IMAX'S MAGIC DEAL; MOTION PICTURE PIONEER HOPES AGREEMENT TO SHOW DISNEY'S `FANTASIA 2000' BOOSTS PROFILE OF LARGE-FORMAT FILMS, THEATERS.

Byline: Dave McNary Daily News Staff Writer

Imax Corp., best known for breathtaking giant-screen documentaries about nature's wonders, looks like a big Y2K winner already.

On Jan. 1, 2000, Imax hopes to swap its status from niche player to full-fledged Hollywood mainstreamer. That's when Imax becomes exclusive exhibitor for The Walt Disney Co.'s ``Fantasia 2000,'' a large-format version of one of animation's crown jewels, for the first four months of the year.

``We were clearly looking to premiere a significant Hollywood film in the Imax format so it was just perfect that Disney came along with `Fantasia 2000,' '' said Richard Gelfond, co-chairman and chief executive. ``The two brands really create an event atmosphere.''

``Fantasia 2000'' has been in the works for a dozen years and combines six new segments with three from the 1940 original: ``Dance of the Hours,'' ``Nutcracker Suite'' and ``Sorcerer's Apprentice.'' About half of the 200 or so Imax screens open by the end of the year, following a five-city tour, will show the film, marking the first time a full-length Hollywood feature has been released in the giant-screen format.

``The deal puts a significant stamp of approval on the Imax format,'' said Richard Wayman, an analyst with Ohio Co. `` `Fantasia 2000' is going to have a wide appeal.''

``This is a great, great deal for Imax,'' said Steven Bernard, analyst with Everen Securities who has a ``buy'' rating on Imax. `` `Fantasia 2000' is Disney's signature product so putting it through the Imax system before it goes into the rest of the world's theaters really says something. It validates the giant-screen technology and concept.''

Imax, which leases projection systems to giant-screen theaters, will receive a cut of grosses in exchange for work in post-production, marketing and distribution. ``Fantasia 2000'' should help Imax increase the number of theaters from the current 183 to about 250 by the end of 2000, Gelfond said.

``Fantasia 2000'' will be released in 2-D but Imax executives point out that digitally animated films could be released in Imax's 3-D format. ``Films such as a `A Bug's Life' scream to be shown in Imax,'' co-chairman Bradley Wechsler told reporters following the deal announcement.

Gelfond said the partnership has perked interest from other producers and noted 1999 will see as many as 20 new giant-screen movies roll out, including one involving Michael Jordan's final season as a player. He also said another of Hollywood's major studios is likely to commit to a giant-screen project.

More significantly, Imax could become a full-fledged member of Disney's global family should the partnership - the corporate equivalent of going on a date - work out. Burbank-based Disney, analysts note, could buy part of Imax much like it has invested in Internet access specialist Infoseek, special-effects house DreamQuest Images and computer-animation producer Pixar in recent years.

``Logically, down the road, someone like Disney would be a candidate to buy Imax out,'' Bernard said. ``Imax is probably grooming itself for that.''

William Scovin, a Ladenburg Thalman analyst, agreed. ``Imax would be a logical fit for Disney although Disney is not the only one,'' he said. ``Imax would be a fit for content providers like Sony or Fox - an interesting outlet for someone wanting to do family oriented product.''

The Imax format, which debuted 32 years ago at Expo '67, has already achieved massive box office success thanks to ``Everest,'' the documentary that has topped $62 million in domestic grosses despite never playing on more than 62 screens at once. Should ``Fantasia 2000'' succeed, the lingering idea that giant-screen theaters are a fluke would be banished.

`` `Fantasia 2000' does a great job of responding to Imax's chicken-and-egg question, which has always been whether great films will get made in a format that has limited distribution,'' said entertainment consultant Kevin Skislock of Laguna Research Partners. ``Now, they've effectively and methodically dealt with that problem.''

Skislock said ``Everest'' attracted millions who might not have gone to an Imax theater otherwise, partly because it explained the 1996 tragedy that left eight climbers dead on the world's tallest mountain.

``The film clearly demonstrated the format's ability to convey a powerful dramatic story line even though it did so with no planning at all, no storyboards,'' he said. ``Who would have thought things like a shot of two men in a tent conversing on a phone with one of the climbers would have been that compelling?''

Imax, which grew revenues 20 percent last year to $190 million, makes money in three ways - installing systems in new theaters, which usually cost at least $8 million; a 7 percent fee from grosses for licensing the projection systems; and the occasional production of giant-screen films. About 200 films can play on Imax systems, which use a 70-millimeter format that is 10 times larger than conventional 35mm stock.

Landmark titles include ``Everest,'' ``The Rolling Stones at the Max,'' ``Wings of Courage'' with Val Kilmer, and ``To Fly,'' the 1976 film that was made for $500,000 and has grossed $150 million. But ``Fantasia 2000'' is quite different, Scovin noted, and will have profound effect on Imax.

``The real issue is that traditional Hollywood needs to see what Imax's value will be as a distributor of more conventional product,'' he said. ``So `Fantasia 2000' is really going to be a case study because it will only be available in Imax.''

Early buzz on the movie is positive, based on reaction from those who have seen rough cuts, according to Scovin. But ``Fantasia 2000'' isn't a slam dunk, he noted.

``Disney's marketing clout can get people into theaters in the first week, but if nobody shows up after that, you have a real problem,'' Scovin said. ``But Disney wouldn't be doing it if they didn't feel confident that the movie in this format will be breathtaking.''

For now, the Disney alliance is a major boost for Imax's image. Hollywood had been waiting for Imax to expand past its core business of showing films like ``Into the Deep''; most had expected its first mainstream movie would team it with Paramount for a ``Star Trek'' film.

Imax had already been transforming itself from a stodgy specialist with theaters next to museums and into a top-tier lure at today's successful entertainment centers, which bristle with bookstores, coffee houses and one-of-a-kind retailers. Of its 183 theaters, 58 are in so-called ``commercial'' locations; of the 76 sites in Imax's backlog, 68 are commercial and mostly as part of multiplexes run by major chains.

``Having an Imax has become a great branding statement because, in the consumer's mind, you've made the location special,'' Gelfond said. ``Since the Imax frequently sells out, spillover tends to go into multiplex and it's a lot cheaper to build than a stand-alone because of the shared concession areas and walls.''

The first Imax comes to the San Fernando Valley area next month at what will likely be called the Valencia Edwards Imax Theaters. The complex, next to a Borders bookstore and three restaurants at Valencia Town Center, will have a dozen regular-format auditoriums and close to 3,000 seats.

A second Imax will open next year at Universal Studios' CityWalk next to the Cineplex Odeon 18.

The transformation of Imax has put its stock on a roller-coaster this year. It went from $17 to over $29 last year, then topped $33 in January before Goldman Sachs removed Imax from its ``recommended list'' and a surprise announcement that 1999 results would be flat. The stock fell all the way to $15 before recovering.

It's been trading in the $20 range ever since Bear Stearns upgraded its rating to ``buy'' from ``attractive'' earlier this month, citing ``Fantasia 2000'' and strong prospects for the recently released ``Encounter in the Third Dimension.''

``There are no momentum people in the stock anymore,'' said Scovin, who has a ``buy'' on the stock. ``We believe the market has punished it as much as it should be punished.''

``I like the Imax story more than ever because it's a very different fundamental situation than traditional theaters,'' Skislock said. ``They have the ability to distinguish themselves as a brand far more than any studio except Disney.''

For the longer-term, Imax is in the right place at the right time, Skislock said. It can take advantage of moviegoers' increased preferences for unique films from the non-major studios such as ``Everest,'' ``The Full Monty'' and ``Life is Beautiful.''

``The playing field is more level between indies and majors because indie product gives moviegoers an alternative to the repetition of tasteless, violent studio product,'' he said.

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3 Photos

PHOTO (1--2--Color) Disney's ``Fantasia 2000,'' an updated version of the animation classic, will be shown on large-format Imax movie screens starting Jan. 1.

(3) Disney's ``Fantasia 2000'' will be shown on Imax movie screens starting Jan. 1. Above, a scene from ``The Sorcerer's Apprentice.''