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Cineplex suffers summer chill from lack of blockbuster hits

Customers purchase movie tickets at the Cineplex Scotiabank Theatre in Toronto in this file photo.

Matthew Sherwood/The Globe and Mail

Vacationers might be dreading the end of summer, but film industry executives aren't, as a sluggish slate of movies is shaping up to yield the lowest May-to-Labour Day movie returns in several years.

Summer blockbusters are the backbone of the industry's revenue, but the 2014 season has largely failed to produce a box-office standout, and experts are predicting that summer sales could wind up being 15 to 20 per cent less than last year's record-setting level.

The lacklustre summer hamstrung Cineplex Inc., which reported its second-quarter profit fell 18.7 per cent from a year ago, due mostly to a 4.2-per-cent drop in box office sales, excluding newly purchased theatres. Movie houses everywhere felt the slowdown, and to counter the cyclical vices of the film business, Cineplex is trying to diversify by driving more customers to its online store and expanding its reach in advertising on digital signs.

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Total industry box-office revenue for April through June was $2.93-billion, down more than 6 per cent from last year. The period marks the first time that figure has fallen below $3-billion in the second quarter since 2008, according to Box Office Mojo, even as analysts predict another record year in 2015.

"At the end of the day, [box office is] product-driven, it's cyclical, it's going to naturally ebb and flow every year," said Paul Dergarabedian, senior media analyst at entertainment research firm Rentrak. "You have to have a strong stomach to go on this roller coaster ride, but it's just going to continue."

None of spring or summer's biggest films – which included Captain America: Winter Soldier, the Sleeping Beauty spinoff Maleficent, and new additions to the Transformers, X-Men and Spiderman series – have grossed $300-million. At least one movie cracked that threshold every summer since 2001, including Iron Man 3 and Despicable Me 2 in 2013.

Last week's release of Guardians of the Galaxy smashed expectations by earning $94-million on its first weekend – a record for an August opening. That sparked hope of a late-season recovery, but summer totals are still expected to fall short of $4-billion for the first time since 2006.

The summer slate was short on family-focused films that often draw huge audiences to theatres, while the anticipated debut of Fast and Furious 7 was pushed back to 2015 after star Paul Walker died in a car accident in November.

Its predecessor, Fast and Furious 6, accounted for nearly 7 per cent of Cineplex's total box-office sales last summer. Had the next instalment come out on time "and done what the other ones did, we wouldn't be having this conversation about a bad quarter," said Ellis Jacob, Cineplex's CEO. "One film can affect the whole quarter."

Soccer's World Cup in Brazil was also, at the very least, "a huge distraction" competing for eyeballs, Mr. Dergarabedian said.

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At the same time, on-demand and streaming services are growing into serious competitors, with Netflix adding nearly two million paid subscribers in the second quarter. Cineplex recently launched a new online platform for renting and selling digital movies, but Mr. Jacob said the evidence still shows "if you give people what they want to see, they come out" to theatres.

Weak spells like the current one may drive picky moviegoers online more often, however. "Every movie that doesn't get a good response from audiences in theatres opens the door to have people check out digital content," Mr. Dergarabedian said.

On Wednesday, Cineplex reported earnings of $23.2-million, or 37 cents a share, a drop from $28.5-million, or 45 cents a share last year.

Revenue for the quarter was $323.5-million, up 7.2 per cent from $301.6-million last year.

Same-store attendance fell 5 per cent, offset in part by a continued expansion of premium-priced UltraAVX, Imax and VIP theatres, which pushed the average ticket price up four cents to $9.40. Food and drink sales were a bright spot again, with concessions per patron hitting an all-time high of $5.08, after topping $5 for the first time in the previous quarter.

Cineplex is now looking ahead to 2015, when a slew of highly anticipated flicks are set to open, including new Star Wars and James Bond titles, as well as Jurassic World, a revival of the popular 1990s dinosaur hits.

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About the Author
Banking Reporter

James Bradshaw is banking reporter for the Report on Business. He covered media from 2014 to 2016, and higher education from 2010 to 2014. Prior to that, he worked as a cultural reporter for Globe Arts, and has written for both the Toronto section and the editorial page. More

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