Theaters, studios see $1.1 billion upgrade deal in Q2

http://movies.yahoo.com/mv/news/va/20080309/120511493600.html

 

Sunday March 9 7:08 PM ET

Several theater chains and studios are nearing an estimated $1.1 billion financing deal to deploy in cinemas digital technology that promises to boost attendance and save Hollywood billions of dollars in annual print and delivery costs, industry officials said on Sunday.

"We're hopeful that in the second quarter we will get it all arranged," said Travis Reid, chief executive of Digital Cinema Implementation Partners. DCIP is wholly owned by theater chains Regal Entertainment Group, Cinemark Holdings Inc and AMC Entertainment Inc, which collectively operate over 14,000 screens.

The long anticipated upgrade at an estimated cost of $70,000 to $75,000 per screen is expected to be a key topic this week at ShoWest, the annual Las Vegas gathering of movie exhibitors that begins on Monday.

ADVERTISEMENT

DCIP, formed about a year ago, first hoped to clinch the deal involving six major studios and third party financiers by the fourth quarter of 2007, but market volatility and issues related to equipment procurement, performance criteria, standards and usage fees prolonged the talks.

"Unfortunately, anytime you need to bring consensus on that basis, it's going to take time to get it done. It is literally front burner," said Jeffrey Katzenberg, chief executive officer of DreamWorks Animation on a February 26 conference call.

Katzenberg, a huge 3-D and digital cinema proponent, said he expects the DCIP deal to be done in the next 30 to 45 days.

The studios involved in the talks include General Electric Co's Universal Pictures, Time Warner Inc's Warner Bros, Viacom Inc's Paramount, which distributes DreamWorks films, News Corp's Twentieth Century Fox, Sony Corp and Walt Disney Co.

According to sources familiar with the talks, the deal would require studios, exhibitors and content providers to pay usage and other fees when using the equipment. These fees would go toward paying off loans that will be provided by financial institutions, including JP Morgan, to buy and install the equipment.

About 4,000 of the 37,000 cinema screens in the United States are digitally equipped, industry experts estimate.

Reid said that once the deal is done, the roll-out would start, and it is expected to take about three years to complete the upgrade of the 14,000 screens involved.

The ultimate aim within the industry is to transform all 125,000 screens worldwide to digital projection, enabling studios to beam film via hard drives or satellite dishes to theaters, which can then download them to servers and transfer them to high-resolution digital projectors.

While studios save on storage and distribution, theaters would benefit as audiences are drawn to higher-quality images.

Additionally, once outfitted with digital projectors, theaters can add 3-D capabilities, which promise more programming options at higher prices.

Many look to the success of the 3-D concert movie, "Hannah Montana/Miley Cyrus: Best of Both Worlds Concert Tour," which grossed nearly $30 million in its opening weekend as a template for the future. Tickets sold for $15, about 50 percent more than the typical movie prices.

About 1,000 cinema screens worldwide have 3-D systems, and the number is projected to hit 4,000 by 2009, according to Michael Lewis, chairman of Real D, whose digital projection 3-D technology was used in most theaters showing "Hannah Montana."

"3-D is the big game changer and the compelling reason for doing digital cinema," Lewis said. "More people are showing up to theaters to see 3-D and top filmmakers are using it as a new way to tell their stories."

Some industry experts have cited concerns about whether or not there will be enough screens to accommodate a growing pipeline of 3-D titles, including Disney-Pixar's "Toy Story 3," DreamWorks' "Monsters vs. Aliens," and "Avatar" from "Titanic" director James Cameron.

(Reporting by Sue Zeidler, editing by Richard Chang)