Maoyan has about 55%-60% market share. We did an investment into their company.
And so far, it's been very helpful because they really have, you know, so much data about buying patterns and customers and the ratings of movies and, you know, what makes a movie work. So, you know, we're still talking to them. There's a lot more we can do with them. But it's been a positive thing so far.
So let's move away from China and talk about some of the other international markets. You signed some recent deals in Japan, the Middle East. I'm not sure if there are any other markets. How are you thinking about the runway for growth in these markets and any other potential?
Yeah. So you mentioned two of the best ones, Jessica. Like Japan, it took a while to gain a footing there, but we've got about 35 theaters open and about another 15 in backlog. And the performance in Japan is among the best in the world. We just opened a theater on the 40th floor of some skyscraper, and it cost the partner there an insane amount of money, but it's like selling out at 4 o'clock on Tuesdays. So they've kind of got the IMAX bug there, and it's going extremely well. So that is a market I feel really good about. The Middle East, we've had a presence for a long time, but as many of you know, Saudi Arabia recently opened up to Western cinema, and our partners are going into Saudi Arabia, you know, in a fairly significant way.
We have two theaters open now with VOX, which is a big Middle Eastern chain. And those are both within our top five in the world. And we just signed a 12-theater deal with AMC and the Saudi Sovereign Wealth Fund, their partners. So we have about another 18 theaters in backlog. So I think that's going to be a strong market for us as the whole Middle East. And we're very underpenetrated in some countries in Europe like Germany. We only have less than 10 theaters open. And it's going extremely well. India has been a very frustrating place for us. It's taken a long time. So like 15 years ago, at conferences like this, people would say, you know, which is a better market, India or China? So in China, with our backlog, we're close to 1,000 theaters. In India, we're close to 50 theaters.
It's taken a while. And there are a lot of, you know, reasons having to do with infrastructure there and transparency and rule of law. But I think they're finally getting their acts together. And we've gotten a lot more traction in the last couple of years than we've had before. And the big open space for us is really South America. But South America has been a messy place with tariffs. It's been a messy place in terms of government regulation in a lot of ways. I think it's going to take a while, but hopefully it'll open up.
A lot of what we've talked about already, you know, it's understandable how you can grow your box office 10% in the U.S., for example, and the industry is at, you know, down 6% or 7%. Your valuation of the company, I love your perspective on this, it doesn't seem to reflect that disparity in performance and the growth opportunities. I'm just curious to get your perspective as to why you think that disconnect exists.
I think there are probably three things, Brian. One is several years ago, our China performance was we had a lot of challenges. We spent a lot of time. You know, we've turned that around. As you said, eight straight quarters of box office. Our same-store sales are up almost 10%. Our box office is up 25%. So I think there was a little hangover in the stock from that period of time. When you deliver consistent results, you overcome that hangover. You know, we beat a number of quarters in a row. If you look at our earnings over the last couple of years, they're up significantly. The first thing is time. The second thing I would say is China, which I talked a little bit about. I think you do business in China.
And people say, oh my God, the trade war, you know, China, but it has nothing to do with us. And the results are good coming out of that. So I think that's one thing that in time goes away. And then the third thing is I think people put us in a comp group with North American exhibitors. And there are issues facing North American exhibitors, such many of them you ask questions, streaming, windowing, you know, all kinds of things, which in fact, you know, not only don't affect us, but are probably accrued to our benefit. And our capital structure, we have no debt at IMAX, no net debt. We have lots of cash. So we're completely different. But I think investors have trouble comping it. So we just brought in a new and revamped IR team in China and in the U.S.
I think we're going to tell our story better.
So I have one last question. But let's just see, are there any questions from the audience? Let's give anybody a chance to ask. So if not, let's just go to the must-ask question of capital allocation. And, you know, how are you thinking about capital allocation opportunities as it relates to either investment potential in new technology, growing regions as China or Japan, which is kind of an interesting new tidbit for us? While also balancing stock repurchases, you have roughly $127 million left on your repurchase authorization, which expires in June of 2020.
So we bought in a significant amount of stock over the last few years, both in the U.S. and in China. Part of our business model is to invest in a joint venture model in some of the theaters worldwide. And the IRRs on those investments are, you know, quite high depending on the country and the structure. But they can be anywhere from 15%-40% or 50%. So I think our first priority is to invest in those high-return investments. And, you know, when you look at the IMAX model, as you guys know, we throw off significant operating cash flow. And over time, without those reinvestments, we'll throw off significant excess cash flow. And I think when that starts to happen, you know, everything is on the table. I think for now, we're, you know, opportunistic in terms of buying back.
We don't have a formula set to do it. But I think in the long run, you know, when we generate a lot of this cash, and if there aren't those reinvestment opportunities, we'd be open to, you know, every alternative that company looks at, that companies look at. That makes sense.
Would you say local language film production is something that's an area of investment for you?
In general, we're not interested in the production business. It's, you know, it's a high-volatility business. It takes a lot of expertise in different countries. We did have, we've had a small fund in China that does local language content. But it really didn't get off the ground in the right way. But we were the GP of it. And we levered off of other people's investments. So if we did production, I think the way we would do it would be to lever off other people's money and maybe put a little bit in. But that's not core to our strategy.
Right. Great. Thank you so much for coming.
Thanks a lot.
Thank you.