Film-Tech Forum ARCHIVE: Direct Paramount-Exhibitor VPF Agreements

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Posted by Kevin Fairchild (Member # 4985) on 01-22-2009, 03:50 PM:

Here is a copy of a letter we got today.

quote:

PARAMOUNT PICTURES ANNOUNCES DIRECT-TO-EXHIBITORS
DIGITAL CINEMA DEAL

First Studio To Implement Agreement To Accelerate
Expansion Of Digital Footprint

HOLLYWOOD, CA (January 22, 2009) – Paramount Pictures, a unit of Viacom Inc. (NYSE: VIA and VIA.B), today announced it has become the first studio to offer digital cinema support directly to exhibitors across the United States and Canada. The move is expected to accelerate the roll-out of digital and 3-D projection systems in theatres. The announcement was made by Jim Tharp, President of Domestic Theatrical Distribution.

The deal works in parallel with previously announced agreements with DCIP (Digital Cinema Implementation Partners), Cinedigm, Kodak, and Sony but allows exhibitors to seek financing for d-cinema systems locally rather than wait for comprehensive integrator agreements, which require significantly more upfront capital, to be completed. In addition, the agreement allows exhibitors to own and control their equipment (which is required to be DCI/SMPTE compliant), and to switch to an integrator-supported agreement at a later date if desired. The new agreement also includes independent theatres that do not belong to any integrator groups.

In making the announcement, Tharp said, “We are excited about the potential of more theatres offering more of Paramount’s films in the highest quality digital and 3-D. Today’s announcement is a good step forward to providing more audiences with the very best in movie viewing.”

NATO President and CEO John Fithian said, "Paramount is getting out front on this critical industry transition and we applaud them. Direct arrangements between distributors and exhibitors won't work for everyone, but for some of our members, it could make the difference in surviving and thriving in the digital era. And it certainly enables some exhibitors to get wired much faster -- and that means more 3-D screens sooner. We urge all studios to give this creative option a fair chance."

To date, Paramount has signed nine digital cinema integration deals, the most of any major studio. They include domestic agreements with Cinedigm (previously Access IT) Phase 1 and Phase 2, Kodak, Sony, and DCIP, three deals with European integrators XDC, Arts Alliance Media and Ymagis, and two deals with Asian integrators DCK and GDC. So far, more than 3,500 screens have been converted to digital under Cinedigm’s Phase 1 plan.

About Paramount Pictures Corporation
Paramount Pictures Corporation (PPC), a global producer and distributor of filmed entertainment, is a unit of Viacom (NYSE: VIA, VIA.B), a leading content company with prominent and respected film, television and digital entertainment brands. The company's labels include Paramount Pictures, Paramount Vantage, Paramount Classics, MTV Films and Nickelodeon Movies. PPC operations also include Paramount Digital Entertainment, Paramount Famous Productions, Paramount Home Entertainment, Paramount Pictures International, Paramount Licensing Inc., Paramount Studio Group, and Worldwide Television Distribution.

[ 01-22-2009, 06:24 PM: Message edited by: Kevin Fairchild ]

Posted by Todd McCracken (Member # 4718) on 01-22-2009, 04:59 PM:

Thanks for posting this, interesting read.

Posted by Mike Blakesley (Member # 26) on 01-22-2009, 05:29 PM:

CBG communications are supposed to be private to the members only. I suggest removing the CBG part of that memo and leaving the Paramount document (which is public).

Posted by Kevin Fairchild (Member # 4985) on 01-22-2009, 06:25 PM:

Thanks Mike, post had been edited.

Posted by Julio Roberto (Member # 4976) on 01-22-2009, 11:31 PM:

Thank you for posting that.

OMG, maybe they are finally listening. This could have a major impact in the amount of small theaters converted to digital now that distributors might start inking generic deals with independent exhibitors to participate in the investment of digital convertion.

I hope others follow soon and that UIP in Europe does the same.

If, i.e., Universal/Paramount, start offering a generic deal such as $1000 discount for each movie projected digital for 2 weeks instead of 35mm film for the next 5 years, many customers could start migrating one or two screens to digital and booking uip films in them exclusively (as long as there are enough).

When other distributors do the same, new digital screens could be added. Those that don't participate will get the sparkling 35mm backup projector treatment.

The equipment will be paying for itself with the VPF and, when the contract is over, the burden to replace/maintain will stay with the theater. But at least the transition would've been made.

Note that the industry itself is acknowledging that digital equipment will only last about 10 years before becoming too obsolete to maintain.

This is nothing new as, we all know, even relatively new "digital" simple machines like DTS decoders, SDDS, or even certain models of persistant Dolby have become hard to maintain/obsolete. Think QuVis, JVC, 1.3K DLP projectors, etc.

I repeat. Many manufacturers of digital cinema equipment themselves have stated in the past that expected life of equipment is 10-15 years tops. Forget the 20-30 years of old 35mm and (some) analog equipment.

Posted by Scott Norwood (Member # 30) on 01-23-2009, 08:49 AM:

So, um, what is the deal? How much are they willing to pay? Do they make a distinction between different types of theatres? Do they pay more to theatres that have more expensive equipment? Will they guarantee that every Paramount release--both past and present--will be available for DLP? Have they suggested that there might come a time when 35mm prints of new titles will no longer be available to exhibitors who are unwilling or unable to make the conversion?

If the cost of equipment and installation is (say) $80-100k/screen and it lasts for 8-10 years, then the cost to the exhibitor is $10k/screen/year, not including finance charges or maintenance. That's about $200/screen/week.

If the numbers work out to be at least break-even, I see this as being a good thing for independent exhibitors (assuming that other studios offer similar deals), as it cuts out the middlemen and reduces the conversion cost for everyone.

Posted by Mark J. Marshall (Member # 1409) on 01-23-2009, 09:11 AM:

quote: Julio Roberto
Forget the 20-30 years of old 35mm

How about 70 years? The Everett in Middletown Delaware has two E7s that were installed in used condition in 1940, and they still run like tops.

Posted by Mark Gulbrandsen (Member # 72) on 01-23-2009, 09:24 AM:

quote: Mike Blakesley
CBG communications are supposed to be private to the members only. I suggest removing the CBG part of that memo and leaving the Paramount document (which is public).

I personally have no problem if any CBG stuff gets posted here. This is the beginning of the end of CBG anyway. They've done absolutely nothing for any exhibitor in their entire existance.

Posted by Mike Blakesley (Member # 26) on 01-23-2009, 10:36 AM:

Well it doesn't matter to me either, but CBG members sign a contract saying they will not distribute group communications publicly so I figured he might be jeopardizing his job if his employer got in trouble because of the thing being posted.

Posted by Mark Gulbrandsen (Member # 72) on 01-23-2009, 01:50 PM:

I know about that but I have a number of customers that are VERY unhappy with the CBG and whom have given me all the news letters and such... I've been very tempted to post em on here a number of times but there is really very little usefull info in them anyway... always just more put-offs than anything else.

quote:
If the cost of equipment and installation is (say) $80-100k/screen and it lasts for 8-10 years,

Actually Dolby and Christie are both stating 15 years, and knowing these companies, their reputations, and the fact that they have alot of product to support it'll be more like 20 years. Face it Scott, just about all DTS 6 units are still in service after 16 years... its not that difficult to support this stuff.

Mark

Posted by Kevin Fairchild (Member # 4985) on 01-23-2009, 03:11 PM:

I also have the 21 page contract. Anybody at Film-Tech want to upload this for me?

Posted by Steve Guttag (Member # 268) on 01-23-2009, 04:43 PM:

I have not seen the 15-year statement on that one Mark and supporting a DTS system that is not nearly as complicated and uses much from other industries is not the same animal as something that primarily uses propritary stuff from a single source.

Another nasty thing I seem to be bumping into is how much the distributors can demand info on equipment, require upgrades and are just generally demanding period. For a film print...it doesn't seem to be a big deal...to get a digital HD...my what hoops one has to jump through...at least to get into the system...it isn't just a matter of registering your player/projector to get the KDMs going. Oh and some studios are not forcing the issue on the POTS line...I had to upgrade a 2-week old unit to handle that...I guess email and the internet was too easy...on the upside...most will feel more secure without haveing their expensive systems connected to the internet.

Steve

Posted by Mike Blakesley (Member # 26) on 01-23-2009, 04:46 PM:

quote: Mark Gulbrandsen
Actually Dolby and Christie are both stating 15 years, and knowing these companies, their reputations, and the fact that they have alot of product to support it'll be more like 20 years.

Those are great companies but in truth, with the speed technology changes, how can they possibly guarantee this stuff will be usable in five years, let alone 20?

Posted by Steve Guttag (Member # 268) on 01-23-2009, 05:12 PM:

Mike,

While I don't know about Dolby (which controls much of their product)...Christie and Barco both offer up to 10-years worth of warranty beyond their standard 2-years.

So, if you invest in the rather modest cost...you can legally require them to repair or replace the equipment to keep it running for at least 10-years...beyond that...its anybody's guess.

Steve

Posted by Scott Norwood (Member # 30) on 01-23-2009, 05:38 PM:

Does the buyer have to purchase the 10-year warranty up front? Or can it be extended on a year-by-year basis? A twelve-year warranty (which is pretty impressive, all things considered) isn't much good if there is nothing to play on the unit in twelve years. In any case, I fully expect that far better equipment will be available then and that quality-minded exhibitors will want to upgrade by then. Think about the "state of the art" in video projectors in 1997 and compare that with what is available now.

Posted by Steve Guttag (Member # 268) on 01-23-2009, 06:44 PM:

Scott,

Generally speaking, yes the warranty is purchased at the time the projector is purchased. The total warranty period is 10-years, not 10-years plus the 2 you get with the projector.

If you are drinking the koolaide, to use the vernacular of the day, and you believe that DCinema is here and to stay in, more or less, its present form...you'd be foolish not to purchase the warranty. It really is priced reasonable and odds are you will do well with it...having the unit warranted for 10-years is cheaper than footing the bill on the light engine (or at least on the order of it).

As to content to play on it...well if DCI is to mean anything...the studios will need to support it at that level. Also, you have the fact that HDSDI is pretty well intrenched in other fields, like Broadcast so the odds are that for 10-years, even if DCinema wanted to move to another method of signal transmission, there would be other content that would be usable.

For those that are buying units for just a few screens...presumming technology marches along...one could move these units down to smaller/lesser theatres to make way for the new whiz-bang units.

Then again, exhibitors really do have it within their power to "just say no." That is...don't purchase or lease or sign any deals for DCinema...if enough don't there isn't much the studios can do about it.

Steve

Posted by David Stambaugh (Member # 1102) on 01-23-2009, 09:01 PM:

quote: Steve Guttag
Then again, exhibitors really do have it within their power to "just say no." That is...don't purchase or lease or sign any deals for DCinema...if enough don't there isn't much the studios can do about it.

In 1977 didn't Fox tell certain exhibitors "You will install 70mm 6-Track Dolby if you want to show our little space movie"? Or is that a myth?

Posted by Mark Gulbrandsen (Member # 72) on 01-23-2009, 11:08 PM:

quote: Steve Guttag
I have not seen the 15-year statement on that one Mark

There is no statement. I asked them flat out in the last training class I attended how long they intended to be able to keep this stuff going. According to Paul Pearson they are set for up to 15 years of support. With companies like this not only do they have reputations to uphold but the sheer number of product that will end up in the field will warrant its support and it'll also be profitable for them to do so.

I have seen very similar patterns for equipment support in the broadcast field. Where equipment produced in small numbers is left for neglect after say ten years but equipment produced in even modest numbers gets support for many years, sometimes measured for decades and sometimes even by several other companies by that time.

quote: Steve Guttag
supporting a DTS system that is not nearly as complicated and uses much from other industries is not the same animal as something that primarily uses propritary stuff from a single source.

I think Carl at Quality would tell you differently. The whole problem is semiconductors... you're dealing with a long obsolete D to A converter chip and a number of other chips that have long been gone. One has to haunt obsolete semiconductor houses to be able to perform the repair tasks on these old units. Its like how many do you have and how many can I buy and how much per unit and so on.... then you find out from your broker they're located in China. I've also bought from these places and sometimes you're lucky to get just a few semis!

Mark

Posted by James Westbrook (Member # 3690) on 01-23-2009, 11:53 PM:

David,
I believe the Fox/70mm extortion in 1977 is a myth.
I have heard that some theatres had to book a bad film (The Other Side of Midnight?) before they could have that little space movie that the director allowed to let get $1,000,000 over budget.
I wonder if they were able to recoup that $1,000,000...that was a lot of money in 1977...

Posted by Julio Roberto (Member # 4976) on 01-24-2009, 12:38 AM:

At the price level and quality/reputation of most current DCinema offers, I agree that a 10 years life expectancy is plausible. I'd even dare to say 15 years TOPS (i.e. if you're lucky). But, again, nothing compared with the 20-30 years "guaranteed" performance you can get from 35mm equipment, "70 years" tops if you're lucky.

It's the same with all modern electronics. If you want to buy a top-of-the-line computer system for your operation from "the best", say HP or Dell i.e., 10-15 years down the road you are not going to be able to get it properly serviced. It will just make much more sense to toss it all out and replace it with the stuff in use then.

DTS had its "problems" with SCSI CDROMS dissapearing, and having to find SCSI-to-IDE adapter boards and changing CDROMs to DVD-ROMs, i.e.

SDI is indeed a solid stablished standard in the A/V industry, so that shouldn't be a problem in 10 years other than the multiple cables needed for "proper" 2K-48fps 3-D (current servers just split the signal, which forces the image to go from 4:4:4 12bits to 4:2:2 10 bits. This is not a DCI limitation of server or film, it's only a limitation of the SDI tranport. A server with 4 (instead of 2) SDI cable outputs would be needed, 2 cables for each projector in a dual 3D setup or a hypothetical future projector model with 4 inputs.

This is a rather cheap modification in the servers, so I think it will show up sooner than later, specially if dual-projection for 3D starts to become common, but a not so cheap one on the single-projector solutions.

If I was the owner of a small-medium movie theater, I indeed would say NO to digital. It offers little to no advantages for me and it places a lot of cost in my back and all for what? So that hardware manufacturers and film distritutors can make more money?

If distributors are willing to pay for it by, i.e., giving me a $1000 discount in exchange from showing a film digital for 2 weeks instead of 35mm for 5 years, then fine. That's about $130.000 in savings per screen in 5 years. With that, the equipment is paid. I'm now left with 5 years old equipment that's expensive to mantain and will probably require change in 5-10 more, but at least I can maybe start saving a bit in labor costs and by that time cheaper equipment may be available.

Studios would also benefit as, $1000, is about half what it would cost them to strike/license/transport/warehouse/destroy a 35mm print for me, which may even bomb and remain in the screen for only 1 week. I don't know why they are not doing far more of this. The excuse of legal complexity is muted. Just write a list of digital equipment you approve for films for (basically all in the market today) and fax a letter stating:

"Starting with the 1st film you show digital and for a period of five years after that, receive a $1000 discount/kick-back for each of our movies you display digitally for at least two weeks on the approved equipment list for the next 5 years. This offer is good until Dec 31 2010. This offer is good only for you and if you don't purchase the equipment from aggreators we already have VPF agreements with."

Done.

The day the main distributors do that is the day they'll see plenty of theaters asking for digital bookings.

Updates to equipment and the whole security schmoola can be handled down the road. Studios must realize that, in some 15 years tops, all current theaters are going to change to brand-new equipment anyway, so the update is guaranteed. I don't think they think that they can stop piracy before that ... wishful thinking. Although I am surprised at how good the watermarks on digital work ...

Posted by Ky Boyd (Member # 23) on 01-24-2009, 03:02 PM:

What the heck does CBG stand for? Collective Bargaining Group? Coalition Best Guess?
Certainly Better Graft? How do I make an emote-icon that looks like Adams picture? New acronyms confuse me!

Posted by Steve Guttag (Member # 268) on 01-24-2009, 06:41 PM:

CBG = Cinema Buyer's Group.

It was the brain-child of Wayne Anderson of RC-Theatres in the Mid-Atlantic area. He sold the CBG to NATO but remains as its director for NATO ... an entity he as been very active in for some time.

Posted by Frank Angel (Member # 248) on 01-25-2009, 04:17 AM:

But the issue isn't if the manufacture will warrantee the equipment out to 10 yrs or 15 yrs or even 20yrs. It's the studios who now have exponentially increasing control over the distribution of their product; it won't matter if the projector is still working, if the studio sez they won't book their picture if you haven't installed this or that upgrade, or met this or that new requirement.

Disney was issuing ultimatiums that they wouldn't let their stuff play on certain equipment that wasn't on their list of so called 100% DCI compliant hardware. I wonder if the exhibitors who bought that hardware were informed at the time that there was DCI compliancy and then there was Disney DCI compliancy. Who knew there were different percentage of DCI compliancy. Bet all those 1.3K original digital projectors are still viable and working....just go tell any of the studios you want a 1.3K version of their current product to play on your 10yr old working projector. You'll be able to hang up the phone and still hear them laughing in Burbank. It's not the equipment, it's what the studios will allow you to play on it....and where and at what time.

Posted by Mark Gulbrandsen (Member # 72) on 01-25-2009, 07:38 AM:

Ha! Frank if you think all that is bad... and it really isn't as bad as it sounds because firmware upgrades are getting further and further apart you should see the 21 page long requirement from Disney for stacked 3-D. Now that very definately IS a joke although its pretty easy to meet.

Mark

Posted by Mark J. Marshall (Member # 1409) on 01-25-2009, 08:03 AM:

I'd like to see that. Can you post it? Or is it secret squirrel stuff?

Posted by Julio Roberto (Member # 4976) on 01-25-2009, 09:06 AM:

Yeah, I'd like to see that two, as I'm a big proponent of dual-projection 3D solution for Digital. Also, what is Dolby's current suggested retail for the glasses? If it has lowered some more, dual-projection Infitec might start to look REALLY good.

Posted by Steve Guttag (Member # 268) on 01-25-2009, 09:15 AM:

Actually, the 1.3K machines can take a 2K input...that was always in their design, despite their 1280x1024 imager. I feed em 2K stuff all the time.

The problem is in the fact they can not handle JPEG and only have the original CineLink decryption, not CineLink II. I believe that the 1.3K units are stepping off of the upgrade path at TI firmware 11.x.x.x. We are now up to 13.x.x.x. I was quite impressed how long the 1.3K units were able to continued to be upgraded though I've certainly ceased upgrading them around 10.x.x.x. as they were running stable and DCinema content was not going to be heading their way.

I do think the studios should have been required to support all "DCinema" equipment...through attrition, the older stuff would fall by the wayside. Smaller screens, 2nd run...etc could have benefitted from the cast offs just like they do with film equipment. The studios should have stayed out of the equipment business...it isn't like they go around to film theatres and require them to buy the latest lens or a better projector...why should they have that power with digital?

Steve

Posted by Julio Roberto (Member # 4976) on 02-11-2009, 03:00 AM:

The Paramount deal seems to be they'll pay up to $1000 per film for TEN years if you convert half your screens or at least one screen to 3D.

Seems pretty good to me. If one or two more important distributor join in, I would start converting w/o much problem, knowing that each screen will say get $1000 every 3-4 weeks, so easily $12k-$15k/year ... >$120.000 in 10 years would sort-of pay for itself.

In 10 years time the digital equipment will them be better and cheaper, probably, so I should have no problems picking up the tab from there on. There could be some savings in labor costs too.

But for distributors not paying VPF, I would refuse to display anything digital. They'll get time on the trusted 35mm gear for the next 70 years.

Unfortunately the deal seems to be for the USA and Canada only. So no luck for us here.