It used to be fun to go to the movie theatre. When I was ten years old, my 18-year old brother brought me to see The Return of the Jedi. It was a journey all its own. At least, at the time, it seemed like it was. My father drove us to the city; we queued, bought tickets, and found the perfect seats. As the lights went down and the opening music reached its crescendo, the crowd roared at the first glimpse of the notable Star Wars-Lucas opening credits. It was electric.
Sadly, going to the movie theatre today has lost its lustre. Movies have become an endless stream of mindless comic book superheroes, paired with music scores that lend no credence. Theatres have become the modern arcade, less about the art, more about packing seats. Gimmicks are the new charlatan and lack of substance to create a sticky experience.
Evolutionary drudgery aside, the pandemic has not been kind to notable Canadian movie theatre operator Cineplex (TSX:CGX). It recently reported a loss of $98.9 million or $1.56 per share in its second quarter, compared with a profit of $19.4 million or 31 cents per share in the same quarter last year. Revenue for the quarter ended June 30, totalling $22 million, plummeting 90 percent from $438.9 million, while its cash burn rate fluctuated between $15 million and $20 million every month.
Cineplex is also suffering from a failed $2.8 billion takeover bid by U.K.-based Cineworld, resulting in a series of lawsuits. The results for which will likely set new case law in Canada and the U.K.
Although I don't frequent theatres, I'm bullish on Cineplex. The stock is down 73% from a historic high of $34, and the decision to open-up locations will help the organization, but it won't be enough. New content remains an issue. Studios are not releasing new titles fast enough, and the lack of fresh content will make pulling-in movie goers difficult. What Cineplex needs to do is reinvent itself.
In late 2015, Cineplex paid $10 million U.S. to acquire the assets of WorldGaming, which has a platform used for tournaments and leagues for the competitive gaming community. The eSport market size is currently valued at $1.1 billion U.S. and set to reach $1.6 billion by 2023. The idea and the concept of using eSports in partnership with Microsoft, Sony, Google, and Apple to bridge the gap between home and arena (theatre) would be impressive. A natural step in decentralizing the dissemination of content. The first step for Cineplex to move forward with something new. Sadly, four years to the day, in 2019, Cineplex decided to put WorldGaming up for sale.
All the while, Enthusiast Gaming Holding Inc., a Toronto-based company, acquired rival electronic gaming platform Omnia Media for $44 million to create the dominant eSports platform. Enthusiast is backed by a collective of entertainment executives, including the owner of the Vancouver Canucks. Rest assured, they'll take it the distance. I see the collaboration between Enthusiast and Cineplex as an excellent opportunity for Cineplex to let someone else do the heavy technical lifting and leverage its venues as a central launchpad. A more modern approach to interconnected media.
Entertainment is experiential, and it's about community. To crack the nut, you need to bring the real and near-virtual world together. That's what Cineplex needs to do. It's not just movies, its multiple forms of content.
What do you think?