Exhibs Ask for 3-D Conversion Funds

With the exhib biz enjoying a recession-fueled boom, the heads of several top theater circuits gathered in Gotham on Thursday to make their pitch to Wall Street. Amid all the justified hype at the confab hosted by brokerage and research firm Gabelli & Co., execs conceded that frozen credit markets remain a major impediment to large-scale 3-D conversion. Many players on both the exhib and distrib side see 3-D as a major revenue enhancement based on encouraging results from titles such as Coraline and the Hannah Montana concert pic.

Exhibs remain unable to lay out any definitive timetable. Execs said Thursday that the finance model hammered out in a rare collaboration between the two notoriously contentious sides of the B.O. equation would enable the conversion of about 200 screens a month. All that's needed is some $1.4 billion in credit.

"We need to get that funding in order to get rolling," Cinemark topper Alan Stock said.

The current 3-D screen count is about 1,500. Perhaps the most vocal cheerleader for 3-D, Jeffrey Katzenberg, has said the tally is short of DreamWorks Animation's initial targets for the upcoming bow of Monsters vs. Aliens. Late last year, Katzenberg was projecting 2,500.

The toon may still enjoy a healthy debut, but the implications are greater for holiday titles such as Disney's Robert Zemeckis-helmed Jim Carrey starrer A Christmas Carol and Fox's big-ticket James Cameron comeback Avatar.

Regal chief financial officer Amy E. Miles said the company had, as a temporary measure, begun redistributing many of the 3-D projectors in different markets so as to maximize the B.O. for releases in the format. The nation's top circuit, controlling 18% of the market, has 232 screens equipped for 3-D.

A panel on digital and 3-D featured former AMC chief Peter Brown, who now runs investment firm Grassmere Partners, and Clearview Cinemas founder Bud Mayo, who now heads up Cinedigm Digital Cinema. Cinedigm has been the third party handling many of the conversions.

"We're finding pockets of credit available," Mayo said. "And we could probably do a few hundred screens that way. But the exhibitors' resolve is there, the studios are committed. This is a moment when we could be doing a lot more."

Skeptics of 3-D were in short supply, but Marvel vice chairman Peter Cuneo noted the extra costs involved. "We're still a fledgling studio," he said, though Marvel projects are "perfect for 3-D" and the company is open to possibilities in that arena.

Regal chief exec Mike Campbell said the recent B.O. boom has not resulted in any extra leverage for studios in terms of splitting up revenue.

"Compared with when I got into this business 28 years ago and we were negotiating declining splits, there's been a recognition of the need for equality and fairness," he said. Firm terms with pre-negotiated shares are widespread, he added.

Turbulence in the commercial real estate and consumer retail sectors has affected exhibs in different ways, though a strong appetite for moviegoing has carried the day lately.

Even though Regal spends 13% of its annual revenue on rent, Campbell said the damage from the economy wasn't taking a major toll because many Regal locations are standalone megaplexes that don't rely heavily on surrounding retail.

"We don't like to see the carnage that's gone on, but it's a lot of times developers and new builds that have been hit," he said. "The screen count in this country, at 38,000 to 39,000, is adequate, so if any screens can't get built or need to close, that could actually be a good thing."

Thursday's trading session brought no signs of immediate relief on the credit front, but the stock market had another strong showing to extend this week's rally. The Dow broke the 7,000 mark, rising nearly 240 points, or 3.5%, to close at 7,170.06. The battered S&P 500 is up 10% this week alone.

Exhib stocks largely fared well. Regal rose 5% to close at $12.53; Cinemark was flat at $7.79; Marcus, which owns the No. 7 U.S. circuit, shot up 12% to $8.34.

The lone exception was Carmike Cinemas. The Georgia-based circuit saw its depressed shares sink an additional 4% to $1.35.

Longtime Carmike chief exec Michael Patrick was removed by the company's board in January. The circuit will announce quarterly earnings and address Wall Street analysts on Monday.

By Dade Hayes, Variety