German Exhibs Battle over Digital Cinema

German theater owners and the German Federal Film Board (FFA) are engaged in a high-stakes game of chicken with the future of digital cinema in the country hanging in the balance. The film board wasn't blinking this week when it told exhibitors they could kiss goodbye about 40 million euros ($60 million) in FFA funding toward a digital upgrade of German cinemas.

The FFA pledged the cash -- part of a 300 million euro, five-year, all-industry digital rollout plan -- on the condition that exhibitors drop a lawsuit against it. But UCI Kinowelt, the German arm of the Odeon & UCI Cinemas Group, refused to back down. So the FFA offer is off the table. Local exhibitors association the HDF, whose members operate about 75% of Germany's theater screens, is holding a two-day powwow in Berlin this week to decide on a response.

At issue is Germany's ticket levy, the share of boxoffice revenue German movie owners are required to pay to the film board. The FFA uses the cash to subsidize production, distribution and exhibition efforts across Germany. Some German exhibitors -- most of them big multiplex owners like UCI -- say the levy is unconstitutional and have sued to have it eliminated. The HDF offered to pay 25% of the ticket tax, and that with reservations, but the FFA said no.

"That's completely unacceptable," FFA spokesman Thomas Schultz said. "Not 25%, not 75% -- it's 100% or nothing."

While the two sides duke it out, Germany is falling behind its European neighbors in the digital cinema race. While UCI and other big multiplex operators have been upgrading their equipment, many smaller owners are having trouble financing the changeover. They are losing out as audiences flock to digital screens to watch the 3D versions of blockbusters such as Up and Ice Age: Dawn of the Dinosaurs.

By Scott Roxborough, The Hollywood Reporter