Again, things are moving in the right direction, and we’re thrilled to see that the studios, despite what happened with the strikes, there hasn’t been any change in the strategy with regard to studios’ intentions to continue rebuilding their pipeline of films. If anything, it’s been reinforced by just the ongoing results that these films are providing those companies. Transitioning to your question on our circuit, you’re right, we’ve had certainly a higher number of closures of theaters domestically over the last couple of years than we have had new builds and additions. As you mentioned, those theaters, while we’ve always had a process of optimizing our circuit and closing lower-performing feeders and older theaters and repopulating that with newer opportunities, there have been more of those that have been on the cusp that we’ve exited, which net-net do provide a bit of bottom line lift for our company going forward.
So, from a just pure EBITDA perspective, it’s actually a net positive. We have added, at the same time, about 16 new theaters over the last few years, and we’ve seen that the results of those theaters have been very strong. In fact, in the majority of those cases, our actual results have exceeded our pre-pandemic pro forma targets that we had in mind based on significantly higher volume levels. So it definitely gives us a sense that there are clearly those market opportunities still. And as I mentioned in prepared remarks, we’ve reactivated that development pipeline now as we’ve seen that, and certainly, as we just continue to build further in our recovery. So, as we look forward, I think, yes, we do anticipate that we will start to see a greater amount of activity of real estate, new build to supplement and offset some of the closures that we had.
It doesn’t mean we wouldn’t have some more of those types of closures that happen as we’re just trimming some of the lower-performing older assets in our company, but we do expect that we’ll be adding more than we have over the past few years. Clearly, that’s going to be moderated a bit just based on our continued cash flow generation coming out of this year in 2024 as we continue to recover and balancing that with some of the debt actions that Melissa mentioned.
Mike Hickey: Thank you.
Sean Gamble: Thanks, Mike.
Operator: Thank you. [Operator Instructions] Our next question is coming from Jim Goss from Barrington Research. Your line is now live.
Jim Goss: Okay. Thank you. I wanted to talk a little more about the relationship with streamers that you’ve alluded to. I’m wondering if it’s going to match the traditional studio partner patterns or are you creating some sort of new mutually beneficial working models in terms of the number and variety of releases and expectations in terms of theatrical windows? For example, are they looking at it as a way to directly create new — launch new series and it might tie in that way, or certainly it goes directly into their product? So, anything — it seems to be early stage is the best time to shape plans and expectations. And I’m just wondering if you have any commentary on that.
Sean Gamble: Sure, Jim, let me answer that and then if need be, I can elaborate further. The current direction is, I’d say, more akin to traditional studios. I think what everybody’s data has shown is these films that are being released theatrically are performing better on streaming platforms and they’re delivering [indiscernible] amount of value in terms of consumer interest. So, acquisition, retention, those are the films that tend to be viewed to a higher extent. So, I mean, what we’re seeing right now from the streamers is they’re leaning into similar types of traditional films and looking to launch them in similar ways to derive that same type of lift on their platforms when they hit those platforms. By the way, with comparable types of windows, which are starting to gel around that 45 days give or take us some.
By the way, that also — we also continue to see the opportunity for additional types of programming, as you mentioned, where it doesn’t have to be limited to films. We’ve seen phenomenal consumer enthusiasm and response for premieres of series, episodes, even bringing back episodes that have previously been shown on these platforms that are really well received by fans. They just — they love. Again, as we know, the most active streamers are our most active moviegoers. These are people who just love to view this content in an elevated format and they also view it amply at home. So, this is just a great way to give fans an elevated event and [indiscernible] opportunity. So, they’re leaning into in similar ways and we just — we see the opportunities there to be sizable both for films as well as other episodic type of programming.
Jim Goss: Okay, thanks. Just one other thing. I’m wondering, in discussing how you’re leaning into merchandise, I’m wondering if you’re taking any inventory risk on this. Do you have to determine how much you think you can sell? Or is — will they take totally back and you’re an extension of them, so there’s really no added risk to try to managing that getting into the concessions mix portfolio?
Sean Gamble: The deals definitely vary based on who carries the inventory risk. So, it is something that we remain highly focused on as we pursue merchandise. So, there are many examples where we do take on that risk and we’re careful about how much we’re purchasing as a result of that. And then like I said, there’s other models where the supplier is carrying that risk. We are leaning more into e-commerce opportunities with merchandise in addition to what we have in our theaters with — we’ve seen a great appetite for that for consumers. And obviously, there’s greater self space and greater opportunity to host more SKUs that way. And those types of models lend themselves more to a model where there’s more risk for by the actual supplier than by us. But it’s a great question. It’s something that we are particularly focused on, especially as we’re ramping that part of our business more.
Jim Goss: Okay. And just a follow-up. So, you could probably put kiosks in your theaters or something like that and then it becomes sort of a catalog merchandise online when the consumer is very interested in it at that moment?
Sean Gamble: When you mention a kiosk, are you referring to just like kind of a pop-up stand or are you talking about…
Jim Goss: Yeah, something of that nature, just some direct access. I know you can go to your phone and do it that way too, but…
Sean Gamble: That’s right. I mean, we have shelf space and stands in the majority of our theaters already where we put merchandise. Sometimes that’s limited by the size and space in our lobbies, but we do that already today. And what the online channel provides is an opportunity not only for that same merchandise, but other SKUs. I mean, a perfect example is what we saw earlier in 2023 when we had Scream popcorn tubs that all of a sudden became this huge phenomenon with fans and we sold out of them almost instantly in our theaters. And we were able then to extend that to an online offering and direct consumers to go purchase them online because they were no longer available in our theaters. And we sold a ton of those online as well. So, it’s a great way to just extend that in certain cases as well as gain greater shelf space for that we may not have available in our theater while carrying lower inventory risk.
Jim Goss: All right. Thanks very much. Appreciate it.
Sean Gamble: Thanks, Jim.
Operator: Thank you. Next question is coming from Omar Mejias from Wells Fargo. Your line is now live.
Omar Mejias: Good morning, and thank you for the question. Sean, you mentioned that non-traditional content was 14% of total North America box office in ’23. Can you maybe give us an update on what are your plans for non-traditional content this year, and if you expect that number to continue to grow as a percentage of box office? And just — my second question, just on — can you guys unpack the impact from the Taylor Swift concert film on average ticket price and concessions per cap? Thank you.
Sean Gamble: Sure. Thanks for the questions, Omar. Well, first just to clarify, the 14% is specific to Cinemark. So that was our percentage that non-traditional represented of our box office results. So, it was certainly a large part of the industry as well, but we tend to over index on that type of content. So, it would be a touch lower for the industry as a whole. In terms of future expectations, look, we remain optimistic about the growth in this area. Historically, pre-pandemic, we were seeing — we always believe there was a lot of potential in alternative content. And it was just something that never really seemed to meet that potential. It generally hovered around 2% or so of box office each year, despite what we saw as upside.
And it’s been great to see now that that’s been playing through certainly in the areas of foreign films, faith-based films, concert films, like those all of a sudden have been taken off. When we look at 2023 specifically, I would say that was in — the results were inflated a bit by some real outliers. I mean, obviously you had Taylor Swift: The Eras Tour concert film, which did over $180 million of box office domestically. You had Sound of Freedom, which did about $185 million. Like, those are phenomenons, which — look, we’re hopeful to see some of those repeat, but it’s hard to bank on that. But even if you were to strip that out for us, non-traditional content still represented about 9% or so of our full year box office results. So, when you consider that and we consider where we were last year, look, we’re enthused about it.
We think that as Hollywood content fully recovers, this could still be 5%-plus or so of box office and there’s more potential there. So, I think if you’re a musician, you’re seeing what Taylor Swift and Beyoncé just did, I don’t know how you wouldn’t lean into that more. So that’s a channel of opportunity. When you look — we know already they’re in the faith-based category. There’s traditional studios like Lions Gate and Sony getting more into that. There’s Angel Studios, now has all of a sudden really ramped up production. They’ve already announced five films this year. They were the ones who brought us Sound of Freedom in 2023. And certainly the foreign films have continued to scale. I mean, Indian films, Chinese films, these movies are doing phenomenal business in the U.S. now.
So, we’re really optimistic about where this goes. And again, we see this being potentially 5% or so box office going forward, if not greater.
Melissa Thomas: Omar, with respect to your question around impact of Taylor Swift: The Eras Tour on ATPs and per cap, the impact on our average ticket price was a benefit of $0.50 in the fourth quarter and the benefit on our concession per cap, particularly in the form of improved product mix, was about $0.14 and the majority that was predominantly driven by that.
Omar Mejias: That’s very helpful color. Thank you, guys.
Sean Gamble: Thanks, Omar.
Operator: Thank you. Next question is coming from Stephen Laszczyk of Goldman Sachs. Your line is now live.
Stephen Laszczyk: Hey, great. Good morning. First on margins, perhaps for Sean, you mentioned the efficiency from the variable workforce. I was wondering if you could perhaps talk a little bit more about what you’ve learned on that front in 2023 and how much more room you think there is to operate the business more efficiently from a structural perspective as we look into ’24 and then as the slate normalizes in ’25? And then, one on CapEx for Melissa. You talked about your expectations for CapEx increasing as the box office recovers, but not back to peak levels. I think you’re at $150 million for this past year. CapEx is north of $350 million at its peak, that’s a fairly wide range. Is there any framework you could offer us in terms of thinking about how CapEx could trend as the box recovers in ’25 and ’26 that’d be helpful. Thank you.
Sean Gamble: Sure. I’ll start on margins and I’ll let Melissa delve into that further as well as your second question, Stephen. This is — when we talk specifically about labor management, this is an area that we’ve been working on for some time. Obviously, predates the pandemic, we’ve seen a lot of opportunity just in the workforce management realm. We’ve put in that all kinds of time studies around what it takes to perform different activities in our theaters. We become more adept certainly with lower volumes of attendance in determining what things we should turn on or off based on expectations of demand. It’s an area that we’ve got a range of initiatives that we’re continuing to lean into to drive that further. Obviously, the deeper we go into that, the more complicated those efforts become because you’re getting into reengineering processes more significantly in order to capture more productivity and do more with less.
But we’ve got a line — a range of initiatives going forward and I’ll let Melissa speak to just margin expectations.
Melissa Thomas: Yeah. As you think about salaries and wages in 2024 while we continue to drive and pursue further productivity initiatives as Sean mentioned, I think the big thing to keep in mind for 2024 is that we may be more impacted by minimum staffing levels given the expected reduction in content and box office potential. So that’s something to keep in mind as you think about how that line item moves. And then in addition to that wage rate pressure, which we expect will be more in line with what we’ve seen historically on the labor front. And then, with respect to your question on capital expenditures, as we think about our CapEx expectations, as you mentioned, we do believe our peak CapEx years are behind us and we are continuing to benefit from those investments that we’ve made in our circuit historically, which we think is actually a key differentiator for our company.
