NATO's John Fithian Analyzes a 'Recession-resilient' Business

“I’ve been saying this for a while, but I really do think this is a big year for this transition,” declares John Fithian, president and chief executive officer of the National Association of Theatre Owners (NATO). “It’s going to be huge and will dominate everything.”

Given the recent announcement from Paramount Pictures about directly contributing to exhibitors’ d-cinema installations, it is safe to assume that a stop on the Melrose Avenue was included. “We are looking for as many digital-cinema options for our members as there are viable,” Fithian explains. “For many of our exhibitors, self-financing is very viable. Some cinema operators have very good relationships with their local banks and can explain why the digital-cinema transition is good for their business. They can get support at a time when some of the bigger market banks and investors have frozen credit policies. And due to their established long-term relationships, smaller, regional operators like to work with their local banks anyway. A lot of our exhibitors are excited and want to go out to do this.”

“Going back four or five years,” Fithian reviews, “we suggested this idea of self-financing. We had members who were interested from the beginning. It’s not alone about the current credit freeze, but the fact that some cinema operators want to own their equipment and don’t want to have to go through an integrator company. They wish to keep control themselves and got the financial resources and/or backing to do so. The studios all said ‘No’ to begin with, but now that we are seeing a particularly large slate of 3D films lining up, and the economic climate is not facilitating a transition quickly enough, the situation is changing a bit.”

Furthermore, he points out, “Fox has always been sympathetic to self-financing. Paramount’s now out with that very public proposal. And we’re strongly encouraging other studios to support that option as well: not as an exclusive play, but as a serious option for a lot of exhibitors in North America and around the world. It is not the panacea for all, but for some of our members, self-financing is a very good option.”

Looking at the deals already lined up as part of the third-party integrator models, “we have literally 25,000 to 30,000 screens pretty much ready to go.” Fithian refers to existing virtual-print-fee (VPF) agreements for Digital Cinema Implementation Partners (DCIP), Cinedigm Phase 2 and, with overlap into the former, the theatres in the Cinema Buying Group (CBG).

“Really, this was all teed up and ready to go last fall. The original timing of the d-cinema transition was to get all these VPF and integration agreements sorted out by October of 2008. But, what did happen then? The markets crashed and the credit markets froze. And so...” he sighs, “we’re all waiting for that situation to loosen up again. If the current market thaws in a couple of months — and we are already seeing encouraging signs of that — the rollout will accelerate rapidly and you’ll have lots of digital and 3D screens being installed during the rest of the year.”

Asked about that very economic situation, Fithian elaborates on the theme of “recession-resilient” versus “recession-proof.” “The exhibition business tends to do fairly well during hard economic times,” he observes. “The cinema is a relatively inexpensive way to be entertained. If people don’t have money to go on a big vacation, they take a mini-holiday at their local movie theatre. So the environment of challenging times is generally good for us, but that doesn’t mean it always works. You need to have good movies. People are not going to escape the burdens of the day by going to see a bad film.”

The industry’s billion-dollar box office in the first month of 2009 certainly seems to prove Fithian’s point. “In January, we also had very good movies,” he reminds, “and diverse movies that were appealing to different genres and demographics. October and November too were just huge. December was pretty strong and January was indeed the best we have had in forever.”

Overall for 2008, at $9.79 billion “the largest ever,” box office was up, he reiterates. “We were down a couple of points on admissions, close to 2.5%, with the difference coming from an increase in average ticket price to $7.18. Nonetheless, those results in this kind of economy are pretty strong. As long as the movies are good, we have a great chance of continuing to roll.”

With some 13 titles lined up at interview time in a “pretty exciting 3D film slate,” Fithian looks at “the first significant uptick in our business models this year due to 3D. The faster we can get through the credit market crunch or make additional self-financing deals, the more beneficial that slate will be.”

By Andreas Fuchs, Film Journal International