Film-Tech Forum ARCHIVE: Having a look at the Paramount direct VPF contract..

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Posted by James B Gardiner (Member # 5151) on 03-08-2009, 04:42 AM:

J. Sperling Reich at http://celluloidjunkie.com has posted a draft of the Paramount VPF with a good overview of the contract.

Interesting. Find it Here. .

James

Posted by Steve Guttag (Member # 268) on 03-08-2009, 07:43 AM:

That is a very interesting document and post.

There are definitely poison-pills in the Paramaount deal.

One item that he notes...the LMS/TMS thing...I know Dolby has pretty much solved that as a single DSS100 can serve as a LMS/TMS for up to 3-screens...so a small complex is covered. I believe all Paramount is looking for there is a single point of entry to the complex.

He also felt the need to point out that the distributor must be informed about a server swap...well-yeah...who has a DCinema system running doesn't know the importance of always keeping your server/projector serial numbers current...that is how KDMs are made. If you change either the player or the projector, your existing KDMs won't work anymore...forget about the $100 that Paramount would want for not informing...worry about the movie that won't be playing so no money will be generated!

I hear the FIPS level 3 thing is going to be a costly one for the projectors and is one reason Barco is declining to offer a 1.2" full-frame triple-flash projector since one would need to upgrade again.

What the DCI folks are really missing on...if they want early adoption...exhibitors should feel confident that they DON'T have to upgrade...they should only need the security/performance features of the day they install it. It is one thing that after a feature becomes available to require FUTURE installs to have it...however DCI really needs a Grandfather clause.

A number I'm hearing for upgrading projectors is between $15K-$20K. That is freakin' huge.

I also noted that the VPF is less than $1,000...27.5% less for 2D..even 3D, which costs a lot more to equip, maintain and run, only gets you an extra $100.

Also what is noted is that this is not a 10-year deal...this was a maximum 10-year deal with a common end date for all. It is now, if signed today a 9-year, 11-month deal and counting down. Thus your potential VPF to pay off your system will be getting smaller, the later you join. However, once you join, you have another clock ticking to get a substantial investment going...1/2 the complex in 6-months and the balance within 3-years. Which they give you more incentive for...you loose your VPF if they need to strike you a print to run in your complex...after all, it isn't a virtual print if they need to make a real one. Fair is fair.

Steve

Posted by Mark Gulbrandsen (Member # 72) on 03-08-2009, 09:29 AM:

Steve... I'm somewhat surprised you haven't seen the VPF Agreement yet, its been around since late last year... of course the whole Paramount paper while being important to the conversion is only the needle in the haystack. You only get paid if you run Paramount Product! There is not enough Paramount product out at one time to cover the screns in a 16 plex... a 10 plex.... a 6 plex... or a 3 plex for that matter. All of the other studios will need to follow suit for all this to work... if an exhibitor has $$ comming in from 5 different studios at once it makes conversion really practical as there will be an actual cash flow generated by the VPF's... DCIP recently announced that they've got an agreement with Fox which was a major step in them getting theor conversion under way. They have to pay back Wall Street the millions somehow! Once DCIP starts conversion of the three chains the quantity of film prints produced will dwindle quite rapidly since the total of these three chains represent the majority of screens in this country. All of this VPF stuff is slowly being worked out and will ultimately happen, it takes time. I think we can assume the Paramount/Exhibitor contract to be a model of what the other studios will persue except probably for Disney. They always have a contract thats twice as long with ten times more stipulations in it!!

Mark

Posted by John T. Hendrickson, Jr (Member # 849) on 03-08-2009, 03:48 PM:

It is my understanding that there is a "most favored nations" clause in the Paramount contract. What this means, simply, is that if you agree to receive a LESSER VPF from another distrib, then you will only receive that amount from Paramount FOR ALL FUTURE contracts. [Eek!]

To date, has any other studio announced that they will pay VPF's directly to exhibitors?

I also understand that if you commit to this contract, you must convert 50% of your screens to digital within a certain amount of time (can't remember if it was six months or a year), or you will lose your VPF's.

Posted by Steve Guttag (Member # 268) on 03-08-2009, 04:45 PM:

There are several things in the contract that make it bad...

Yes, you have 6-months to convert 1/2 of your screens to DCinema. 3-years to convert the rest.

There is a 3D clause that is a bit confusing...one can interpret it to mean you HAVE to have at least 1 3D screen or it may mean you can have the contract by only having 1 3D screen for that screen.

While Mark is right that Paramount alone can't make this a good deal...it is still a crappy deal if every studio jumps in. The money offered does not cover the difference in cost between film and digital equipment.

Furthermore, the Most Favored Nation clause means the deal you sign today may be worse tomorrow, depending on what other studios are willing to do.

The fact that it is not a 10-year deal...it has a common termination clause means the deal gets worse with time.

The Uber-Stupid clause about if any deployment firm takes over the VPF deal, then Paramount would need to be repaid for all payments to date. Whereas Paramount would have saved on striking prints for the complex during that period of time, Paramount (or any other studio) has no grounds for wanting a repayment

The "you must keep up" clause should be a deal-breaker for every exhibitor out there...the deployment firms should have passed on that one too. Since none of the projectors out there now are fully "DCI Compliant" they are going to require you to spend quite a large amount of money to keep up...The lowest price I've heard for the FIPS Level 3 is $15K....Do the math, if you have to pay that to keep up, it will negate over 20 titles to pay for that one screen alone!

These deals NEED a grandfather clause if they want to encorage people to invest now. Why are they hell bent on punishing those that started the DCinema movement. If those people had not started it, we would not be where we are now.

NATO is really doing their membership a disservice if they don't encourage their membership to insist on Grandfather clauses and pass on Most Favored Nation clauses.

Nobody from the studios tells an exhibitor how to run their film cinemas. Why would they surrender this control for digital?

To sum it up...it is a bad deal that leaves the exhibitor vunerable for a lot of money that never really is paid back in any manner.

Posted by Julio Roberto (Member # 4976) on 03-08-2009, 05:01 PM:

I agree it's not the deal I wanted to see. A bit stiff with the $ amount. A bit unforgiving with old equipment. A bit pushy on upgrades. And depending on what others offer to set their prices? Ridiculous.

Up the amount at least 10% (better 20% if you want people to jump in).

Open a 6 months window where everybody gets a 10 years contract for that time (i.e. also 10 years for those signing 6 months from now).

Forget the worst nation clause. Make your offer firm.

Lock the minimun DCI specifications and push MANUFACTURERS, not exhibitors, to comply. REWARD the compliance and updates, don't PENALIZE those that don't have access or $$$ to spend in extra security and stupid stuff like that which should have been settled years ago.

I don't know. It's not a bright start and I have the bad feeling the rest of the deals will be even worse, so digital may indeed come to a stall after the early adopter's and new openings are over with it and they realize the math doesn't add up.

Posted by Scott Norwood (Member # 30) on 03-08-2009, 05:14 PM:

Agreed that it is a bad deal, unless you believe that [dlp]

will increase ticket sales. The biggest problem for me is that, at the end of this not-quite-ten-year deal, the exhibitor is left with equipment that will be obsolete (or soon to be obsolete) and in need of replacement. What happens then? He can only hope that the replacement equpment will be substantially cheaper in 2019 than it is now.

Still, I give Paramount credit for offering something directly to exhibitors. I like the idea that a theatre owner should be able to go to his regular dealer and purchase equipment that meets his needs, rather than being subject to the whims of whatever some middleman-type organization thinks is best. I do believe that the industry is better served by this type of agreement than by directing all VPF payments through a middleman (who came up with the term "integrator" anyway?).

I'm curious about the six-month/50% requirement. This seems as if it might be difficult to meet, either due to exhibitor scheduling or equipment/installer availability (to say nothing of cost).

Also, does this deal obligate Paramount to provide a DCI copy of any Paramount title that the theatre books that isn't subject to one of the exceptions listed? It does not seem to make any exception for repertory titles. This could get very expensive for Paramount very quickly if an art house or rep house were to take them up on this deal (unlikely, but possible).

In any case, this is all mostly a curiousity at this point. The economics don't work, and no one else is offering a similar or better offer to exhibitors, so I can't see any theatre owner actually taking them up on this deal.

Posted by Steve Guttag (Member # 268) on 03-08-2009, 05:22 PM:

Scott,

Unless I misread it...the contract specifically exempts Paramount from HAVING to provide anything in terms of content. Distribution and movie deals will continue as normal. So signing up does not get you a golden ticket to Paramount titles.

Again, the only way a deal could really work is if it covers ALL stuidos. The presumption then is you are playing "someone's" title at all times on all screens.

Remember too, Paramount and other studios write off the cost of prints as complete losses within 2-weeks...There is a reason they don't want to pay any more in VPFs than absolutely necessary, their real costs for film prints are not as high as many many think they are.

Steve

Posted by Scott Norwood (Member # 30) on 03-08-2009, 05:32 PM:

Section 6(b) says that they will provide a DCI copy, with four exceptions. I don't see anything that would exclude repertory bookings, as long as the other conditions are met.

Posted by Julio Roberto (Member # 4976) on 03-08-2009, 05:37 PM:

quote: Steve Guttag
their real costs for film prints are not as high as many many think they are

That would be the only logical explanation for such stiffness. I mean, $100 more than they are offering and it would still be the bottom I would've guessed they were gonna do.

Then again, perhaps in markets like the USA they indeed have a reduced print cost, due to the sheer number of copies, the reduced transportations/taxes, etc.

In Europe, for prints with soundtracks (Dolby/DTS, crapcode, etc) in small-ish countries (i.e. runs of 1000 prints or less), I would've guess a $1200 minimun (in 2009) for a not-too-long print even for majors. More for Watchmen [Wink]

Much more for independents.

Then again, everything in Europe is more expensive than in the USA [Frown]

Posted by Bill Enos (Member # 440) on 03-08-2009, 09:09 PM:

A coworker who has a cousin who is a business law attorney sent the attorney this thing. She says she would advise a client not to sign it.

Posted by Anslem Rayburn (Member # 1267) on 03-09-2009, 02:59 AM:

quote: Scott Norwood
Section 6(b) says that they will provide a DCI copy, with four exceptions. I don't see anything that would exclude repertory bookings, as long as the other conditions are met.

But section 6(a) says that the decision to license any film is up to the studio, and the studio only.

So if you request an old title and they haven't created a digital version, they can just refuse to license the movie to you in the digital format. If they have a digital version, and wish to allow you to license it, then they will provide it.

Unless I'm misunderstanding the question or what the paperwork says.

Posted by Scott Norwood (Member # 30) on 03-09-2009, 06:15 AM:

If you interpret 6(a) as saying that they can refuse to license specific titles because no DCI version is available, then signing this agreement sounds like a great way to ensure that a significant number of titles will never play at your theatre.

It would be interesting to see what the lawyers would say, but Paramount really should clarify this issue.

Posted by Lyle Romer (Member # 1266) on 03-09-2009, 09:45 AM:

According to that write-up, if a projector is installed before 12/31/09 (10 more months) then they don't have to be upgraded to FIPS level 3.

Posted by Steve Guttag (Member # 268) on 03-09-2009, 11:42 AM:

Section 4 states that equipment that is not DCI compliant when it is installed (due to lack of available DCI compliant equipment), will have 6-months to upgraded, AT THE EXHIBITOR'S EXPENSE, to make it conform to DCI spec.

There is a later clause to deal with changes in DCI spec over time where such upgrades can be negotiated. However, if Paramount were not to get its way on such changes...what can the exhibitor do? Paramount could deam an impass and terminate the contract.

Posted by Bill Enos (Member # 440) on 03-10-2009, 10:05 AM:

Like any contract it gives almost all of the rights and privileges to the entity that originated the contract, and they are well aware that the independents don't have enough clout to do much about it.

Posted by Julio Roberto (Member # 4976) on 03-10-2009, 10:48 AM:

They can push associations and other independents to vouch for not signing contracts and switching to digital.

If enough do, it won't happen at a significant scale, and distributors would have to reconsider if they still want a switch to digital.

As it stands, it looks like they are not very interested, so why should anybody else?

Posted by Mike Blakesley (Member # 26) on 03-10-2009, 12:01 PM:

They ARE very interested in the switch. They are just not interested in paying their fair share for it.

I just hope the major players in the industry hold out for more reasonable terms. If they don't, we're all screwed in 10 years, probably.

Posted by Louis Bornwasser (Member # 3063) on 03-10-2009, 12:11 PM:

Studios have no real interest in Digital; they are scared to death of high-quality copies, also their costs went up severely since they have to pay "outsiders" on each and every print.

Theatres cannot recoup the expense. They also have nothing to gain.

Who does? The 3rd parties/outsiders.

Look to see where "information" comes from and judge it accordingly. Louis

Posted by Mark Gulbrandsen (Member # 72) on 03-10-2009, 08:22 PM:

quote: Louis Bornwasser
Studios have no real interest in Digital; they are scared to death of high-quality copies, also their costs went up severely since they have to pay "outsiders" on each and every print.

Thats the biggest load of crap I've read here in three weeks! About as useful as the present Box Office magazine is....

Actually the studios loose their films from editorial department leakage, dishonest lab people and other "inside sources" that sneak them out. Until they stop that from happenning they should just close up and stay home!

Posted by Bill Enos (Member # 440) on 03-10-2009, 09:47 PM:

The majors won't hold out because they either have the bucks or can arrange the financing. Para. is making a token offer because they don't want it to be said that nothing was done to assist the independents in making the change. The nature of the deal is such that what they are really saying is fuck you and good riddance.

Posted by Tristan Lane (Member # 1169) on 03-11-2009, 01:46 AM:

quote: Louis Bornwasser
Studios have no real interest in Digital; they are scared to death of high-quality copies

How does d-cinema promote high-quality copies of pirated movies? If nothing else, it helps eliminate cap code, while still being able designate where the camcorded movie came from.

If you think the studios are worried about people pirating content straight from the DCP, you're wrong. The encryption is too strong. DCI did their homework on that end of things. The only thing that is going to stop high-quality pirated copies is to look into their own operations and the people they distribute screener content to.(as Mark said above) HDCP is far less of an encryption standard and people still haven't found a cheap or easy way around that.

Posted by Steve Guttag (Member # 268) on 03-11-2009, 06:59 AM:

quote: Tristan Lane
HDCP is far less of an encryption standard and people still haven't found a cheap or easy way around that.

Why do you believe that hasn't been broken? There are indeed HDCP strippers out there.

Steve

Posted by Scott Norwood (Member # 30) on 03-11-2009, 07:16 AM:

I'd be amazed if the DCI encryption lasted a decade before being broken, or at least without some other weakness in the system being exploited to allow the "content" to be made available in an unencrypted form.

Remember that CSS was broken by a 16-year-old kid.

Posted by Lyle Romer (Member # 1266) on 03-11-2009, 10:12 AM:

The major weakness is that obviously the image needs to be unencrypted somewhere in the projector head. The right electronics carefully tapped into the right places would be able to copy it.

I think the whole idea is that by embedding the metadata in the image, if somebody did this they would know exactly which projector the copy was made from and where that projector is.

If somebody did crack the protection on the movie file allowing copies to be made off the hard drives, software upgrades could close the holes. This is possible since unlike blu-ray you're not talking about tens of millions of deployed units. Worldwide there will only be at most a couple of hundred thousand when the transition is complete.

Posted by Tristan Lane (Member # 1169) on 03-11-2009, 11:30 AM:

Steve,

I'm well aware that there are HCDP strippers out there, but I feel that is different than cracking the encryption itself. The stripper simply emulates an HDCP compliant display. I'm not denying the fact that someone with enough knowledge and resources could break Cinelink with a stripper of sorts. I feel that the hardware needed to capture the video post-decryption from the projector, and the risks involved defeat any benefit the potential pirate might gain. How plausible is it really for someone to make a device that emulates a projector head simply to trick the decryption?

My point was that I don't see any increased risk of piracy from current DCP encryption over film, nor do we hear of anyone "almost" pirating a movie from a DCP. Quality pirated digital copies of films were hitting the streets when D cinema was still in it's infancy.

Posted by Louis Bornwasser (Member # 3063) on 03-11-2009, 12:22 PM:

Currently piracy means home units not sold.

With D Cinema, it is possible to copy a cinema ready clone. This has never been financially possible before, 35mm copies from prints look horrible.

What makes you believe that the code has not already been cracked? Remember: "Bigger lock, bigger key."

FWIW: While I do not know of anyone who has cracked this code, I do know of those (friends & relatives) who crack codes for a living. They believe it to be "no problem" for those who are at the top of their craft. Louis

Posted by Bobby Henderson (Member # 840) on 03-11-2009, 12:48 PM:

I think one of the biggest things on the side of D-cinema remaining unbroken is: why would pirates want to bother?

DVD quality or a good bit lower than that seems to be good enough for most people into watching bootlegged movies. It's easier for pirates to dub off DVD screener discs and the like rather than haul some expensive computing gear into a d-cinema projection booth to attempt ripping a d-cinema screening to some hard discs. Not many people are going to want to download such an enormous amount of data either -especially when telcos are now setting up bandwidth toll meters.

Posted by Martin McCaffery (Member # 37) on 03-11-2009, 01:23 PM:

quote: Bobby Henderson
why would pirates want to bother?

Because it is there?

You really think there aren't enough geeks out there who would do it for the challenge? Once the software/hardware safety's are cracked, the same people who would run a bootleg copy of a 35mm print would be more than happy to do the same with a digital copy.

Posted by Mark Gulbrandsen (Member # 72) on 03-11-2009, 05:59 PM:

I still think it's going to be basically an impossibility to pull off. First off I remember someone telling me that that a KDM is equivelent to about 10,000 pages of code. Secondly, the decryption signal changes randomly at least at 30 minute intervals... if one unplugs the Cinelink-2 to the projector the image will continue on until the required decryption update interval at which time the image either turns to snow or blanks out. All I can say is good luck! No one will be able to predict those intervals... they are always changing. This time I agree with Bobby... and if the pirates knew about this they wouldn't ever bother.

Regarding the VPF deals themselves... What it's going to amount to is an exhibitor putting down X amount per system and the studios picking the rest up over time. No way are the studios going to foot the entire bill... nor are they ever going to do anything totally in your favor. The fact that they ARE WILLING to do direct VPF at all is in itself a miracle. If 5 or 6 studios all pay the VPFs over 7 or 10 years thats enough time to pay off most systems sans the theater's down payment. Personally, any attorney that would advise a client not to take free money is off his rocker. Any sane attorney would gladly accept free payments. Required updates that may have to be done will be very seldom required if ever and generally no more expensive than it was converting from analog to digital sound!!

Mark

Posted by Chase Taylor (Member # 778) on 03-12-2009, 09:30 AM:

Mark that is the smartest thing you have said.

Posted by Louis Bornwasser (Member # 3063) on 03-12-2009, 10:05 AM:

I don't know. . . .discussing the sanity of lawyers is itself somewhat insane.

IF obsolensence was not a factor, then Mark would be almost right. Louis

Posted by Mike Blakesley (Member # 26) on 03-12-2009, 12:07 PM:

So if I was to win the lottery and install a digital system tomorrow, and a year from now (let's say) Universal started paying VPFs to indies, would I get those payments? Or does it only work for "future" installs?

Posted by Chase Taylor (Member # 778) on 03-12-2009, 03:35 PM:

Mike

You would start getting VPF's from Paramount when you sign the contract now or later no matter when you install the equipment as long as it is DCI complaint. Once you sign you will have from that date to February 28, 2019.

Who knows what Universal or any other studio for that matter will say or do? I'm hoping that at ShoWest there will be announcements of other studios doing this.

IMO let there be no mistake about this, this will be the only viable way for independents to convert to digital. If you thank this agreement is bad business than you should check out some of the integrators out there. By the time you pay the up front cost, alternative content fees, maintenance agreements (something that most independents around me are not use to paying, especially at that amount of money), and bulb cost because they decide to replace every bulb in the complex (before their warranty is up) because they are all close to needing replacing and it will be awhile before they get back to you. These things add up. And through all of that you lose control of your booth. Their equipment not yours.

While I understand that Digital Cinema is not something that someone can just dive into and be able to take care of these projectors and servers just from knowledge that they already have it is something that is readily available to cinema owners or their representative to learn. I encourage all independent cinema owners to take the time to thank about going off and learning how to take care of these pieces of equipment themselves.

Chase

Posted by John T. Hendrickson, Jr (Member # 849) on 03-13-2009, 03:57 PM:

I'm speculating that Paramount jumped on this VPF deal in the hope of getting independents to quickly convert screens in time for the 3D release of Monsters v. Aliens.

I'm wondering how successful the effort was. Anyone with information on the increased number of screens going digital 3D since they came out with the announcement?

As far as other studios announcing VPFs, I don't think I would hold my breath, but we should know more after Show West.

I get the feeling that most folks are holding out until they see how this all shakes out over the next few months. No one in our area seems hell bent to jump on the digital 3D bandwagon and pitch their 35mm equipment. I think exhibitors are worried that if they convert, they will never earn back their investment.

Posted by Geena Phillips (Member # 3726) on 03-13-2009, 05:32 PM:

quote: John T. Hendrickson, Jr
I'm speculating that Paramount jumped on this VPF deal in the hope of getting independents to quickly convert screens in time for the 3D release of Monsters v. Aliens.

I think you're probably right. Studios are clearly using 3D as a wedge to push more theatres into adoption of digital, but Monsters Vs. Aliens is not quite the slam-dunk in this regard that, say, UP will be (our theatres' very poor performance for the film, non-3D version of Bolt is, I think an example of this); any theatre running the film version of UP in a market where someone else has the 3D version is almost certain to take a beating this summer.

Posted by Scott Norwood (Member # 30) on 03-13-2009, 05:42 PM:

Paramount did not announce the possibility of this deal until late January and probably didn't have a draft of this deal ready until early February. I find it difficult to believe that any significant number of theatres and/or chains would be able to read the deal, agree to it, work out financing, order equipment, and do the installation in the six weeks (or so) provided. Therefore, I doubt that this had much (if anything) to do with the MvA release.

How much lead time is required for a [dlp]

install in an existing theatre? If I call up Mark or Steve or some other dealer and have cash, can I get a full setup (server, projector, installation, etc.) delivered and installed in a week? Two weeks? What if I want 3D and need a new screen and/or dishwasher installed, too?

Posted by Julio Roberto (Member # 4976) on 03-13-2009, 05:52 PM:

Some hotshot at Dreamworks I think it was (or some other major studio) said that 3D was the "only carrot instead of a stick they had to get theaters to convert to digital".

It couldn't be more clear.

They could be doing 3D with film easily and cheaply for everyone, BTW, but obviously don't want to.

Posted by Steve Guttag (Member # 268) on 03-14-2009, 08:44 AM:

Scott...it all depends on where you are in the ordering process, like any other piece of equipment. If you get behind others, it can take a small amount of time...generally, I'm seeing orders within 2-weeks. However, from the theatre side, once your serial numbers are known, getting into the system I've heard it can also take a couple of weeks. I don't know if this is for the first unit for a complex and subsequent ones go faster or not.

Steve

Posted by Mark Gulbrandsen (Member # 72) on 03-14-2009, 09:29 AM:

quote: Louis Bornwasser
IF obsolensence was not a factor, then Mark would be almost right. Louis

Louis, Let us not forget we are facing film's obsolescence in the very near future as well. Unfortunately the ball is rolling there and at this point it can't be stopped. Everything becomes obsolete eventually... even you and I! ONce DCIP get one more studio to pay VPF's film is basically finished...

Mark

Posted by Geena Phillips (Member # 3726) on 03-14-2009, 07:33 PM:

I'm sorry if I wasn't clear, Scott. I agree that the 3D release of
Monsters Vs. Aliens has probably nothing to do with the VPF agreement Paramount's offering; I was just using it as an example of how the studios are using 3D as an inducement for theatres to convert to digital.

Posted by Brad Miller (Member # 2) on 03-14-2009, 11:52 PM:

Steve, I started getting test KDMs only a couple of days after I submitted the paperwork with the serial numbers.

Posted by James B Gardiner (Member # 5151) on 03-15-2009, 03:42 AM:

Paramount going alone on VPF could also be a result of issues with AccessIT. (Ro cinedgim or something) Go look at there public announcements and details on there profit and loss.
There stock went down a long way. (And probably for good reason) Recently it has improved. And as such, I hope for everyone.

Posted by Julio Roberto (Member # 4976) on 03-15-2009, 05:05 AM:

I never quite understood the appearance of these so-called aggregators in the whole Digital Cinema picture. I get that they are a company with the intention of earning money out of the "brief" period of cinemas transition from analog to digital by offering something similar to financing or leasing capabilities for the expensive equipment.

The fact that distributors are willing to share profits with them by paying them a VPF only shows that distributors know it's to their interest in the long run to pay, at least in part, for DCinema.

The studios not doing it straight with the exhibitor instead of going through these "revenue sucking" intermediaries waiving "legal complexity issues" as the excuse is what drives me mad.

Paramount has proven that direct-to-exhibitors VPF agreements in reasonalbe terms can exist. They can probably be even further simplified and refined if they wanted.

No intermediaries are needed.

Same thing with RealD. If they want to be an equipment supplier, fine. They can make their money out of selling 3D glasses or whatever. But to become yet another intermediary, not only sucking money out of the circuit but telling you what you can or can not put in your booth and what you can and can not show in your screens and for how long .... it's an obstrusive intermediary who is also making you earn less money.

I would never recommend these intermediaries. Specially once distributors start offering straight VPF deals.

Wide digital transition is NOT going to happen in Europe until these intermediaries are gone. Money for this whole Digital thing is already thin, so no need for extra people outside the industry getting rich in times of recession.

Posted by James B Gardiner (Member # 5151) on 03-15-2009, 07:16 AM:

Julio,
I agree/disagree 50/50%.
We do need to reduce the middle men, but at the same time, the Integrator, as it is called, is a valuable concept that cinema owners need to get their heads around. Just as you need a computer infrastructure company to look after all your POS (point of Sale) systems and POS database, Email etc. You need some type of company to supply integrated services for that which running a DCI cinema requires. They do not necessarily need to be connected with the VPF contract, however, this also makes a lot of sense. (Ie one but to kick if for some reason you cannot keep conditions for VPF approval.Ie loss of sessions etc. Otherwise,expect finger pointing in a big way.
Considering the total self running cinema complex that cinema owners expect this technology to supply one day. This type of "navana" comes with a few strings attached.

James

Posted by John T. Hendrickson, Jr (Member # 849) on 03-15-2009, 10:59 AM:

It seems to me that you would use an "integrator" only when:

A. You do not possess the necessary skills to perform the specific task.

B. The task could be performed more cheaply by an outside source.

C. The task would be a waste of your time, considering you could be doing more important work.

So, we are talking about "outsourcing", are we not?

On the other hand, when a company (or an individual owner) can eliminate the middleman, it behoves them to do so.

I am not a theatre owner, but if I were, I wouldn't be crazy about sharing the profits of DCinema indefinitely with an integrator. I am not opposed to progress, but I have yet to be convinced of the efficacy of throwing out all of my 35mm equipment and replacing it with DCinema.

Of course, the driving force in all of this is 3D. If you are in a highly competitive area (which is the case where I am), and someone else goes for it, then you will have to weigh the loss of patrons going to the other guy verses the additional cost to you. In the end, I feel that one way or the other, you are not going to make money. Thank God I'm not an owner.

Interestingly, I attended a symposium in early February on the possibility of getting independents on board with 3D here in the tri-state area. The sponsors of the program flatly stated that the symposium would not have been possible without Paramount's announcement about VPFs, and assured the gathering that there was pleanty of time to get screens up and running for MvA.

We are now less than two weeks away from the opening of MvA, and I'm wondering how many participants from that symposium signed on and took the deal.

Posted by Julio Roberto (Member # 4976) on 03-15-2009, 03:09 PM:

While I don't deny the utility of outsourcing your equipment maintenance and "purchase" to another company as a convinience, what I really "don't buy" is that you were almost "forced" to go through them.

The "threat" is: if you don't use an integrator, you get no VPF. If you don't use an integrator, we'll make you pay up your nose for equipment upgrades until full DCI compliance. Etc, etc.

It's almost like RealD before MasterImage, Dolby, XpanD and dual-projection (Imax) became strong players. It was like: if you want 3D, you have to go through us in our terms. We'll forbid you to use any other equipment for 10 years and we'll tell you how long to play 3D movies, etc.

Come on.

Not only they keep parts of the profits but they also exert a lot of power and pressure about what you can and cannot play, for how long, and how (i.e. AccessIT forcing their releases on their equipment).

Again, I don't mind the integrators. It's the lack of alternatives and the excuse of the legal complexity for VPF that bothers me. Same with RealD. I don't mind a vendor that leases equipment on whatever terms. But don't tell me how to run my theater and what I can or can not do on top of taking my money.

Either take my money and do what I say or don't take it and tell me what to do. But don't do both. If I am paying YOU, you should do what I want. If you are paying ME, then I shall listen to your requests.

Posted by David Zylstra (Member # 4230) on 03-15-2009, 06:37 PM:

quote: Julio Roberto
Not only they keep parts of the profits but they also exert a lot of power and pressure about what you can and cannot play, for how long, and how (i.e. AccessIT forcing their releases on their equipment).

The only "parts of the profits" AccessIT gets contractually off phase 1 is alternate content - there is NO pressure about what we play and don't play beyond a restriction on not playing a film if the studio has not previously cleared it with AccessIT (i.e. paid a VPF). Our contract explicitely states we can refuse any content offered and there are clauses that keep AccessIT out of what films are booked.

quote: Julio Roberto
We'll forbid you to use any other equipment for 10 years and we'll tell you how long to play 3D movies

The original standard RealD contract was 5 yrs (and the one I signed last year was only for 5 years); and RealD has NO control over how long we play 3D movies, but the studios already dictate how long we need to keep a specific 2D title (digital and 35mm) so there is no change here - if we agree to a 4 week run then we have to show any title for 4 weeks. The only requirement to not use anyone else's 3D system is on negotiated price - i.e. if I were to install a Dolby 3D on one of our screens we would lose our preferred pricing on future RealD licenses, I'm sure if Dolby or Master Image went with a lease model they would put the same restrictions on the exhibitor.

quote: Julio Roberto
But don't tell me how to run my theater and what I can or can not do on top of taking my money.

Neither the AccessIT nor RealD contract tells us how to run our theatres, the only restriction is on studios that have not made prior arrangements with AccessIT to show their digital film on their projectors (there has been only once in 3+ years where AccessIT has questioned a title we had).

From what I know of the studio contracts with the integrators they have similar "gotchas" that this Paramount direct VPF contract does (i.e. the same restrictions on missed shows applies to AccessIT as well as DCI compliancy).

Posted by Julio Roberto (Member # 4976) on 03-15-2009, 06:39 PM:

Thanks, David, for clearing that up.

I was under the impression they were, legally or otherwise, a bit more pushy on the terms I expressed that seems to be the case according to your review on your experience with them.

I stand corrected and downgrade AccessIT and RealD "pushiness" and "interference" ratings [Wink]

quote: David Zylstra
The only "parts of the profits" AccessIT gets contractually off phase 1 is alternate content

So is it correct they don't get any profits from maintenance contracts either? That wouldn't seem to be possible, right? Or is it only after phase 1 that they start charging for maintenance or "rent" on the equipment? Or is ownership transfered to you or new terms have to be signed with them? I never saw an AccessIT contract. Over here, other integrators such as Arts Alliance have more presence in the market.

Posted by David Zylstra (Member # 4230) on 03-15-2009, 09:59 PM:

The maintenance contracts are through Christie Digital, I'm not sure if they share any funds with AccessIT - if a DoReMi issue is software related the Christie NOC has to involve the AccessIT help desk. One of the requirements of the AccessIT deal (and TDC, Kodak, etc?) are that the exhibitor is required to keep a maintenance contract to ensure the equipment stays repaired - they tell me this is a "studio requirement" to ensure the equipment is kept DCI compliant.

It is nice to be able to have a light engine replaced with no charge to us, or a DoReMi for that matter (after 3 years we are still seeing a 30% failure rate on the DoReMi units, I'm told the latest DCI units that we are getting eventually are more reliable).

Don't forget that AccessIT has several divisions to bring money in: they compete with Deluxe and Technicolor to master and distribute digital content, they have their own satellite delivery system for "print" delivery, they have an advertising division to provide revenue from on screen advertisements, an alternate content division that has some programming and a live 3D system.

Posted by Julio Roberto (Member # 4976) on 03-15-2009, 10:17 PM:

quote: David Zylstra
It is nice to be able to have a light engine replaced with no charge to us

Although we know we are paying for it one way or another [Wink]

Posted by David Zylstra (Member # 4230) on 03-16-2009, 07:19 PM:

You got that right - over the life of the contract we'll end up paying more, not to mention cutting our reliance on our local service company or in house tech staff by relying on the manufacturer for service.

Posted by Mark Gulbrandsen (Member # 72) on 03-16-2009, 08:21 PM:

David,

We are just a few more film studio direct VPF contracts away from seeing that whole middle company thing implode. Had to believe AIX is still in buisness to be hinest. They must be hanging by a thread right about now. Then it'll be the local dealers that reap the benefits. Then sales and service will return to normal.

Mark

Posted by Justin Gorka (Member # 3727) on 03-17-2009, 12:41 PM:

Still waiting in the UK......

Posted by Julio Roberto (Member # 4976) on 03-18-2009, 02:51 AM:

Yeah. Still waiting everywhere in the world.

Why do they think that Digital adoption has been/continues to be so slow?

And they better start offering "solid" 10 years deals and a small windows to jump in and not that crappy 9 years 8 months or whatever they have set their high horses to.

Or, at least, they should advertise well in advance when they are going to start offering it so it catches their clients well prepared.

But until at least 2 or 3 additional majors jump in, Paramount alone doesn't cut it at all, specially when forcing entire convertion in such short period of time.

Also, the DCI standard compliance mess needs to be settled once and for all before jumping into big $$$$$$ mistakes.