Okay, great. Thank you all for joining us this afternoon. Again, my name's John Hodulik. I'm the Media and Telecom Analyst at UBS. And our next presenter comes to us from IMAX. Today we have the CEO, Rich Gelfond, the Interim CFO, Joe Sparacio, and the head of investor relations, Brett Harris. Guys, thanks for joining us today.
Thanks for having us, John.
And we've got about 40 minutes for some Q&A to put together a bunch of questions. So why don't we start? You know, it's always what we always like to do at this conference. It's late in the year, obviously a pretty eventful 2021. Can you give us, you guys give us a sense of what the company's priorities are as we look out into 2022?
Sure. You know, I think our major priorities fall into two categories. One is getting the network back to normal. We've come back a long way. September was consistent with our best year ever in box office, which was 2019. And October of this year was our biggest October by 50%, a record for us. So one of our 10 best months in IMAX's history. So we feel we're really on our way to doing that. Obviously, the variant is playing a little bit of games right now, but we're in 85 countries and virtually all our theaters are open. But our first priority is just getting things back to normal again. And from a film point of view, operational point of view, audience coming point of view, all those things. Second key priority is to focus on our new businesses.
And I know we'll talk about this later in the discussion, but we have several. We have something called IMAX Enhanced, which is a way people can watch movies at home in the IMAX format and a better image than they would otherwise see. And we recently announced a deal with Disney+ to bring that service to their streaming platform. And then the other thing would be IMAX Live, which again, I'll talk more about later. But that's where we're starting to wire a number of our theaters and bring events to IMAX theaters around the world. And the third one would be our direct-to-consumer application, all of which we're very excited about. And as we go through this, I'll tell you more about them.
That sounds great. So yeah, let's dive in on the, you know, unfortunately on the COVID and the most recent variant. I mean, how do you expect, how are you seeing customers react to the Omicron variant? And how do you think that as this plays out? And obviously, you know, none of us have a crystal ball, but do you have a sense for how maybe it's affecting your business now and what you foresee going forward?
So it's interesting because of the way films roll out this year and next year. So the fourth quarter was very strong. December has, I think, the most anticipated film of the year, Spider-Man coming out. There's not a lot going on right now. So we did, you know, decent numbers for Ghostbusters. West Side Story opens next weekend. But the real, the rest of this year comes down to Spider-Man and The Matrix, which are released mid to late December. If you look at our Spider-Man pre-sales, they're astounding. They're close to the best pre-sales in IMAX's history. They're very much neck and neck with Avengers: Endgame, which is the second biggest movie overall of all time. And I think the second largest, second biggest IMAX movie of all time. We've, you know, there's still almost two weeks to go and we have over $10 million in pre-sales.
The other film, Matrix, just went on sale and I think yesterday actually, or maybe the day before, and ticket sales there were strong too, so to me, that's an indicator that the public isn't being scared away by the variant. Obviously, they bought those tickets. They intend to use them, so that's real-world data. In terms of next year, I talked about how the schedule lays out. The schedule is fantastic for 2022, best year ever in terms of what it looks like in anticipation. However, the first quarter really doesn't have much in it. The big thing for IMAX in the first quarter is Chinese New Year, which is late January and early February, and I don't think the variant has really hit China, and if it does, the Chinese have their own protocols where they close things down for a day, reopen them.
So I don't expect it to have an impact on that. The second quarter is when really the blockbuster lineup gets going. And I would hope, you know, whatever happens with this variant is dealt with by that time. So I don't really think it'll have a material impact.
Got it. So I mean, I think what you're saying is pretty encouraging, right? I mean, it sounds like customers are comfortable, I guess as it stands now, going back to theaters. I mean, how tightly do these pre-sales that you were referencing in regard to Spider-Man, how highly does it correlate into, you know, what you see, you know, through the theatrical release? I mean, is that a really good sign for, or is it sort of loose and sometimes you get, you know, false signals?
The one thing I left out in that answer, John, so I'm glad you asked this, they all went on sale after the Omicron virus was announced. It's not like they were there before. People are measuring. Also, because we're in so many countries, we have sort of a crystal ball, not about this variant, but how audiences react to COVID. In China, which opened a lot before the U.S., people came back in record numbers for the right kind of films. Last year in China, we did a film called The Eight Hundred, which was filmed with IMAX cameras and was the number one global film in the world and did tremendous numbers. Then this year, the number one film in the world was also shot with IMAX cameras. It was called The Battle at Lake Changjin.
In China, again, the numbers were really high. In Japan, where it's been up and down with COVID, during the periods where it's been kind of lower COVID levels, we released what became the number one film in the history of Japan called Demon Slayer. Our experience is that where people feel safe, they're coming back in record numbers.
So are you seeing, you know, sort of variability across different geographies? So it sounds like China's still up and running, doing well. Japan sounds good. I mean, how about Europe? First of all, you know, what's your exposure to Europe? You know, we've heard, or certainly the cases are, you know, heading in the wrong direction there, especially some of the northern European countries. You know, countries are starting to talk about quarantines again and travel restrictions. And can you give us a sort of a little spin geographically to give us a sense of what you're seeing? And at the same time, your exposure to each one of those areas?
Yeah. So about one third of our revenues are from North America, one third from China, and one third from the rest of the world. Your question was specifically focused on Europe, but maybe I'll go a little broader than that. In the pre-sales for Spider-Man have also been exceedingly strong in Europe. So I don't have all of them, but I've looked at France and the U.K. and some other places, and they've been pretty strong. It's important to remember that unlike earlier in the pandemic, things really didn't go to lockdown. So as far as I know, the only country in Europe that's now closed to theaters is Austria. And they're scheduled to announce in the next day or two when they're going to reopen. I think our best guess is they're going to reopen in time for Christmas and Spider-Man movies.
You know, places like the Middle East have been doing really good business throughout this period of time. I think even in Mexico, which is somewhat surprising, our results on movies like Bond have been extremely good during this period of time. I think the places that are kind of suffering the most are India and LATAM, where that wouldn't surprise you because I think, you know, they've been a little deeper into the pandemic longer than some other places.
Right. You know, you announced a deal with Disney+, as you said, you know, in your opening remarks for the IMAX Enhanced service. And, you know, many people think of IMAX as, you know, predominantly a theatrical experience. Can you just walk through the enhanced business and explain the significance of the deal with Disney+?
Sure. But first, I'd like to put it into a little bit of context, strategic context. So when I was part of a group that bought the company almost 30 years ago, IMAX was in science centers and institutions that did almost exclusively documentaries. That's IMAX 1.0. IMAX 2.0 is kind of where we transitioned it into doing Hollywood films with prominent directors. We still have the documentary business, but most of our revenues come from Hollywood movies, global releases, scale, blockbusters. And, you know, that's been a very good model for us. And that's what I call 2.0. We're in the process of evolving into IMAX 3.0. And what 3.0, just like 2.0 incorporated 1.0, 3.0 would incorporate the others. But what we would add to it is we'd be more like a place where people gather to experience event-type content, which is broader than just movies.
You know, it could be sports. It could be other kinds of streaming content. It could be all kinds of things. I thought maybe what I would do is give you examples of this week, what we're doing, because this is really the first conference where I've kind of put it together in a strategic discussion. On Sunday of this week, Apple made a movie called Macbeth that stars Denzel Washington and Frances McDormand. It was made by Joel Coen. In order to help promote that movie, the distributor A24 with Apple kind of four-walled about 25 IMAX theaters in the world. One of our new products is IMAX Live, where we wired some of our theaters and you could do a live stream into the theater.
For that event on Sunday, Frances McDormand and the director Joel Coen were questioned by the head of MoMA's film curation department. And it became sort of an event. So we were performing a service for Apple because it's not really going to be released in theaters. And we were kind of creating an event around it. Yesterday, which was Monday, we did an event with Disney and Steven Spielberg, where we showed, we did a live stream with Steven Spielberg first to talk about West Side Story. And he did a half hour, which, you know, I was, didn't attend that. That was fantastic. So again, we're creating an event around that movie.
If you believe what you read in the rumor mill, and I can't confirm it or deny it, at least for a few more hours, is the Kanye Drake concert on Thursday will be streamed into IMAX theaters as part of a deal with Amazon. It happens to be a big week for that. You caught me at the right time, John, to talk about different examples of how that strategy is coming together. Then at the same, that's called IMAX Live. I think, as I said by way of intro, we're going to try and create events around live content around the world. I think there's a big upside. You know, again, I'm not prepared to go deeply into it, but what makes it special is it's in IMAX.
I know that theaters have attempted to show content in movie theaters. But when it's in IMAX and when it's live and when it's with Steven Spielberg and Frances McDormand and, you know, other people, it's a whole different level of that. We did one already around Ghostbusters when it was released. Then the other part of the strategy is enhanced, which is your specific question, which, as I mentioned, we did this deal with Disney+. When you go on Disney+ and you want to watch the big Marvel movies, you could watch them kind of the regular way or you could watch them in IMAX Enhanced. And when you watch it in IMAX Enhanced, it fills the full television screen rather than it being bars, rather than the letterbox kind of thing that you become used to.
And that's a model where we get paid over time on two ends. One will get a royalty from the streamer or the studio or whoever we're doing the service for. And the other one is we get a royalty on the consumer electronics end. And right now we're in business with four of the seven biggest CE players, including Sony. They're large-scale television sets. So I think there's potential for that. And then going back to the 3.0, you know, that's a world where we can exist out of the traditional movie structure. You know, if it's live, we could do it with a streaming service. We could do it with a concert, do it with a sports league. If it's enhanced, you know, we can do it with a studio. We could do it with a streaming service.
You know, that kind of puts an envelope around that strategy. We're also launching a new direct-to-consumer app this year. What that'll do is try and tie together a lot of these live experiences and be a place where we could eventually sell ancillaries such as merchandise and other kinds of experiential things.
That's great. A lot of detail there. So, you know, maybe we'll start with the live. I mean, I'm definitely intrigued by, you know, how big of a business could that be? I mean, obviously, there's huge demand for live events these days coming out of COVID. You know, again, assuming everything continues to move in the right direction. You talked about movie launches. I think you mentioned sports. I'd love to hear what you think that the opportunity is and, I guess, what you'd be doing is sort of broadcasting within your facilities, you know, live sports, which I think, you know, you see all these fan zone type things all over the place for whether it's, you know, soccer or football or anything like that.
So the whole live opportunity, I'd love to hear more about it and how, you know, what some of your ideas are and really how big that could be.
So we've done tests with a hockey league. We've done some tests with soccer in a few locations, but we're going to be quite thoughtful and strategic about it. So, you know, I don't want people watching this to think, you know, we're doing the Super Bowl in a month because we're not. And we right now will have about 80 wired theaters. We're in the first phase of this out of the 1,600 theaters in the world. So we're trying different kinds of events like the ones I mentioned to you so we can get sort of pro forma results. And then I could give you a good answer into how big it could be. But obviously, the out-of-home market is a fairly large one. And seeing it in IMAX is just, I was personally just so impressed to watch Macbeth.
You wouldn't think that would be a kind of an IMAX movie, but actually we got a couple of tweets. Someone said, you know, who would have known? I thought it was for superhero movies. This was maybe more interesting than that. And I also think it gives us a play into the streaming world because, as you know, there's the issue of windows and what's appropriate. But if we could do, you know, premieres or a series of premieres to help create events around some of the content that the streaming services, it gives us that opportunity. So I think both strategically and financially, it holds a lot of promise for us. But I think it's too early to try and, you know, talk about the size of that market.
Got it. You know, and maybe talk about the D2C app launch later this year. Is that, I mean, is that going to be, you know, how would that work? I mean, would that have content on there? Would that be sort of an SVOD service or, you know, maybe a little bit of a business model around it?
No, for the time being, it'll just be a way that we can establish more of a direct relationship with our consumers. And as you know, some of the world's best directors, whether it's, you know, Chris Nolan or J.J. Abrams or, you know, very recently in Dune, Denis Villeneuve, our fans are rabid fans. So if there was a way they could get looks behind the scenes or updates or find out special content. And the idea would be to use that as a tool both to maximize capacity at our theaters and sell tickets. And over time, I think we also see it as a place where we and our content providers can sell merchandise and other things.
Got it. And lastly, you know, again, on those remarks, the Disney+ deal, is that exclusive to Disney+? I mean, is that something you could do with other, you know, SVOD platforms or is that an exclusive relationship?
No, it's not an exclusive relationship. And we've been talking to a number of the streaming services over the last year or so. And, you know, we were kind of waiting for the right opportunity to launch this. And I think you couldn't find a better partner than Disney to launch it. The reasons being everybody knows they're pretty discriminating in terms of who they partner with and what it means to share their brand with and their platform with. So we felt strategically that was a terrific place to start and we'll figure out where we go from here.
Yeah. Okay. So, you know, beginning in Labor Day, you know, if we sort of step back and, you know, take a look at sort of the broader, you know, film business, you know, beginning in Labor Day, studios really seem to recommit to the theatrical window and consumers started returning to the theaters. You know, in your mind, what drove studios to recommit to the exclusive theatrical releases? And, you know, what does that look like in a post-COVID world? You know, if you could fast forward to mid next year, you know, what does the windowing, film windowing look like as coming out of this?
So I think what drove them to an exclusive theatrical window is that the kind of hybrid releases just didn't work. They didn't create the financial results on the movie side and they didn't create the number of new subscribers on the other side. I think it was just a model. And if you think about it, you know, this battle over windowing was going on for, you know, a decade almost. And, you know, there was never a better time for the studios and the streamers to do that because if you wanted to think of putting an industry through a stress test, right, when it was every theaters were closed, then they were starting to open, you take away the content and you offer them an at-home option. But surprisingly, it just didn't work.
Not enough people wanted to watch movies, particularly the kind of movies that IMAX does, the blockbuster movies, and you know, you can read the numbers as well as I do, but a lot of movies that were slated to do really big numbers didn't do big numbers, then on Labor Day weekend, Disney pivoted and did Shang-Chi, and you know, those numbers were really strong numbers, much stronger than the hybrid release numbers, and now it's online. In a way, the studios were cannibalizing their own business. Piracy was a big issue, one I don't think that had really been well thought through, so you put these pristine copies on the internet and, you know, what a shock, people voted number one for free to see them.
And if you look at the release patterns in places like China, China didn't provide release windows for a lot of those movies because the piracy rates were just so high. So, you know, never again will there be, I shouldn't say that, hopefully never again will there be an experience like that, you know, to test the resiliency of the theatrical experience, but clearly it passed. And then it passed the test and people want to see these big movies in theaters. And then, you know, I should mention Dune, which Warner Bros. released, and they released it at the same time, day and date, on their streaming services and in theaters. IMAX has done over $50 million on Dune. And we indexed over 20% in most places where we played it. So think about that.
You could get it for free and people were paying, and IMAX is a premium ticket price. It's, you know, around $15-$20 depending on the category. So I think the evidence was just so overwhelming that for the right kind of movie, people want the theatrical experience. So it seems to have now settled around a 45-day window. It's too complicated for this kind of a call, but if you think of it as 45 days, and I think barring, you know, lockdowns and things like that, again, for blockbuster movies, I think that's where it's going to stay. You know, for IMAX, that's terrific because we only play movies for one or two weeks. And also, we found this through the demand from the studios and even the streaming services is IMAX, as I said earlier, creates an event around the movie.
So if there's a shorter window and a lot more of your revenue is on the ancillaries on the back end, whether it's streaming or merchandising or theme parks or whatever it is, it makes IMAX even more valuable in the ecosystem because you really want to create an event around that movie. The one place I think that there will be changes and effects is some of the smaller movies where the marketing is expensive. I think those movies will likely go more to streaming than they did previously for financial reasons. And I think the crisis proves some of that out.
But, you know, while I'm hopeful that it doesn't really affect IMAX, but for people in the theatrical exhibition business, I'm hoping that the streaming services, you know, release some of their movies in the context of the shorter window to make up for them from some of that content, which is going direct to streaming.
Yeah. I mean, the way you explain it, it almost looks, it almost seems as if, you know, the streaming could really, I don't know if you could go so far as to say it'd be a benefit for IMAX, but it really doesn't have that big of an impact given the fact that, you know, the shorter window doesn't really affect you. You really don't have the movies, the films that for that long anyway.
I mean.
I mean, there's so many more movies being created, you know, especially if you include Netflix in that category. I mean, it almost seems like it would make sense to have a short window theatrical release just to drive excitement around the content.
One way we think of IMAX is like a curator of content. So if you have a movie that you want to stand out, when it's in IMAX, you know, it says to the audience at large that it's something special. And we've done studies with a number of the studios. So when people see a movie in IMAX, they actually like it better. The Top Box is higher. And it has been a little bit of, I don't want to use inappropriate language in a good way, some kind of show since all this has happened where the studios are kind of fighting to get the IMAX release slates. And even, you know, the few things I mentioned to you, something with Apple, something with Amazon.
I do think when you have a greater need to stand out in the world, that the company that helps you stand out is going to do better.
Right. That makes sense. So, you know, we started off talking about the 2022 slate and you kind of suggest the first quarter, not much going on, you know, Chinese New Year, but it really starts to kick in in 2Q. Can you give us a sense for, you know, the sort of highlights for next year? What are some of the movies that you're most excited about?
Yeah. I mean, there are so many highlights. I can't limit it to the most exciting, but we have three Marvel movies, including the next Black Panther and Thor. We've got a number of DC movies coming out, which are very exciting. We have a bunch of sequels, including Top Gun 2, which I've had the privilege of seeing and it's incredible.
Fantastic. Yeah, I hear it's fantastic.
Fantastic. And IMAX, for reasons you would understand, the aerials and the drones, it's beyond fantastic. We have Mission Impossible 7. We have Jurassic World. That's not a tough sell to IMAX audiences, right? Dinosaurs big, IMAX big. You know, that one's kind of, that one's kind of a natural. And then at the end of the year, we have Avatar. And, you know, I should remind people that Avatar is still the biggest movie ever done in IMAX. When we had about 150 theaters, we're now at $250 million on Avatar. And, you know, this Avatar, Avatar and IMAX have sort of a brand association with consumers. We re-released Avatar in China earlier this year. And on 1% of the screens, we did 30% of the business in China. So I feel, you know, again, I don't want to jinx it.
I'll knock on wood, but, you know, I think that that can be very big. So, I mean, next year is kind of crazy in terms of the amount of IMAX kind of movies coming out.
I mean, again, I don't want to jinx it either, but, you know, if you look to where you were sort of pre-COVID, I mean, and again, this is guidance, but do you feel like you're in a better position to bet this year, 2022, could rival the best year you guys have had in the past?
You know, I'd like to think so, but when I woke up two weeks ago and there was a new variant and they didn't know what it was going to do, I'll withhold a little enthusiasm.
I think that's a good idea. I think I might have just jinxed it even in asking the question. Okay. So, you know, IMAX adds value to movies through its DMR process and you guys often discuss movies with IMAX DNA. Can you give us just a brief description of both of those concepts and maybe discuss what is driving the secular growth in IMAX DNA films?
So the DMR process is, so there are two ways that we could release a film. Either we remaster a Hollywood film digitally to make it look great on the big screen. So we're not just a projector at a big screen. We actually treat the content. And that's done through algorithms. The other way to capture it is through IMAX cameras. And when we use IMAX cameras, we call that special IMAX DNA. And the reason is because, like when we were talking about IMAX Enhanced on Disney, IMAX has a different aspect ratio. It's more a vertical ratio. It's not letterbox like traditional cinema. So when you use our cameras, you get the IMAX aspect ratio and you also get higher resolution than you do through the DMR process.
We found that our movies over-index when we use more IMAX DNA. More IMAX of it could be the aspect ratio, could be the camera. There's years of proof about that. Of course, the Christopher Nolan movies, whether they were the Batman ones or Interstellar or Dunkirk, he filmed with IMAX cameras. He's the one who really pioneered that for commercial films. Our indexing, like for Dunkirk, I think was over 20%. Then, as I said, for Dune, Denis Villeneuve filmed it with IMAX cameras. Again, our indexing was over 20%. When it's filmed with our cameras, our DNA, we get greater market share from doing that. For 2022, there are 12 IMAX films filmed with IMAX cameras. The most we've ever had in any year was six. That includes local language films.
So we have films shot outside the U.S. using IMAX cameras. And, you know, there are a lot of reasons behind that, besides the better experience. The director is more vested. The studio spends more marketing money on it. Premieres are in IMAX, you know, all kinds of reasons. But, you know, our percentage of the box office is much better when that goes on. So one of the reasons it's happening now is you used to have to only film with film cameras, IMAX film cameras. And a lot of directors were more comfortable shooting with their favorite digital cameras. So we developed a suite of lenses that work with a variety of digital cameras where they could shoot in a way that they're happy, but also get the IMAX effect of doing it.
We've also been quite aggressive on a worldwide basis of meeting with studios and meeting with filmmakers and articulating the benefits of using an IMAX camera to film it. Of course, when you release in a regular movie house, you just print it down so you can use the IMAX camera for the whole run. I think our technical efforts as well as our marketing efforts have been pretty successful.
So do you think that number continues to grow over time? I mean, is there any downside to using IMAX cameras? Like, is it more costly or I guess you said that the directors aren't really used to it. They have their own sort of ways of doing things. But, I mean, I guess what are the positives and negatives from a film producer standpoint of using IMAX cameras? And how do you see that evolving?
So for the digital cameras, there's less negatives. On the film cameras, they're not as director-friendly to use as a regular film camera. And, you know, the rewind times are quicker and they're bigger and stuff like that. For the digital cameras, I'd say the only negative, but I think it's a positive, is you have to shoot it a little differently because there's a different field of view in it. And some of the special effects, you have to format for the IMAX format. So it's not traditional. I think, you know, given the number of people doing it and given the success, I would hope that it would go up. But, you know, it depends. They're artists, right?
Yeah.
Like any other artist. So trying something new, that would probably be the biggest resistance. But again, Cary Fukunaga, who was the director of the most recent Bond movie, said that he felt like he'd been flying in coaches his whole life until he used the IMAX cameras. Then he said that felt like first class. And he said he doesn't want to go back behind the curtain again. So I think once they try it, most of them like it.
That's great. Moving in one direction would be great. Maybe a couple of questions on China. I mean, you know, obviously our relationship with China seems to ebb and flow. And now with increasing trade tensions, there's some concern about, you know, access of Hollywood films to China. How important for your overall business is showing Hollywood films in the Chinese market? I guess it's about a third of your screens.
So I'll give you a two-part answer. One, it's important, but two, it's not as important as it used to be. So we do both Hollywood films and local language films in China. And on the local language front, we're up about 50% from 2019 in the revenues from local language in the world. And in China, the same thing. We're up about 50% from 2019. So, and I think that Chinese local content will be about half of the box office in normal times. So it's not, you know, it's not years ago, we were much less than that. So we tried to diversify a little bit away from Hollywood content. But China's put out a goal to have 100,000 screens. I think there are about 80,000 now. And I'm talking about a party document, a direction to go.
You know, if they want to fill those theaters and fill the malls where they're built in, they're going to need Hollywood films because they just don't have enough production to do that. During 2021, a number of things happened. Obviously, relations weren't at their high point, but I don't think that's the main reason. There were less Hollywood films. Other things going on was because of the pandemic. There were a lot of Chinese films in backlog that hadn't been released. I think they didn't want to say, "Hey, bring your films here, U.S.," until they got, you know, when you're a government that controls the economy, you get to do that. You know, you can't do that in a lot of places. That was one of the factors.
I think there were unique sensitivities around some of the films which all of us have read about in the papers that were fueled by social media. I think the day-and-date experiment, which we talked about, I think the piracy. So remember, the government gets a cut of the film revenue of everything that comes in. When they read the piracy numbers and they saw how many, you know, and in China, there's a piracy issue without putting pristine company copies on the internet. So they didn't let in a lot of those day-and-date movies. So I think a lot was going on. You know, going forward, we'll see where the bilateral situation ends up. But one of my favorite sayings is, "It's never as good as it looks or as bad as it seems." So I think we'll approach normalcy.
You know, there'll still be some of the movies that there's political stuff going on. But when you take away the backlog caused by the pandemic and you take away the day-and-date stuff, I think it'll start to approach a normal period of time.
What do you think, you know, over time, you know, again, none of us have a crystal ball, but if you look out over the next five years, there's a lot of moving parts there. I mean, do you expect the number of films accessing the Chinese market to grow over time? I mean, it sounds like given the growth in theaters in China, like you said, they're going to need inventory. There's real sort of monetary benefits to the government from showing those films. I mean, how do you expect that market to evolve?
You know, if we had a couple of hours, I could give you a more specific answer. But China's a really complicated place. And, you know, the good news is we've been there for over 20 years. So as an organization, and we have a very, we have a fairly big office there. So we understand a lot of the nuance. You know, when the U.S. looks at China, they look at it through a bilateral lens. But if you're in China, you know, it's about this guy fighting this. It's not different than U.S. politics layered in in terms of what makes them make decisions one way or the other. And next year is the election again in China. It's all too, if you ask me on economics, if China were a Western country, would it go up? I think for sure it would.
There's a lot of demographic reasons and theater growth and stuff like that. You know, it's so driven by politics. I, you know, I can't guess on that one.
Gotcha. Okay. Can you discuss your network growth through the pandemic and beyond, and you know, what would you say, you know, has COVID changed the TAM of your business in your view?
So what we do is every three years, we update what could be the addressable market. And right now, we have about 1,600, 1,700 theaters open. We have another like 400 in backlog. And we've set our addressable market as 3,300 theaters. But we set our addressable market in China 15 years ago was 90 theaters. And now we have 650 open, 750, sorry, in this week. So that number keeps moving. So I think in the short run, yes, the pandemic has probably slowed things down in some areas of the world. But I think our success and the fact that, you know, we're doing more movies with IMAX DNA. And I didn't talk about this in the Disney+ context, but every time someone in the world clicks on it, they see IMAX Enhanced on it. So our brand reach is growing.
You know, I'd like to think that that will increase over time, but probably not in the short run because of the pandemic.
And what markets would you say you see the most opportunity? We've talked about China a lot, but any other markets you think are especially attractive?
Yep, Japan, we've been really killing it. So I think we have like 40 theaters open in Japan, something like that. The per-screen average in Japan during the pandemic last year was $1.5 million. And the second best market was Australia, which was $750,000 because most of the world was closed. So, you know, and as I said to you, we were involved in the biggest movie, the second biggest movie in the history of Japan. And off the backs of that, we're doing very well. So I think that would be a very good market for growth for us, you know, when things kind of open up. I think the Middle East, specifically Saudi Arabia, as you know, that market only opened cinema in the last two or three years. I think we have about 30 theaters in backlog, about seven open right now.
And I think not only Saudi Arabia, but the whole Middle East has a lot of possibility, which we've just started to mine. And then, you know, I think Western Europe, certain countries like Germany, we just opened the largest IMAX theater in the world in Germany. It's the size of a 737. And, but we haven't really, you know, because it's been two years of basically a shutdown, we haven't had a chance to gain traction. But I think there's lots of room to go to grow in a lot of European places. And then, you know, ultimately India and LATAM are very under-penetrated. But as I said in answer to one of your other questions, I think that'll take a little longer.
Got it. And we're running up against the time limits here, but, you know, last question from me. Obviously, you know, a lot of opportunities to expand, you know, global basis, existing markets, new markets. You also have a buyback in place and were active with the buyback last quarter. You know, how do you view sort of capital allocation? How do you make the decisions sort of how to put the, where to put the incremental dollar? And could the buyback be part of that even within that equation going forward?
Yeah, I mean, the buyback can be part of it. And as a matter of fact, we've been buying back this quarter. You know, people, when they got spooked, we know what our long-term outlook looks like. And, you know, we're confident in our business. Other than buybacks, we allocate our capital, some of it to new businesses, which, you know, we talked about earlier. Part of our business model is joint ventures where we put up some of the capital and we get a larger percentage of the box office in return. And we're continuing to do that at the right locations where we think the return on investment is attractive. You know, we have about $500 million in liquidity because our business model is very asset-light. We didn't burn a lot of cash during the pandemic.
We raised a little bit of capital at very attractive rates during the pandemic. You know, I think we'll be opportunistic. We'll, you know, I think I'd like to think that as these new businesses prove themselves out, if and as they do, that we'll use some of that capital to accelerate their growth.
Well, perfect. Guys, thank you very much for joining us. I definitely enjoyed, you know, spending time with you guys and learning more about the company. So we appreciate you participating.
Thank you, John. Take care.
Okay. Take care, everyone.