Studios Announce a Deal to Help Cinemas Go 3-D

"Eager to get American cinema complexes ready for a surge in 3-D movies next year, four major Hollywood studios announced on Tuesday a deal to subsidize the conversion of 10,000 theaters to digital projection systems.

The announcement, at ShoWest, the annual trade show that gathers theater owners and movie distributors here, overlooked one point: the theaters that could be converted under the deal have yet to agree to it.

The motion picture industry is racing to roll out digital projectors, not just because they avoid the costly printing and shipping of reels of film, but also because they’re needed to show the current generation of 3-D films, which have often been bonanzas at the box office. One, “Hannah Montana & Miley Cyrus: Best of Both Worlds Concert,” generated $31 million its opening weekend on only 683 screens, about one-fifth as many as the typical wide release.

Under the deal announced on Tuesday, the Walt Disney Company, 20th Century Fox, Paramount and Universal all agreed to pay “virtual print fees” for each movie they distribute digitally to the participating theaters. Theater owners will use the fees to buy the projectors, servers and other equipment needed — about $75,000 for each auditorium.

Also on Tuesday, Paramount executives confirmed that “Indiana Jones and the Kingdom of the Crystal Skull” would be released digitally, though its director, Steven Spielberg, has long insisted that his movies be released exclusively on film. Every movie that earned more than $100 million last year was released both digitally and on film.

Access Integrated Technologies concluded a first round of 3,740 theater conversions last year. It now must go out and sell its systems to other cinema owners. It has three years to accomplish those installations; the studios will pay the virtual print fees for up to 10 years.

The size of these virtual print fees was not disclosed, but one person involved said it would be around $800 per movie, per theater — down from about $1,000 in the first phase.

Chuck Viane, president of distribution at Disney, said the studios were insistent that theater owners cover more of the cost of converting, including maintenance. “We’ve always felt that exhibition had to have some skin in the game,” he said.

The announcement came as, in a separate deal, the nation’s three largest theater chains — Regal, Cinemark and AMC — were negotiating for what Variety reported would be a $1.1 billion line of credit to finance the conversion of their theaters to digital cinema. The three, bargaining as Digital Cinema Implementation Partners, own about 14,000 of the nation’s 37,000 screens."

By David M. Halbfinger, The New York Times