IMAX Corporation, together with its consolidated subsidiaries, is one of the
world’s leading entertainment technology companies, specializing in motion
picture technologies and presentations. IMAX offers a unique end-to-end cinematic
solution combining proprietary software, theater architecture and equipment
to create the highest-quality, most immersive motion picture experience for
which the IMAX® brand has become known globally. Top filmmakers and studios
utilize IMAX theaters to connect with audiences in innovative ways, and as such,
IMAX’s theater network is among the most important and successful theatrical
distribution platforms for major event films around the world.
The Company’s principal businesses are:
the design and manufacture of premium theater systems (“IMAX theater systems”)
and the sale, lease or contribution of those systems to customers under theater
system arrangements; and
the Digital Re-Mastering of films into the IMAX format and the exhibition of
those films in the IMAX theater network.
IMAX theater systems are based on proprietary and patented technology developed
over the course of the Company’s 48-year history. The Company’s
customers who purchase, lease or otherwise acquire the IMAX theater systems
through joint revenue sharing arrangements are theater exhibitors that operate
commercial theaters (particularly multiplexes), museums, science centers, or
destination entertainment sites. The Company generally does not own IMAX theaters,
but licenses the use of its trademarks along with the sale, lease or contribution
of the IMAX theater system. The Company refers to all theaters using the IMAX
theater system as “IMAX theaters”.
IMAX theater systems combine:
IMAX DMR (Digital Re-Mastering) movie conversion technology, which results in
higher image and sound fidelity than conventional cinema experiences;
advanced, high-resolution projectors with specialized equipment and automated
theater control systems, which generate significantly more contrast and brightness
than conventional theater systems;
large screens and proprietary theater geometry, which result in a substantially
larger field of view so that the screen extends to the edge of a viewer’s
peripheral vision and creates more realistic images;
sound system components, which deliver more expansive sound imagery and pinpointed
origination of sound to any specific spot in an IMAX theater; and
specialized theater acoustics, which result in a four-fold reduction in background
noise.
Together these components cause audiences in IMAX theaters to feel as if they
are a part of the on-screen action, creating a more intense, immersive and exciting
experience than a traditional theater.
As a result of the immersiveness and superior image and sound quality of The
IMAX Experience, the Company’s exhibitor customers typically charge a
premium for IMAX DMR films over films exhibited in their other auditoriums.
The premium pricing, combined with the higher attendance levels associated with
IMAX DMR films, generates incremental box-office for the Company’s exhibitor
customers and for the movie studios releasing their films to the IMAX network.
The incremental box-office generated by IMAX DMR films has helped establish
IMAX as a key premium distribution and marketing platform for Hollywood blockbuster
films.
DMR – IMAX’s proprietary DMR technology digitally converts live-action
digital films or 35mm to its large-format, while meeting the Company’s
high standards of image and sound quality. In a typical IMAX DMR film arrangement,
the Company will receive a percentage, which in recent years has ranged from
10-15%, of net box-office receipts of a film from the film studio in exchange
for the conversion of the film to the IMAX DMR format and for access to the
IMAX distribution platform. At December 31, 2015, the Company had released 241
IMAX DMR films since the introduction of IMAX DMR in 2002. The number of films
released on an annual basis that have been converted through the DMR process
has increased significantly in recent years with the advent of digital technology
that has reduced the DMR conversion time and with the strengthening of the Company’s
relationships with major Hollywood studios. Accordingly, 44 films converted
through the IMAX DMR process were released in 2015, as compared to six in 2007.
IMAX Xenon-based Digital Projection System – The Company introduced its
xenon-based digital projection system in 2008. Prior to 2008, all of IMAX’s
large format projectors were film-based and required analog film prints. The
IMAX xenon-based digital projection system, which operates without the need
for such film prints, was designed specifically for use by commercial multiplex
operators and allows operators to reduce the capital and operating costs required
to run an IMAX theater without sacrificing the image and sound quality of The
IMAX Experience. By making The IMAX Experience more accessible for commercial
multiplex operators, the introduction of the IMAX xenon-based digital projection
system paved the way for a number of important joint revenue sharing arrangements
which have allowed the Company to rapidly expand its theater network. Since
announcing that the Company was developing xenon-based digital projection technology,
the vast majority of the Company’s theater system signings have been for
xenon-based digital systems. As at December 31, 2015, the Company has signed
agreements for 1,287 xenon-based digital systems since 2007, 127 of which were
signed in 2015 alone.
IMAX Laser-based Digital Projection System – As one of the world’s
leaders in entertainment technology, the Company strives to remain at the forefront
of advancements in cinema technology. Accordingly, one of the Company’s
key short-term initiatives has been the development of its next-generation laser-based
digital projection system, which it began rolling out at the end of 2014. In
order to develop the laser-based digital projection system, the Company obtained
exclusive rights to certain laser projection technology and other technology
with applicability in the digital cinema field from Eastman Kodak Company (“Kodak”)
in 2011 and entered a co-development arrangement with Barco N.V. (“Barco”)
to co-develop a laser-based digital projection system that incorporates Kodak
technology in 2012. Furthermore, in 2014, the Company announced an agreement
with Necsel IP, Inc. (“Necsel”) to be the exclusive worldwide provider
of specified lasers for IMAX’s laser-based digital projection systems
in exchange for preferred pricing and supply terms. The Company believes that
these arrangements with Kodak, Barco and Necsel enable IMAX laser-based digital
projectors to present greater brightness and clarity, higher contrast, a wider
color gamut and deeper blacks, and consume less power and last longer than existing
digital technology. The laser projection solution is the first IMAX digital
projection system capable of illuminating the largest screens in its network.
14.39 %