Film-Tech Forum ARCHIVE: Extended Warranty

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Posted by Mark Kosinski (Member # 8074) on 01-17-2014, 08:28 PM:

Not sure if this is the best place to ask this question but I figure that you all know more than me so I am sure your help will be appreciated.

I am on the Board of a non profit that runs a small theatre in a small town. We have two screens. We purchased digital about 14 months ago. Our warranties from Barco expire some time at the end of the summer. They have inquired as to whether we want to extend those warranties for $2500 per screen per year. Since we distribute our profits to local youth organizations, we are very careful how our $ is spent. I am not sure whether the $5000 is money well spent. Extended warranties for other items are always a questionable purchase. The way I view it is... over a five year period, we will have invested $25,000 into extended warranties. I guess I am questioning whether we will incur $25,000 in problems over the 5 yr period of time (assuming the warranty would even extend out that long).

Thanks in advance for any advice

Posted by Mike Blakesley (Member # 26) on 01-17-2014, 09:02 PM:

The question isn't really the amount of the cost of the warranty...it's the cost to fix things. There are some parts in a projector that cost many thousands of dollars. If you can afford to absorb a big out-of-warranty repair bill, then you can wing it. If you can't, then buy the warranty.

I don't know any statistics about the reliability of Barco projectors. We've had our NEC for going on 4 years and it's been trouble free. The only issue of any kind we've had is server hard drives, and one xenon bulb that suddenly failed to light.

Posted by Frank Cox (Member # 6258) on 01-17-2014, 09:16 PM:

My view of extended warranties is that the outfit selling the warranty isn't there with the intention of losing money. Therefore, the average yearly cost to keep a projector (or anything else) working for one year must be lower than the cost of the extended warranty.

Of course, that's playing the averages and you may be unlucky and get nabbed with the uncommon, expensive repair that would othersie be covered. Or not.

Posted by Kenneth Wuepper (Member # 1174) on 01-18-2014, 07:59 AM:

Extended Warranties are actually major service insurance. It is not the individual premium that will pay for your major repair, rather it is the many that need little service that pay for your big bill. If there are enough insured projectors, there will be some money left for the insurance (extended warranty) company.

If you just save up your premiums, you can still be burned by a very costly repair that is much more than you have accumulated.

It is only good business to have a maintenance fund that you add to on a regular basis to have the funds for repairs to everything in your business from the roof to the light bulbs, etc..

Posted by Scott Norwood (Member # 30) on 01-18-2014, 09:27 AM:

One question to ask would be if warranty repairs get priority service. With some companies and products (not specific to the cinema indusry), warranty repairs will be handled faster and with less red tape than cash repairs. This alone could make the extended warranty worthwhile even though, as mentioned above, the cost of the warranty will be higher than the estimated "average" repair bill over the warranty term (spread out over thousands of units).

Also, if your organization's income is not consistant over time, this may be a way to insure against a major cash shortage in the event of an expensive repair. Fire insurance is a bad deal financially, too, but that does not mean that organizations should not buy it.

Posted by Dave Macaulay (Member # 813) on 01-18-2014, 10:37 AM:

Obviously Barco doesn't expect to lose money on the extended warranty program but there is some financial risk to them as well.
For the projector owner, a failed light engine costing tens of thousands to replace would be a big problem.
With a business that depends on the projector - few patrons will drop in to buy overpriced confections without a movie to watch - having it broken costs a lot more than just the repair price. If Labor Day comes and you're dark trying to find $20,000 in a hurry for repairs... you will probably be wishing you had paid for the $5000 extended warranty.
A cinema operated as a hobby (although not many of these survived the digital revolution) or charity is different, and choosing to self insure is more of an option: if a very expensive repair is needed, you find a new hobby or look for an angel to fund it.

Posted by Carsten Kurz (Member # 5396) on 01-18-2014, 02:58 PM:

Also, this cinema has two screens - even if one would go out of operations, it could still be kept open.

In my opinion, the money is better put to an account. Barco knows that most of their gear has little problems during the first years of operation. You may end up canceling the extended warranty in 3-4 years and then the real problems turn up.

What screen size/what typ of projectors and servers do you have? LightEngine Swap is the most costly repair. Within 5 years, you may get new projectors for less money than you spent on the warranty. Important thing - change bulbs on their warranty expiration or before. A blown lamp/shattered lighthouse is probably the second most expensive repair.

- Carsten

Posted by Marcel Birgelen (Member # 6801) on 01-18-2014, 03:37 PM:

Who actually pays for the repairs if the bulb blows before the warranty expired and the warranty on the projector has already expired? I guess it's the owner...

Posted by Carsten Kurz (Member # 5396) on 01-18-2014, 08:36 PM:

The bulb manufacturer/his insurance. At least for parts.

- Carsten

Posted by Mark Gulbrandsen (Member # 72) on 01-18-2014, 10:59 PM:

If I were a small operator I would forget the extended warranty and just sock that much money away every year in a contingency account. Note that the ocst of these extended warranties increases with the age of the projector. In four years or so you'd have sufficient funds to buy just about any major part in a projector. If you have multiple screens and sock that much away you could also buy a new BMW. Plus you make the interest on your money!! ON servers I feel it is simply not worth doing extended warranties at all. The most expensive part is the media block and they rarely ever fail.

Posted by Steve Guttag (Member # 268) on 01-19-2014, 04:26 AM:

The key here is that you DO sock the money away...you WILL start to use that fund, trust me.

A typical repair bill on a DCinema is going to be thousands, not hundreds. Series 2 projectors are now starting to be 4 years old (first ones hit the streets in 2010)...the vast majority have not had any issues or if their was infant mortality, the issues were addressed early in their life. So it is a game of odds. That said, some have failed and we are starting to see the failure rate rise with age (not huge but enough to take note when someone is hit with a $5000 module replacement).

Another thing to keep in mind is that these projector companies don't repair most or anything after the warranty expires...your only choice is to buy a new module. So the cost isn't going to be cheap. If you really lose, the thing that fails is the light engine and now you are into a $20,000 bill (or there abouts). That is a BIG expense to have hit you all of the sudden. I believe they all will repair light engines but you have to send it away for it to be repaired...you'll be down for that. Or, you could buy a new one, send yours out and when it gets repaired, have a spare on the shelf for the next one. What are you going to do if it is just a stuck pixel? What is the threshold for "good enough" when it is your money on the line?

As you have noted, extended warranties get expensive FAST. If you think of your projector as a 10-year life cycle (typically the longest you can get a warranty for)...then you have to figure what you would spend in 10-years in warranty versus what you would spend repairing the projector in 10 years. I would say that the odds you will have a light engine fail or have a show compromising issue is high between the two machines in 10 years time. However, if you bought two projectors worth of warranty for 8 years (presuming you started with a factory 2-year)...you would have spend $40K on warranty to protect yourself from a single light engine failure and maybe a couple of modules. It would have been a better deal to just buy one. They only way you "win" is if you end up having both fail and perhaps a module or two.

Really, I see extended warranties as only protecting single screeners and maybe twins as the cost of them are just too high for larger quantities. Heck, you'd be better off just buying a spare projector to rob parts off if you had 3 screens or more rather than buying a warranty for all three.

Posted by Marcel Birgelen (Member # 6801) on 01-19-2014, 10:56 AM:

I haven't checked myself, but I'm wondering: Is any of those extended warranties actually covering something like a single stuck sub-pixel?

Even a single stuck "sub"-pixel in the "on" position, on any odd 2K machine is a major distraction in every dark scene, especially if it happens somewhere in the middle of the picture. And with age, the chance of hitting on one is only increasing.

quote: Carsten Kurz
The bulb manufacturer/his insurance. At least for parts.

And do they pay right away or do you first need to file a compliant and wait until their insurance clears the case?

quote: Steve Guttag
Really, I see extended warranties as only protecting single screeners and maybe twins as the cost of them are just too high for larger quantities. Heck, you'd be better off just buying a spare projector to rob parts off if you had 3 screens or more rather than buying a warranty for all three.

Although I agree with this, it obviously only works if all of the projectors are of the same type. Many multi-screen venues around here did a "tiered upgrade", moving their older Series 1 projectors to smaller screens, while upgrading their larger screens with a Series 2 projector. In some odd cases it's even a multi-vendor situation. Like they started with a Barco DP100 to not miss the Digital 3D train, but switched to either Christie or Sony for their remaining screens later on, once it became clear that 35mm was going the way of the dodo.

Posted by Mark Gulbrandsen (Member # 72) on 01-19-2014, 12:16 PM:

@ Steve Guttag: I think indie theater owners that managed to get this far are smart enough to keep that account seperate from the rest of operations. Many indies I know already have seperate similar accounts for the occasional up front demands by distribution on bookings. I can certainly say that about mny own customers. They are very smart cookies and most of them were smart enough to be in a position to simply write a check for theor conversions. The ones that didn't were in a position to simply sign at the bank. I also find that the majority of my customers that signed up with GDC for their VPF programs are almost 75% paid up on VPF already! Not sure how Cinedign customers are faring although I know they are getting paid...

Mark

Posted by Brad Miller (Member # 2) on 01-19-2014, 01:59 PM:

quote: Steve Guttag
Heck, you'd be better off just buying a spare projector to rob parts off if you had 3 screens or more rather than buying a warranty for all three.

The really smart ones have that spare projector installed into their big house so at least if the big house happens to fail, a couple of wires can be moved and the show can continue. [Wink]

quote: Mark Gulbrandsen
I also find that the majority of my customers that signed up with GDC for their VPF programs are almost 75% paid up on VPF already! Not sure how Cinedign customers are faring although I know they are getting paid...

The Cinedigm customers end up taking more money home once you factor in the fees and gotchas, but most of the independents couldn't qualify so they had no choice but to go with GDC. Their alternative was to shut down. At least Cinedigm let the customer choose what equipment was installed and they didn't force something down their throats in order to stay open.

Actually they did have one other alternative...Sony. Now THAT ROI model is just awful AND they forced their own product down the customer's throats too just like GDC. In that comparison the GDC VPF program was better. Still, Cinedigm was the real winner if you could qualify.

Posted by Mark Kosinski (Member # 8074) on 01-19-2014, 06:08 PM:

I really appreciate everyone's input. I am going to do a lot more investigation into what the extended warranty would cover, etc. Since we have until the end of summer with the factory warranty, I wanted to get a head start on what the general consensus is toward extended warranties.

Our board has done a great job separating out $ for maintenance and other type of issues such as that. We found ourselves in a very difficult position with the original purchasing of the digital equipment. We were not in a position to spend $120,000+ for upgrading the two theatres. Luckily, we have a pretty amazing community. Our city council funded the project at 2% interest and contributed $50,000 to help. Just a couple months ago, we paid off 3 yrs of the 5 year loan. We have also managed to give away nearly $15,000 over each of the past 3 years to local youth programs. That number will hopefully skyrocket when we have the projectors paid of in a year or two and the mortgage paid off in 7 yrs.

I will re-post when I get more info about the warranty and exact model numbers of the projectors. Again, I appreciate everyone's help.

Mark

Posted by Mark Gulbrandsen (Member # 72) on 01-19-2014, 07:29 PM:

quote: Brad Miller
The Cinedigm customers end up taking more money home once you factor in the fees and gotchas

Definately not true and Cinedigm is WAY WAY more expensive by the time the end rolls around. I have customers on both. There are no fees on GDC other than the off the top flat percentage which is the same amount that Cinedigm takes with each booking. With GDC there is no expensive LMS, No NOC monitoring required and No large recurring software fees. Cinedigms initial startup fees were 2K per screen when my customers signed up, you HAVE TO have NOC monitoring, and the racks ARE uber expesive. GDC had no initial start up fee per screen except a 400.00 per screen software fee. But you can't blame Cinedigm for the large recurring software fees since they are technically just a software company anyway. I have some customers that will have been paid back fully by GDC before the end of this year rolls around. Not so of Cinedigm even though those LMS systems went in about a year before the first GDC VPF deal was ever signed.

A theater owners real goal with these programs is not about equipment brands but to get his money back as quickly as possible, or pay off his bank loans fast. GDC is at the head of the pack as far as that goes.

Mark

Posted by Brad Miller (Member # 2) on 01-19-2014, 09:49 PM:

Absolutely not true Mark, but it doesn't matter at this point since it is all in the past.

Posted by Justin Hamaker (Member # 2165) on 01-20-2014, 02:42 AM:

If I can add my 2¢, I would say you would be better off to bank the money. You're taking a risk in the first year or two you're out of the factory warranty, but as long as you're diligent about banking the full amount, you'll likely be better off in the long run - especially if you don't have any expensive repairs until the equipment gets to be 6-7+ years old.

Doing it this way, you're the one earning interest on the money, and you reap the rewards if the necessary repairs don't eat the full fund by the time you need to replace a projector. But it's a gamble.

Posted by Steve Guttag (Member # 268) on 01-20-2014, 06:03 AM:

Well that is just it...if you bank the money for 10-years and don't use it...then you can buy yourself the next technology and keep going and let the cycle repeat. That is something people have to remember...this stuff isn't going to last beyond 15 years...even being rosy about it. The technology alone isn't going to be sustainable. There is a lot of sole-sourcing going on here.

Posted by Mark Gulbrandsen (Member # 72) on 01-20-2014, 03:54 PM:

Justin - Steve,

I have one customer that is doing just that. But what he is going to do is bank all his ad money. He never ran ads before, nor does he need that money to help sustain his operation... But from saving over the next ten years there will be a large sum of omney available to leap onto the next technology.

Mark

Posted by Kirk Futrell (Member # 5006) on 01-24-2014, 11:48 AM:

I'm on the fence about the extended warranty myself. While you all make very good arguments for banking the money, I have to mention that I got a stuck pixel on a 4K within 2 months of owning the projector. I think the odds of something happening to the light engine on a 4K are much greater due to the much greater number of pixels. I have 17,694,720 pixels in our 2 projectors to get stuck. Also a 4K light engine is going to cost quite a bit more as well.
Steve's point is very valid about 'what can you live with presentation-wise'. The users of this forum have been great proponents for perfect presentation, but when cash is tight and its one small 4K pixel glowing red, only during dark scenes, you can start justifying not paying $$,$$$ to fix it, pretty easily.

Posted by Mark Gulbrandsen (Member # 72) on 01-24-2014, 12:55 PM:

If you were one of the very early ones that bought 4k the stuck pixel thing doesn't surprise me at all. A lot of the first batches of 4K DMD's had varying issues. I have replaced three 4K light engines, all fomr the first few onths of 4K sales. I had engines with as many as 60 stuck pixels after just a few months of operation. The replacement light engines have never given any issue at all since. Those light engines are around 33K USD each. If I had a lot of customers runnng 4K and especially on a marginal operation then the extended warranty would be serously worth considering.