Hollywood Hopes to Cash in as Saudi Arabia Lifts Its 35-Year Ban on Movie Theaters

Hollywood is falling head over heels for the Kingdom of Saudi Arabia.

The Middle Eastern nation is lifting a 35-year old ban on movie theaters, prompting a mad dash by both U.S. and international exhibitors eager to be among the first to build cinemas in a country that’s been film-deprived for decades. Add to that a well-to-do citizenry of some 30 million — the majority of which is under 25 years old — and it’s easy to see why studios and entertainment companies want to cash in on the gold-rush frenzy.

“This is a very big opportunity for the entire movie industry,” said John Fithian, CEO of the National Assn. of Theatre Owners. “It’s a market that’s potentially huge. The vast majority of people in Saudi Arabia are young people with a lot of disposable income and they have a real appetite for movies.”

Indeed, experts believe that in three years Saudi Arabia could produce $1 billion in revenue, and that by 2030 it could be among the 10 biggest film markets.

“It’s a huge population that basically has nothing to do” in terms of entertainment, said Karim Atassi, who oversees business development for Middle East exhibition chain Cinemacity, which has closed deals to develop sites in several Saudi malls.

Statistics suggest that when theaters open, audiences will quickly follow. Although cinemas have been banned for a generation, Saudis are entertainment savvy. They download movies, often illegally. Many have satellite dishes. And they’ve found a way to catch the latest films despite the ban, traveling to neighboring Bahrain or Dubai to get their big-screen fix.

“It won’t happen overnight,” said Andrew Cripps, Fox’s president of international theatrical distribution. “It will take two or three years for there to be meaningful revenue and an infrastructure in place. But once it’s up and running, it has strong potential.”

It’s not just the chance to broaden the consumer base for cinema-going that’s got the industry excited. The country is also interested in injecting capital into a business in need of fresh sources of cash. Plans were recently announced to spend $64 billion on entertainment investments, of which some $10 billion will be earmarked for film and fine arts.

In the mid-aughts, Hollywood, always eager for fresh cash, got an infusion of Middle East oil money when the UAE and Qatar decided they wanted to build a media and entertainment industry from scratch as part of their economic diversification. But the Arab investors soon got burned and for the most part rapidly pulled back. Cut to 2018, enter Saudi Arabia, and the oil cash has been turned back on. This time could be different: The money might not be as dumb.

A deal is imminent under which the Public Investment Fund of Saudi Arabia will acquire between a 5% and 10% stake in Endeavor, the holding company for Hollywood talent agency WME, for a sum believed to be $400 million to $500 million. There are also plans to earmark as much as $10 billion for film projects. The thinking in Saudi Arabia is to integrate the nation’s Hollywood investments with building a local industry, according to several sources.

This all comes at an opportune moment. China, once seen as a virtually unlimited resource for funding, has stopped writing checks to Hollywood. Its government has decided that Chinese money isn’t getting enough of a return on its investment; at the same time, the Trump administration’s order to impose tariffs, possibly on $60 billion worth of Chinese imports, is making the possibility of a trade war with the Asian giant a looming danger. The thought is that Saudi Arabia can help fill some of that funding gap.

Michael Kirkham for Variety

It’s easy to understand why hopes are high that the relationship could be profitable for all parties, but there are also reasons to believe this could be something of a mirage in the desert.

Saudi Arabia is an autocracy after all, one ruled by the whims of the 32-year-old Crown Prince Mohammed bin Salman. Moreover, it’s a society characterized by layers of bureaucracy, all of which have to be navigated by Westerners who are newcomers with little experience working in the kingdom.

There are already problems with mixed signals. Many who have made the journey to Riyadh to court the Crown Prince leave with the clear feeling that they have received a greenlight to build theaters or embark on business deals, only to find out later that several hurdles remain. For instance, Saudi Arabia has told insiders that it plans to initially limit theater construction to three or four foreign companies (who will work with local partners). Yet, there are at least six exhibitors vying to be among the first to build cinemas in the country, many of whom believe that they have been promised permission to break ground. AMC, iPic, Empire, Vue, CJ CGV and Cinépolis are among the companies that have announced plans to have bases of operation in the country.

Licenses started to be granted this month, and studios have been told that they may be screening films in Saudi Arabia by April. Dubai-based Vox Cinemas — the leading exhibitor in the Middle East and a major competitor in the region for global exhibition chains — launched its first public screening in the area on March 1, showing satirical Saudi cartoon series “Masameer” and other Saudi content in a space in Riyadh’s Digital City that was not fully outfitted as a movie theater.

Yet, other issues remain. Saudi Arabia is a conservative country — it wasn’t until September that women finally got the right to drive. That means the first films to score debuts in the kingdom will likely be family pictures or animated features, and nothing with a political message. Censorship standards are still being worked out, but the country has signaled that it will have an age-based rating system. The restrictions will probably be similar to those in place in Kuwait, Bahrain and the UAE, meaning that movies concerning or containing sex, homosexuality and religious issues are prohibited. In many cases taboo scenes can be chopped out. Due to censorship, most Hollywood movies that play in Kuwait last for only about an hour.

It’s also unclear if the theaters themselves will be segregated in terms of gender, and how box office grosses will be tracked and tallied. With less than a month to go before cinemas are supposed to light up their marquees, numerous logistical issues are still being worked out.

Meanwhile the kingdom’s General Culture Authority has just announced that the Saudi Film Council has been set up to “build a dynamic film and content industry ecosystem,” said the council’s CEO Faisal Baltyuor. Areas of activity will include talent development programs, a regulatory framework, production infrastructure, funding solutions and initiatives to promote the kingdom’s overall brand and culture. The new Saudi film body is expected to make a splash at the upcoming Cannes Film Festival with a large space at the Marché du Film.

And in another development that points to broader reverberations in Hollywood likely to be prompted by Saudi Arabia’s cinematic impetus, the Hollywood Chamber of Commerce and Beirut-based company Milestones have just signed a deal to license the Walk of Fame in the Middle East.

“What [the Saudis] are doing is very supportive to what we want to do,” said Milestones CEO Albert Bamboukian, who aims to foster a Hollywood-like star system across the Arab world. “As a matter of fact,” he notes, “it would complete our vision.”

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