IMAX Corp.'s China Expansion: Betting Big on Blockbusters and Screens in a Recovering Market

The global film industry's recovery hinges on China, and IMAX Corp. (NYSE: IMAX) is doubling down on its strategic bet. With a partnership at the heart of its growth—the Wanda Cinema Line deal—and a reliance on blockbuster hits to drive box office revenue, IMAX is navigating a market still healing from pandemic scars. But as its screens expand and Chinese audiences return, can the company sustain its momentum without overexposure to hit-or-miss film performance?

The Wanda Partnership: A Pillar of Growth

IMAX's strategic screen expansion in China is anchored by its partnership with Wanda Cinema Line, the country's largest movie exhibitor. Under the terms, Wanda is upgrading 61 theaters to IMAX's “Laser” technology, renewing leases for 37 existing locations, and potentially adding 25 new IMAX theaters by 2028. The focus on tier-one cities like Beijing and Shanghai underscores a push to dominate premium viewing experiences in high-income markets.

This deal isn't just about numbers. Wanda's parent company, China Ruyi Holdings (backed by Tencent), brings new capital and digital synergies, potentially opening doors for IMAX to integrate its technology with streaming or gaming content. The partnership also includes collaborations on exclusive films and immersive experiences—areas where IMAX's premium branding could command higher ticket prices.

Box Office Recovery: Riding the Wave of Blockbusters

China's box office revenue fell to $5.8 billion in 2024, down from $7.5 billion in 2023, but early 2025 data hints at a rebound. IMAX's Lunar New Year performance in January-February 2025 was record-breaking: $121 million in global box office, driven by Ne Zha 2, which alone contributed $106 million in China. The film's success—surpassing Avengers: Endgame as IMAX's top Chinese release—showcases the power of IP-driven content in a market hungry for escapist entertainment.

Yet this recovery is fragile. Foreign films struggle to attract audiences, while domestic hits like Ne Zha 2 and Detective Chinatown 1900 dominate. IMAX's strategy leans heavily on such blockbusters, which account for a disproportionate share of its revenue. In 2025, films like Avatar 3 and Mission: Impossible 8 are poised to boost its global numbers, but over-reliance on a few hits creates volatility.

Risks: The Double-Edged Sword of Blockbuster Reliance

IMAX's growth is tied to two critical factors: screen expansion and hit films. But both come with risks.

1. Hit Film Dependency: A string of underperforming releases could crater revenue. In 2024, no foreign film broke $137 million in China, and local films like Creation of the Gods II faced backlash over quality. If sequels like Ne Zha 2 or Detective Chinatown fail to sustain their momentum, IMAX's China revenue—a third of its global total—could suffer.

2. Streaming Competition: China's streaming giants (iQiyi, Tencent Video) offer convenience and lower costs, eroding theater attendance. Hybrid releases—where films debut simultaneously in theaters and on streaming—threaten to dilute box office potential.

3. Economic Uncertainty: China's post-pandemic recovery remains uneven. Consumer spending on discretionary items like cinema visits could stall if inflation or job losses resurface.

Can IMAX Sustain Its Growth?

The company's prospects hinge on diversifying revenue streams while capitalizing on its screen expansion. Here's the calculus:

• Screen Growth: Adding 25-30 new IMAX theaters in China over three years (via Wanda) expands its footprint. But China already has 778 IMAX screens (vs. 364 in the U.S.), raising questions about saturation.

• Content Strategy: Partnerships with Wanda and local studios to produce IMAX-exclusive films could reduce reliance on third-party blockbusters. The Ne Zha franchise's global rollout (now in Australia/New Zealand) also hints at untapped international revenue.

• Premium Pricing Power: IMAX's 4.3% market share—despite operating just 1% of screens—suggests demand for premium experiences. If theaters can justify higher ticket prices, even in a slow economy, this could offset risks.

Investment Takeaway: A High-Reward, High-Risk Play

IMAX's China strategy is bold but fraught. Investors should weigh:
- Upside: A $1.2 billion global box office target for 2025, fueled by Ne Zha 2's success and Wanda's screen expansion. Long-term, China's film market is projected to grow to $15.3 billion by 2029, with IMAX positioned to capture a premium slice.
- Downside: Overexposure to hit films, streaming competition, and macroeconomic headwinds could derail progress.

Recommendation: IMAX is a speculative bet for aggressive investors. Its China play offers growth, but reliance on blockbuster hits and an uncertain recovery make it volatile. A long-term hold requires confidence in sustained film quality and Wanda's expansion plans. For conservative investors, wait for clearer signs of market stability and diversified revenue.

In the end, IMAX's fate in China mirrors the broader industry: it's all about the next big hit.