Five Studios Ink Digital Cinema Deals

Five film studios have formally announced their signing of agreements with the nation's top theater chains to fund the rollout of thousands of digital projection systems.

Studio consortium Digital Cinema Implementation Partners on Wednesday announced the funding pacts with Fox, Disney, Paramount, Universal and Lionsgate. The agreements with Regal Cinemas, AMC and Cinemark will cover the majority of costs on the rollout of a minimum of 14,000 digital systems in the U.S. and Canada during a three-year period beginning in the first quarter.

The deals also should spur the quicker conversion of thousands of digital screens to 3-D, with those costs to be absorbed solely by exhibitors. The installed base of 3-D screens is so paltry that Warner Bros. was only able to secure 854 3-D venues among its 2,811 playdates for the July release of Journey to the Center of the Earth, a film originally intended to play only in 3-D auditoriums.

DreamWorks Animation is particularly keen for a quicker industry implementation of 3-D projection because the studio will release all of its future films in the extra-dimensional format starting with March 27 release Monsters vs. Aliens.

"We believe we will now start to see a high level of 3-D penetration as screens roll out without delay, an important and long-awaited next step to bringing the exciting future of cinema to theaters nationwide," DWA chief Jeffrey Katzenberg said Wednesday.

Katzenberg hopes as many as 2,500 3-D screens will be in place for its inaugural foray into extra-dimensional releasing. Although that number might seem a tad bullish, it's worth noting the DCIP-funded trio of circuits intend to seed key markets nationwide in their first round of system rollouts and quickly add 3-D bells and whistles to those initial installations.

Reps for Sony and Warner Bros. also are well advanced in negotiations with the three theater circuits, and those talks are expected to result in similar "virtual print fee" deals supervised by DCIP. Through VPFs, distributors agree to pay the equivalent of print costs for several years after the conversion of screens to digital to help pay for digital hardware and installation.

Investment banks JPMorgan and Blackstone are providing financial backup to the $1 billion-plus rollout plans. The studios inked their VPF agreements in recent days, with news trickling out last week that a critical mass of majors had done so after a more than yearlong effort to hash out pacts with the leading exhibitors.

DCIP chief Travis Reid lauded the merits of digital cinema and 3-D to moviegoers and industryites alike.

"Guests will enjoy enhanced presentation as well as a number of additional entertainment options at their favorite theater," he said.

At least 4,000 screens are expected to be installed under the plan by the end of 2009.

Fox distribution president Bruce Snyder said the DCIP agreements mark "the tipping point for the conversion in the United States," while Disney distribution boss Chuck Viane estimated that "20,000 additional theaters" will be converted to digital via the deals.

Par distribution head Jim Tharp noted that "digital distribution is becoming increasingly important to the industry and to Paramount's global distribution strategy."

Uni distribution maven Nikki Rocco lauded d-cinemas as "ultimate in big-screen entertainment." And Lionsgate distribution topper Steve Rothenberg noted that his company will release one of the first 3-D movies boosted by the agreement when it unspools the horror film My Bloody Valentine on Jan. 16.

Michael Lewis, chairman and CEO of 3-D vendor RealD, predicted that the DCIP news "ensures the continued rapid growth of the RealD 3-D platform."

The company has 6,500 screens under contract for eventual conversion to digital 3-D projection.

The National Association of Theatre Owners praised the DCIP agreements, but the trade group also urged the consortium to offer similar deals to smaller-fry exhibitors.

"With a deal in place for the largest U.S. theater chains, it is time to conclude a similar digital cinema agreement for the hundreds of independent cinemas and thousands of screens not covered by this agreement," NATO said. "It is imperative for the health of the industry and for the millions of moviegoers in small towns and cities that the benefits of digital cinema be spread as widely as possible."

Toward that end, Paramount on Wednesday also announced an "integrator agreement" with Kodak, making the tech giant another installer authorized to tap studio VPF capital for digital conversions by exhibitors who aren't part of the DCIP deal. Hollywood-based AccessIT is also an integrator targeting circuits not covered by DCIP agreements.

By Carl DiOrio, The Hollywood Reporter