Film-Tech Forum ARCHIVE: Movie Theaters Secure Financing for Digital Upgrad

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Posted by Michael Voiland (Member # 5386) on 03-01-2010, 02:11 AM:

News article

quote:
Three large movie-theater chains are set to unveil a new $660 million financing plan to convert nearly half of the country's silver screens to digital technology, paving the way for Hollywood to roll out more 3-D movies in the wake of the success of James Cameron's "Avatar."

Using a 2007 joint venture established by AMC Entertainment Inc., Cinemark Holdings Inc. and Regal Entertainment Group, the trio will fund the overhaul of about 1,100 theaters, or about 14,000 movie screens.

In a digital conversion, theaters rip out old celluloid film projectors, and stop receiving weekly shipments of large film canisters. They instead use fiber optic lines to transfer huge digital film files.
Upgrade in Progress
Bloomberg News

Traditional celluloid film, above, sits in bulky canisters in a projection room, in contrast to the small hard drive that contains a digital movie, below.

The move to digital projection has been a hot topic of discussion for a decade. Currently in the U.S. there are about 40,000 movies screens and only about 7,600 of them are digital. Converting screens can cost $70,000 apiece.

AMC, Cinemark and Regal will convert most of their theaters from celluloid film reels to digital screens and projectors by the end of 2013. They will likely start in bigger markets such as New York, Los Angeles and Chicago, which have shown a bigger appetite for 3-D films.

The theater owners' joint venture, known as Digital Cinema Implementation Partners, or DCIP, was formed in 2007, but its fund-raising efforts were stymied by the financial crisis that erupted in 2008.

The new funding should enable theaters to quickly install digital screens and projection systems, which are currently in high demand as a crush of new 3-D films are slated for release.

J.P. Morgan Chase & Co. is backing the deal, which includes $445 million in debt and $215 million in equity. J.P. Morgan and Blackstone Group served as financial advisers to DCIP.

Six movie studios are also part of the deal: Walt Disney Co.'s Disney Studios; Viacom Inc.'s Paramount Pictures; General Electric Co.'s Universal Pictures; Lions Gate Entertainment Corp.; Sony Corp.'s Sony Pictures and Twentieth Century Fox, a division of News Corp., which also owns The Wall Street Journal.

The one major studio that hasn't signed on to participate in the transaction is Time Warner Inc.'s Warner Bros. People familiar with the matter said that Warner Bros. plans to join the consortium and is finalizing its agreement.

Studios currently pay $1,000 to $1,500 per screen for a celluloid print—and then must pay to replace that print when it wears down after about six weeks.

Under this venture, studios will agree to pay Digital Cinema Implementation Partners, a fee for every booking of the film. That fee will be about $850 per booking, according to people familiar with the matter.

The plan could be a boon to Sony of Japan and Belgium's Barco NV, whose digital technology will be used by the theater chains.

The new joint venture can't start soon enough for the Hollywood studios and U.S. exhibitors. Sparked by the success of recent 3-D films such as "Up" and "Avatar," the studios are flooding the marketplace with more than 20 3-D films this year.

For a big-budget movie aimed at an international audience, releasing it in 3-D may increase its profits by about 25%.

One such traffic jam happens next month, when Walt Disney Co. releases "Alice in Wonderland" in early March. DreamWorks Animation, helmed by 3-D evangelist Jeffrey Katzenberg, comes out with its second 3-D release, "How To Train Your Dragon," just a few weeks later. A third film—Warner Bros.'s "Clash of the Titans"—debuts in early April.

Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Lauren A. E. Schuker at lauren.schuker@wsj.com

Posted by Brad Miller (Member # 2) on 03-01-2010, 02:15 AM:

quote:
Studios currently pay $1,000 to $1,500 per screen for a celluloid print—and then must pay to replace that print when it wears down after about six weeks.

WOW! 6 weeks? Does AMC, Cinemark and Regal suck THAT much in the booth???

Seriously, that is a laughably pathetic bit of news reporting there.

Posted by Michael Voiland (Member # 5386) on 03-01-2010, 02:26 AM:

I found it kind of funny. But sad that someone is so misinformed. The key part I was focusing on was the fact they got 660 million to make a lot of theaters digital. Even the pro 35's that are shaking and squealing apart at my work don't scratch up film that much usually.

Posted by Jonathan Althaus (Member # 5042) on 03-01-2010, 01:54 PM:

Yes, unfortunately, we do suck in booth. (Other than my booth, I would hope) I can't even go to any of our theatres in our chain because of presentation issues that bug the crap out of me. If we don't get the film, I head over to studio movie grill.

We were told to get some electric work done to make room for our centralized server, so this article doesn't surprise me at all.

Posted by Martin McCaffery (Member # 37) on 03-01-2010, 03:17 PM:

Do prints ever get so bad the chains actually replace them? After about 6 weeks, are most prints dumped on some other theatre anyway?

Posted by Darryl Spicer (Member # 711) on 03-01-2010, 03:34 PM:

quote: Jonathan Althaus
We were told to get some electric work done to make room for our centralized server, so this article doesn't surprise me at all.

Yes the central server will probably come into play even if the entire site is not fully converted. Most likely all 3-D screen conversions will come first. Then they will come back later and finish the rest. Got to get all we can out of 3-D while it is hot. It is a wait and see game right now.

Posted by Jonathan Althaus (Member # 5042) on 03-01-2010, 04:06 PM:

Replacement prints here aren't actual replacements here, just less crappy conditioned prints. Since we share product and have 15 screens, prints tend to stick around for a while here. (Still have Precious, Blind Side, and Chipmunks among others)

5 of our screens have been converted to silver, but we haven't had any word of more conversions. We finally got a barco back in October, but again, have no word of any more conversions, except the advanced outlet for the server but no word on if and when it will be installed.

Posted by Julio Roberto (Member # 4976) on 03-02-2010, 12:50 AM:

Just some random quotes from recent related articles:

quote:
Year 11 and We’re Still Talking About Rollout

Eleven years have passed since the first public introduction of digital cinema at ShoWest. The industry has since come a long way…and it has still a long way to go. With nearly 100 percent worldwide digital screen growth in 2009, and with the three major circuits in the US set to rollout in 2010, one might get the sense that digital cinema is on a roll. While the US is on track to convert approximately 50 percent of its screens, there is still the remaining 50 percent to think about, as well as the rest of the world.

3D has proven itself to be the reason for adopting digital projection. Nearly all of the digital cinema installations in 2009 were 3D, resulting in a large number of installations where only one or two screens were converted to digital. Naturally, distributors need all screens converted to digital in order to completely transition to digital distribution. But the majority of these new screens weren’t installed under a deployment agreement. No monies are committed to fitting out the remaining screens with digital projectors, leaving a less-than-desirable footprint of projection technologies that requires dual film and digital distribution. While 2009 was witness to an incredible growth in digital screens the question we were left is how the industry will transition to 100 percent digital projection?

quote:
Have We Turned That Corner?
Submitted by Nick Dager on Thu, 02/25/2010 - 13:19. Big PictureThe Big Picture
For years now people involved in exhibition have been gathering at various industry events expecting to hear that the Digital Cinema Implementation Partners finally have their funding and will finally begin to convert the three largest movie chains in the world to digital cinema. And for years, at every event, the word has been that the funding is just around the corner. Now comes ShoWest 2010, which is being held later this month in Las Vegas and the chances are good that the news from DCIP will again be some variation of just around the corner. Yet despite that, many people are ready to pronounce the digital rollout all but over. What am I missing?

Most people, and I include myself in this group, look at the digital cinema situation and see a tremendous amount of work yet to be done. But there are many people who have said that, basically, the heavy lifting in digital cinema is all but over, this despite the fact that some 70 percent of North America and as much as 90 percent of the rest of the world still hasn’t made the transition. That dynamic is likely to serve as a backdrop for this event.

Two things are certain to be discussed – 3D and 4K – but other issues will also get attention. For most exhibitors, especially those who haven’t made the transition yet, the issue will be how to pay for it. For those who have already made the transition, an issue building momentum is how to service and maintain the new technology.

As the general manager of one of the largest chains told me, “The digital industry and equipment are so new that everything is evolving almost on a daily basis. I get the feeling that the manufacturers are learning as we all are (on the fly) and that many issues are first-time issues. It's going to be a while into the conversion before many of the lingering problems are ironed out.”

Posted by Paul Mayer (Member # 355) on 03-02-2010, 01:35 AM:

Glad the financing finally came together. I interviewed not long ago to get in on some of this conversion work, pending the financing. I really could use a break going my way right now...

Posted by Jonathan Smith (Member # 5609) on 03-02-2010, 11:45 AM:

No it's actually good news reporting.

Every news article has at least some errors in it, and certainly a lot more spin.

CELLULOID= wrong as the poor, late John Pytlak would say. Celloid is nitrate film, hasn't been used since 1950 with Sunset Blvd.

Cellulose acetate or cellulose polyester are just about the only film bases used these days, true story. . .

Posted by Sean Weitzel (Member # 244) on 03-03-2010, 11:07 AM:

If it's taken 11 years of talk and fluff to get to this point, I have to wonder once the bulk of theaters are converted, will they be stuck with that particular technology digital projection, or will there be regular upgrade cycles worked into the cost to keep the digital cinema systems current? I have a vision of theaters 20 years down the road still using 2 and 4k projectors when people at home have something far higher in resolution or technological advancement. Maybe this really is the beginning of the end of moviegoing in a public place.

Posted by Mike Blakesley (Member # 26) on 03-03-2010, 11:30 AM:

But how many "K" do you need in the home environment? Once you get to a certain level, you reach a point of diminishing returns because the picture is so much smaller at home.

I wonder if the studios will embrace "same day" delivery on everything and therefore kill the theatre business at around the same time all this digital equipment begins to wear out.

Posted by Julio Roberto (Member # 4976) on 03-03-2010, 01:08 PM:

A "wall sized TV" with 8K resolution is on the drawing board already. Expect it in no more than 15 years. The 8K is so you can have multiple HD channels, video games, web browsing or photographs on it at the same time.

But first, you must purchase the 720p 32", then the 42" 1080p, then the 46" 120hz 1080p, then the 55" 240hz 3-D one, then the 65" 600hz 3-D LED, then the 42" OLED 600hz, then the 55" 4K, ...

Once you buy all of those, someone will plunge the $5bl and 5 years needed to bring rollable 200" 8K OLEDs into full scale manufacturability. The only question is how long it will take. It may be 10 years or it may be 30. But it's coming for sure, as it is manufacturable and it is not expensive.

Let's not forget there are ALREADY 8K projectors and 8K digital cameras in the market today.

Posted by Todd McCracken (Member # 4718) on 03-03-2010, 01:56 PM:

Screen size, especially for 3d format content will always have an advantage at theaters. The larger the screen the greater the separation thus more depth
Also there is something endearing about seeing a movie for the first time with a couple hundred strangers. I don't see that going away anytime soon.
That and I'm a big fan of overpriced popcorn [Razz]

Posted by Julio Roberto (Member # 4976) on 03-03-2010, 03:55 PM:

quote: Todd McCracken
Screen size, especially for 3d format content will always have an advantage at theaters. The larger the screen the greater the separation thus more depth

Never say "always". Besides being able to scale depth to a smaller screen if you so wish at the time of making the film, you may be forgetting "virtual really goggles" and wall size TV's of the future (4K+, of course).

http://www.i-glassesstore.com/
http://gizmodo.com/5442057//gallery/2

Just wait a few more years.

Cinema has already pretty much lost the resolution advantage.

This $450 27" home monitor has MORE resolution (2048 x 1152) than any non-Sony DCI "professional", brand new just installed digital cinema or, for that matter, 35mm 2K digital-intermediate based cinema.

http://www.newegg.com/Product/Product.aspx?Item=N82E16824009165

We won't even talk about this 30" or other similar $1000 ones (2560 x 1600)

http://www.newegg.com/Product/Product.aspx?Item=N82E16824185012

Hell. I shoot (still) pictures with a camera that can do some 5K resolution today.

The sound quality advantage is also lost, with uncompressed multi channel sound easily obtainable at home at very low distortion levels and reasonable volumen and cost.

The 3D advantage (if it ever had one), will VERY soon be pretty much gone too, considering how the first 3D TV is a 55" $3100 model out this month and there are models at 65" announced real-soon-now and 3D models up to 152" have been demonstrated ...

Don't think for a second that movie theaters, EVEN if/when they have 4K and even when (if ever) they have 4:4:4 12bits 3D shows (instead of 4:2:2 10 bits, ie) and even when they have (if ever) 14fl 3D (instead of current 4fl) and even when they have 48fps (all current TV's can do 60fps+) and even when they can triple flash at 144hz (current TV's are advertised for as much as 600hz) .... don't even think for a second that the "home technology" of the future won't be able to touch that.

The battle is lost, specially when theaters start cutting corners with digital such as "non-triple flash", or "severe keystoning" or "lamp flicker" or "hot-spotted screens" etc, etc.

Even when you do digital (2K) 100% perfect in your theater, you are but a small step away from home technology. Don't think your 2000:1 contrast ratio is "untouchable" or anything like that, as home technology offers even orders of magnitude improvements.

Home theaters can CURRENTLY provide all that a normal person can want when it comes to A/V enjoyment, similar OR SUPERIOR to theaters ... TODAY!!!!

Imagine tomorrow. Then imagine 10 years from tomorrow.

I think theaters need to start investing in better tasting popcorn machines/genetic engineering rather than 2K digital projectors. [Big Grin]

Posted by Mike Blakesley (Member # 26) on 03-03-2010, 05:38 PM:

quote: Julio Roberto
The sound quality advantage is also lost, with uncompressed multi channel sound easily obtainable at home

Sorry, but that's baloney. The SIZE of the room is what makes the difference. You can put a gargantuan stereo system into a living room, but you're still in a living room.

Also keep in mind that full-blown home theaters are in a small minority of homes....most people have a "tee vee set" at one ond of the room with a couple of speakers hung on the wall next to it, and the other two on the bookcase and end table.

Posted by Cameron Glendinning (Member # 3516) on 03-03-2010, 06:54 PM:

Yes Mike but what will it be like in 5 years time?

I recently re read an artical I wrote 10 years ago for an Australian filmmaker magazine called IF, the artical was titled "The future of cinema" it discussed new better cinema complexes, emerging digital technology, IMAX in the multiplex, and a focus on better seats and experience to compete with the emerging home plasma screens.

Ten years ago I did not imagine that full 1080p projectors would now start from less than us$1000. As this home technology constantly drops in price and 3d etc is introduced I find it hard to imagine what the effect will be on our industry. It is strange to see that new emerging trends at home include backyard theater where people enjoy both big screens and also get out the house without actually leaving their homes!

I tend to feel that nostalga will emerge to be one of our strongest selling points but can not help but feel that the next ten years will be a far more dramatic shift than the last ten.

Twenty years ago an old school projectionist explained to me that a cinema release was slowly becoming like hard cover books, There is a need and a market for a premium release in a world that reads mostly cheaper paperbacks. I can't help but think that this shift will continue to evolve.

Posted by Scott Norwood (Member # 30) on 03-03-2010, 07:16 PM:

I fail to see why improvements in home technology would kill cinemas. Not everyone wants a giant TV set or a sound system that can blast the neighborhood. Never mind that one can buy hundreds of $10 movie tickets for the cost of such a setup.

Posted by Mark J. Marshall (Member # 1409) on 03-03-2010, 07:55 PM:

It will kill theaters because as the people who care about quality presentations realize more and more that they can get better quality more consistently in their homes without the annoyance of inconsiderate bafoons on the phones sitting next to them, more and more people will stop going. Theaters will add more advertising, thus making the presentation that much more annoying... as their equipment becomes that much more obsolete... etc.

Think about how many theaters will buy new projectors vs. how many people will buy new TVs. If you were a manufacturer, where would you spend your R&D dollars? And thus which product line will progress more/better/faster?

Julio hit the nail on the head in his last post. For the reasons he mentioned, plus mine, plus a myriad of others, the future of the theater industry as we know it is at best on very shaky ground.

Posted by Matt Fields (Member # 3211) on 03-03-2010, 08:09 PM:

Movie theaters will continue to be around (and thrive!) as long as they are the first run.

Posted by Jonathan Althaus (Member # 5042) on 03-04-2010, 08:56 AM:

quote: Todd McCracken
there is something endearing about seeing a movie for the first time with a couple hundred strangers.

This is the one thing I don't forsee home theatres being able to duplicate in the near future. I enjoy going and working these shows. There's just something about standing in line for a couple hours for the latest blockbuster and the crowd experience at a midnight show is different than anything else.

Posted by Mark Gulbrandsen (Member # 72) on 03-04-2010, 09:55 AM:

This is actually not new news... The JP Morgan agreement happened about three years ago... The only new part of this news is the studios paying the 850 per booking.

Mark

Posted by Mike Blakesley (Member # 26) on 03-04-2010, 11:26 AM:

I think it's kind of funny how people keep saying the theatre industry is doomed yet ticket sales keep holding steady or increasing, even while other entertainment options multiply.

Also, no matter what kind of doodads people put in their homes, I will wager that my li'l movie theatre auditorium is still at least 10x the size of their living room.

Posted by Scott Jentsch (Member # 1681) on 03-04-2010, 11:40 AM:

The theater industry is doomed only if theaters concentrate on selling the movie instead of the experience.

People still go to restaurants even when they have kitchens in their homes. People still attend concerts even when they have iPods and home stereos that can play the same music.

They desire the experience, and I believe that's what theaters have to do. Theaters that don't will lose business to other ways that people have to see the same movie. In your home, you have control over the annoyances that can mar the movie-going experience. But it means that you have to do the work yourself and make the investment in the equipment to get a good result.

It's nice to go to a good restaurant and have a well-cooked meal that is prepared by someone else, and the dishes are cleaned up by someone else as well. There are times when going out to eat is a disappointing experience, and we would have been better off staying home and cooking the meal ourselves. Same goes for going to the movies.

If your customers can have a better experience at home than you can provide to them in your theater, you are doomed. The size of the screen, the picture quality, and the sound quality should be a given, even if many theaters seem to have problems with that as well.

There's no excuse for bad service at a theater, and that's the number one reason that I see that people have a problem with. Issues with the presentation come a close second, followed by the facility (seats, temperature, bathroom conditions, etc.).

Theaters that do a great job with those things will be able to compete. If going to Digital Cinema serves that goal, so be it. Theaters that can't do a great job will be like a restaurant that gets a bad reputation for poor service/food and closes its doors.

Posted by Brian Guckian (Member # 1678) on 03-05-2010, 09:52 AM:

quote: Mark Gulbrandsen
The only new part of this news is the studios paying the 850 per booking.

...and one wonders how sustainable that will be!

Posted by Mike Blakesley (Member # 26) on 03-05-2010, 01:25 PM:

[/quote]Theaters that do a great job with those things will be able to compete. [/quote]
There's really only a couple of areas where the home experience is definitely better, IMHO:

1. The chair. I've never seen a theatre chair as comfortable as my recliner at home.

2. Being able to watch a movie naked under a blanket.

Posted by Bobby Henderson (Member # 840) on 03-05-2010, 03:53 PM:

Movie theaters stand a good chance of survival as long as they're able to play the movie exclusively a few months ahead of home video release. If the release window is shortened to perhaps only a month or completely eliminated then commercial movie theaters will be in big trouble. "Day and date" simultaneous release in theaters and on home video in a widespread basis would ruin commercial theaters.

Even with the theatrical release window kept intact commercial movie theaters are under pressure.

People often talk about the thrill of seeing a movie with an audience for the participatory experience. For the past few years I have seen this aspect turn into the biggest drawback to movie-going.

I've had it with all the disruptive behavior from so many other audience members. The only time you'll find me in a crowded movie theater on opening weekend is when I'm on a date or agree to see a show with some other friends. When I choose to see a movie I usually pick some off peak time perhaps a week or two after the movie opened. I'll often see movies at night during the week. The fewer people in the auditorium the better. If I'm the only one in the room then that's perfect!

Unfortunately most commercial movie theaters are powerless to do anything about audience disruptions. There may be less than a handful of small independent movie theater companies who have a tough policy against disruptive behavior, such as ejecting people who play with their phones during the show. More than a few people have had enough of the distractions and have settled for only watching movies at home.

Home theater and HDTV equipment does make watching movies at home much better. The hardware has to be causing at least some customer loss to movie theaters. Some people may not like huge HDTV sets. Nevertheless the trend is for those TV sets to get larger and also more affordable. 10 years ago I would have never guessed you would be able to buy a good quality 55" HDTV set for under $3000. Back in the 1990s it was common place for a good quality standard definition big screen TV to cost over $5000. And that's 1990s dollars.

I think more than a small minority of people have home theater surround sound systems. I know quite a few people locally who have at least one 5.1 surround setup in the home. Lawton isn't a big city with a high income demographic either.

quote: Mike Blakesley
The SIZE of the room is what makes the difference. You can put a gargantuan stereo system into a living room, but you're still in a living room.

A giant sized (and well decorated) auditorium is a great start, but it takes more than that to deliver good movie theater sound. It goes without saying the proper sound equipment has to be installed for that particular size of room and set up properly. Just as important, the equipment must be properly maintained. Only a minority of commercial movie theaters are doing all of that.

A living room surround sound system is often modest, but its user can equip it to his wants/needs, replace broken items when he chooses to do so and adjust the volume to his liking.

Posted by Edward Havens (Member # 4715) on 03-07-2010, 12:35 PM:

Cinema, in whatever form it takes down the road, will still exist for a very long time, just as live theatre continues to exist after many centuries. The human desire to be entertained outside of the home, away from whatever junk is happening in our lives at the moment, is too strong to just disappear.

We have gone from black and white television screens with small cathode ray tubes to massive color high definition monitors... yet people still go to the movies. We've had dozens of way to keep ourselves entertained at home, from Atari to PlayStation 3, from cable with one "premium" channel to a cultural cacophony with hundreds of channels for every possible lifestyle choice... yet people still go to the movies. There's been Beta and VHS and the RCA VideoDisc system and laserdiscs and DVD and HD-DVD and Blu-Ray, allowing us to watch our favorite movies and television shows when we want to watch them... yet people still go to the movies. We've had PPV and VOD that have given us the chance to see certain movies day and date with their theatrical screenings, and sometimes even before they open in theatres... yet people still go to the movies.

Twenty years down the road, when we have interactive holographic entertainment in our homes, we will still be going to the movies. The movies are here for the long haul, not unlike legitimate theatre, which has existed in some form for thousands of years. The only way cinema is going to die is if the technology available to people at home is better than what they can get in our theatres. That's not going to happen anytime soon, except for the extremely wealthy, who already have their own screening rooms in their houses. And guess what? Even with their in-home screening rooms, with their wide comfy chairs and in-room concession stands, they too still like to go out from time to time and see their movies in a real movie theatre, with other people, as billions of others have done for more than 100 years.