Gal Gadot and King Kong Helping Draw Israelis to Movie Theaters in Record Numbers

One Israeli cinema chain may have gone bust recently, but the rest of the industry is thriving, with ticket sales expected to top 18 million this year thanks to hits like 'Wonder Woman' and 'The Lego Batman Movie'

A Yes Planet screen in Jerusalem.
Emil Salman

If the golden days of Hollywood are over, Israelis haven’t heard about it. Many movie theaters across the country are full to capacity. The veteran Globus Max chain of theaters, which owned a quarter of Israel's movie screens, may have gone bust because of huge debts, but the industry otherwise seems safe.

In fact, the Israeli movie theater industry has been steadily growing since 2006, when 9 million tickets were sold. Ten years later, some 17 million tickets were sold for a total box office of 476 million shekels ($135 million). This year, ticket sales are also high: industry sources estimate ticket sales will hit 18 million, buoyed by the likes of "Wonder Woman," "King Kong: Skull Island" and "The Lego Batman Movie."

Old-fashioned cinemas in city centers may have dimmed their lights for the last time, but at the same time mega-movie complexes have arisen, featuring innovations like 3-D, IMAX and 4DX (incorporating 3-D and gimmicky effects like moving chairs). Not only have Israelis been going to the movies: they have paid more for the privilege.

Israel had 56 theaters at the end of 2016, compared with 59 theaters in 2006. Now, though, there are now more screens, 350, compared to 313 in 2006.

Also, ticket sales per screen grew, from 29,000 in 2006 to 45,000 in 2016.

It is true that, in 2016, the number of spectators per screen decreased for the first time in a decade, and some theaters in far-flung parts of the country don't do as well as cinemas in the crowded center. But industry sources say the business still has room for further expansion.

That 476 million shekels box office in 2016 went mainly to three companies, which control some 83% of the market: Israel Theatres (which runs Yes Planet, 26% of screens, and the older Rav Chen chain – 34%); Globus Max (25%); and Cinema City (24%), according to figures from consultancy firm Czamanski & Ben Shahar.

The big movie theater companies also make money from owning distribution companies that release the films in Israel. For instance, Israel Theatres has exclusive rights to distribute movies by some of the biggest Hollywood studios, including Walt Disney, Fox, Sony and others. Globus Max has rights to several big studios, including Warner Bros. and United International Pictures. Cinema City is partly owned by the distribution company United King.

The movie theater exhibitors are not publicly listed for trade in Israel, but Israel Theatres is listed in London. It’s the biggest of the three, after merging its business in Israel and Europe with the British-Irish Cineworld Group.

Cineworld’s reports indicate a growing company whose activity in Israel, through both Yes Planet and Rav Chen, is extraordinarily profitable – even relative to the group’s other activity elsewhere. In May, in a presentation to investment analysts, Cineworld presented its Israel operations as a model worthy of being copied elsewhere.

Tom Holland in "Spider-Man: Homecoming," one of the blockbusters Israelis will be flocking to in the summer of 2017.
Chuck Zlotnick/AP

Why Globus collapsed

Globus Max suffered from management and strategic problems that were unique to it, claims Cinema City CEO Avi Edri, adding that the market for theaters in Israel is stable and even flourishing. “Profitability erodes every few years because while our costs increase, ticket prices increased by less. But then the ticket sales rise, which offsets part of the erosion.”

Guy Shani, from the Lev arthouse cinema chain with its 10 theaters, doesn’t share that sense of periodic erosion. According to the Czamanski firm, it owns 6% of the screens in Israel – but Shani says it has a bigger share of ticket sales.

So why did Globus Max collapse? Bad management, too much investment in accelerated expansion, sometimes in poorly chosen locations.

“Everybody knew it would happen,” says an industry source. “They spent too much on construction. For instance, at the Grand Kanyon [mall] in Haifa, they installed a sound system that cost half a million shekels per individual theater. They took loans and expanded to places where the rent was too high. And they didn’t have a powerful, distinctive brand.”

Edri says the flourishing Israeli movie theater industry is also helpful to the Israeli film production industry. Back in 2002, when he was selling movie tickets, he says people wouldn’t go to an Israeli movie even for free: now there are quality Israeli movies. "In 2016, about 30 Israeli films were released and sold about 1.7 million tickets, and we see that trend continuing in 2017," he adds.

The popcorn law

Despite assertions about the industry’s strength, when the big players are pressed on their identical ticket prices and high fees for booking online, they argue that more regulatory intervention will only jack up prices even more.

The so-called popcorn law, enacted 18 months ago, banned theaters and sports venues from preventing people from bringing in their own food and drink. The Czamanski firm found the law barely dented sales at the cinemas’ concession stands, which – thanks to their high prices – are responsible for a considerable part of the companies’ profits. Yet the industry frets about potential regulatory meddling.

In March, the Ministerial Committee for Legislation scuttled a bill by MK Tamar Zandberg (Meretz) to abolish fees on internet ticket purchases. The consumer protection watchdog is, however, working on another version of the idea, having studied the movie market in recent months and concluding that competition is lacking.

Edri scoffs that the bill taking shape at the consumer watchdog is populist and fails to factor in the theaters’ true costs.

He also says there’s only one single company providing computer services to all the cinema companies, and it charges through the nose. The cinema chains don’t get a shekel out of internet commissions, he says.

The various companies are criticized for all charging the same amount: 40 shekels for standard tickets at Cinema City, Yes Planet, Rav Chen and Lev. All jacked up the price by 1 shekel last year. Edri shrugs that prices are also pretty standardized in Britain, the United States and France.

Screen saturation

Although the exhibitors boast of increasing viewers per screen, that might change: Another 100 screens are planned by 2019, though even those plans may be subject to revision after Globus Max winds down. The Sharon area north of Tel Aviv and Haifa seem saturated screen-wise, with 7,000 to 8,000 residents per screen – compared with the national average of 23,000. In short, the pace of screen proliferation easily outstrips the pace of population growth, says Tamir Ben Shahar of Czamanski.

Their fate is also tied to that of shopping malls, and if the growth of online shopping continues to gain momentum, the theaters will have to invest more in marketing, says Shani.

Meanwhile, over in Hollywood, the studios are thinking of increasing revenues by releasing movies to theaters and homes simultaneously (or narrowing the traditional window between the theatrical and release on DVD or VOD). In Israel and everywhere else, people are increasingly watching movies online and nobody can say how it will affect the theaters, Shani adds.

In fact, downloading high-definition movies at home is the biggest threat to theaters, notes Edri, adding that it’s theft. He’s annoyed that Israeli legislators obsess over popcorn prices rather than preventing people from stealing movies online.