Published:
04-Oct-08
Five US Studios have finally cemented deals to underwrite the conversion costs to digital cinema for the exhibitor consortium Digital Cinema Implementation Partners (DCIP), consisting of the three largest cinema chains in the US, namely Regal, Cinemark and AMC Entertainment. Disney, Paramount, Fox, Universal and Lions Gate have separately negotiated long term virtual print fee (VPF) contracts to help subsidise d-cinema upgrades in as many as 20,000 screens or approximately 50 per cent of the US total alone. Deals with Sony Pictures and Warner Brothers are expected to follow. The screen target is over the 14,000 directly held by DCIP member circuits, therefore leaving room for other chains to advantage from the now finalised business terms, reported at $1,000 per digital movie per screen, or the majority of costs savings between producing a 35mm print. However, it is not known how much, if any, the circuits will also contribute on a per screen basis. The total costs will be backed by approximately $1bn from US investment banks JP Morgan and Blackstone to cover an average of $70,000 per digital screen upgrade (new build venues will have a lower cost per system).
Our take...The final catalyst for contract signatures from the five studios was the now very high profile line up of digital 3D titles starting 2009, given that a basic d-cinema system is first required before 3D capability can be added, at modest incremental cost. Rapid growth of the 3D screen infrastructure is crucial to exploit premium priced revenues from 3D tickets but also to ensure sufficient screen time per release. All of the aforementioned Studios have imminent digital 3D titles led by Disney, which will release up to five digital 3D titles alone in 2009. Universal through its Focus Features subsidiary and Lions Gate will release
Coraline and
My Bloody Valentine 3-D respectively in Q1 2009. Paramount will distribute the first effort from Dreamworks Animation in March. Finally, Fox will release tentpole animation,
Ice Age 3 in 3D in July. The three year long roll-out will begin in earnest in Q1 2009, with a high proportion of the initial screens converted expected to subsequently add 3D capability. For example, both Regal and Cinemark have committed to install 3D equipment in 1,500 digital screens each.
The process of agreeing business terms took longer than anticipated. The emphasis now in North America is on closing a similar deal for the consortium of independent operators representing a further 8,000 screens, known as the Cinema Buying Group (CBG), managed as part of AccessIT's second phase in North America. AccessIT's first successful deployment (phase one) set several benchmarks including a relatively high level of VPF contributions, which the Studios themselves have admitted would not be available for subsequent deals and hence the lengthy negotiations for DCIP.
USA,
Canada,
