Cinemas in Saudi Arabia: A billion dollar opportunity

The participation of AMC entertainment, the world’s largest cinema operator and DIEC is expected to give a boost to the development of the cinema industry in the Kingdom. In April 2018, DIEC opened its first cinema in the King Abdullah Financial District and aims to open 50-100 cinemas across Saudi Arabia by 2030⁴.

The fast paced development of the cinema sector can be demonstrated by the opening of Saudi Arabia’s second cinema by VOX Cinemas. Alongside DIEC, VOX has been an early entrant into the Kingdom’s cinema market and plans to invest USD 533 million to open 600 screens across the Kingdom and provide 3,000 new jobs over the next 5 years to capture a share of anticipated demand⁵. Most recently, IMAX signed a deal with VOX to partner on a minimum of 4 multiplex venues in Saudi Arabia.

Several international cinema operators are also keen to get a foothold early in Saudi Arabia’s promising cinema market and have signed MoUs with local or regional partners:

• Cinépolis, the fourth largest exhibition circuit in the world, and Al Tayer Group have partnered with Al Hokair Group and have been granted a Cinema Operating License by the Saudi General Commission for Audiovisual Media (GCAM) ⁶
• iPic Entertainment has signed a memoranda of agreement with BAS Global Investments Company to develop 25 to 30 sites over the next decade ⁷
• A leading multiplex chain from India, PVR Limited has signed an MoU with UAE based Al Futtaim Group for entry into Saudi Arabia and other regional markets ⁸
• CJ 4DPLEX has also signed a deal with Cinemacity to open 3 4DX locations in Riyadh ⁹
• Kuwait National Cinema Company and Dubai based distributor Front Row Filmed Entertainment expect to develop 12 multiplexes in the next 3 years through their subsidiary Cinescape ¹⁰
• Al Rashed Empire Cinema consortium has also received a license from GCAM ¹¹

<sup>4. Variety
5. Arabian Business
6. Altayer Group
7. Argaam
8. Alfuttaim press release
9. Forbes Middle East
10. The National
11. Arabian Business</sup>

With Saudi Arabia’s population forecast to be 39.5 million by 2030¹⁵, the Kingdom has the potential to absorb up to 2,600 screens.

Market benchmarks indicate an average of 6.6 screens per 100,000 inhabitants in developed markets (excluding USA & Canada, which have a highly penetrated cinema market). While UAE is at the lower end of benchmarks, the screen density has increased significantly from 3.6 in 2012 to 4.8 in 2017. With many new multiplexes expected to open in the UAE in the next few years, the screen density will also be closer to the average benchmark.

A mix of regional and international examples indicate, Saudi Arabia would require around 370 cinema sites based on an average of 7.0 screens per cinema to accommodate 2,600 screens.

Depending on how rapidly the Kingdom’s market evolves, it could potentially generate 60 to 70 million admissions in 2030.

As the cinema industry penetrates beyond the key cities and adopts several different formats (3D, IMAX, VIP, Kids, etc.), the prices are expected to vary a lot and could range from USD 11-14 at the lower end to USD 40 for high-end / luxury experiences.

We estimate the Kingdom's cinema box office market could be USD 950 million in 2030. With non-admission (F&B / concessions and advertising) typically comprising 35% of overall revenue, cinema industry has the potential to generate total revenue of USD 1.5 billion in 2030 and develop into a lucrative revenue stream for the industry players and the government.

Saudis have been known to travel to neighbouring countries such as the UAE and Bahrain to spend on entertainment. Increasing hospitality and cinemas within the kingdom will help reverse this trend and inject recreational spend back into the Kingdom, stimulating the leisure sector.

^{15. Euromonitor}