JPMorgan Said to Raise Almost $700 Million for Digital Theaters
JPMorgan Chase & Co. raised almost $700 million to equip the three biggest U.S. theater chains with digital screens and projectors that can show 3-D movies, according to a person with knowledge of the plan. Digital Cinema Implementation Partners, a collaboration between Regal Entertainment Group, AMC Entertainment Holdings Inc. and Cinemark Holdings Inc., is likely to announce the funding in about two weeks, said the person, who requested anonymity because the details are private.
The financing, delayed since 2008 because of the credit crunch, will speed theater conversions as Hollywood studios increase production of 3-D films, which command premium ticket prices. News Corp.’s Avatar has taken in $2.1 billion, the most of any picture, since it opened Dec. 18, according to researcher Box Office Mojo.
JP Morgan's financing would pay for the installation of digital projectors in about 12,000 locations, thus easing a bottleneck caused by an abundance of 3-D movies competing for too few screens. Anticipating a coming gold rush, the studios plan to release about 20 films in 3-D this year. At present, less than 9% of the country's nearly 40,000 theater screens can play 3-D movies.
Theater owners, who have been dealing with attendance levels largely unchanged from a decade ago, have seen a surge in business thanks to 3-D screenings, which helped fuel a record year in box office revenues. The higher box office from 3-D films, however, is driven in part by their ticket prices, which can run 25% or higher than prices for a typical movie.The dearth of screens is creating friction between rival studios muscling one another to get their 3-D pictures into theaters. Even with the new funding, however, the logjam won't end soon. It could take three to four months to manufacture the digital equipment before it can be installed in movie theaters.
Changing over to digital is expensive, however. Installing the technology costs about $70,000 per theater. As a result, determining who will pay for retrofitting screens -- theater owners who exhibit the movies or the studios that make them -- had been an issue. The problem seemed to have been overcome in 2008, when the theater consortium said it reached an agreement with five studios to help pay for the $1 billion toward installing 20,000 digital screens in the U.S. and Canada.
Studios agreed to pledge "virtual print fees" -- the money they saved by no longer having to make film prints -- to secure the financing. But the ensuing economic meltdown dried up credit markets, forcing major theaters and studios to forestall their ambitious 3-D plans. Since the markets have begin to thaw, however, JP Morgan was able to go back and raise the money.
By Michael White, BusinessWeek
