Now Playing at Imax: Hit Movies

Will rereleasing them help the company boost earnings?

After more than 30 years of eliciting oohs and ahs from screaming schoolchildren watching sharks, mountain climbers, and astronauts looming on five-story-high theater screens, Imax Corp. (IMAX ) faces a crucial test on Nov. 1. That's when the wildly popular Star Wars: Episode II, Attack of the Clones will debut in Imax format on 58 screens in the U.S. and Canada, just six months after its 35mm release. The response of Star Wars fans will go a long way toward determining whether Imax can pull itself out of a financial funk that has hurt revenues and earnings and wiped out 85% of its stock value since mid-2000. "This could really unlock a large market for us," says Richard L. Gelfond, Imax co-CEO.

But will fans be willing to pay a buck or two over the price of a regular movie to see a previously released flick on a big screen? Hollywood studios and theater-chain owners--who foot the bill for building Imax screens--will be watching the Clones box-office returns closely. They'd like to see Imax create a new revenue stream. In fact, many are even asking if there's money to be made in releasing 35mm and Imax versions of movies simultaneously. "We're taking a wait-and-see approach" before committing any more Star Wars movies to Imax, says Bruce Snyder, president of domestic distribution for 20th Century-Fox Film Corp.

No one has more at stake than Imax, which makes most of its $118 million in annual revenues leasing its projectors and technology to theaters. For years, it has suffered the classic chicken-and-egg dilemma: Theater chains have been hesitant to add more Imax screens until they know Hollywood is committed to the format, and studios are reluctant to go the Imax route until there are more screens out there.

Reformatting Hollywood movies is a relatively new opportunity for Imax, which in the past several years developed a technology that allows 35mm movies to be converted to the Imax format for as little as $4 million, plus $30,000 per print. The lower cost is spawning a lot more interest. "It's a great way for people to see a movie," says director Ron Howard, who agreed to release his 1995 film Apollo 13 in Imax in September.

Imax execs hope Hollywood sees good results: Their company's future may depend on it. Imax' sales and earnings have tanked over the past two years amid a drastic consolidation of the theater industry. The Toronto-based company posted a $145 million loss last year, largely due to one-time charges for restructurings and bad accounts.

Gelfond and Bradley J. Wechsler, his co-CEO, got some good news on Oct. 30. Regal Entertainment Corp. (RGC ) announced it was adding five more Imax screens in its Edwards and United Artists chains, bringing its total to 11. Still, when those Star Wars clones hit the really big screen on Nov. 1, Gelfond and Wechsler know they truly need the force to be with them.

By Tom Lowry in New York

    Before it's here, it's on the Bloomberg Terminal.