IMAX Gives AMC 100 Digital 3D Projectors For Free

Imax logo Imax and AMC really, really REALLY like each other in a digital-3D-biggest-deal-EVER kind of way. Yes, it is big. In fact, the news is so big that nobody at Imax has recovered from its impact sufficiently to post a press release on its corporate page yet. But there is plenty of coverage on the trades, regular press and blogs.

The Canadian large format (LF) film specialist is not exaggerating when it calls this deal the most important in the company’s history. This will see 100 new digital screens opening across 33 markets in the US over three years, thus doubling the number of Imax screens in the US. Varity has some of the details:

Pact between Imax and AMC Entertainment was announced late Thursday afternoon. Additional screens will be a major boost for the advancement of modern-day 3-D, since the digital Imax screens will be capable of exhibiting 3-D movies, in addition to 2-D titles.

New Imax digital projection systems will be installed in many of AMC’s top-performing theaters, including the Empire in New York City and 12 locations in the Los Angeles area, including Century City.

And:

Rollout of the first 50 screens will begin in July 2008. An additional 25 will be installed in 2009 and the remaining 25 in 2010.

But it is the more mainstream New York Times that has a better take on the financial specifics that underpin the deal:

In gearing up more theaters, Imax and AMC are chasing different goals. AMC, which is based in Kansas City, Mo., is trying to battle an industrywide slump in attendance while squeezing out more revenue from existing auditoriums. Because Imax tickets cost an extra $2 to $4, the conversion should increase revenue in the converted auditoriums by one third, according to Peter C. Brown, the chief executive of AMC.

For Imax, the joint venture carries extra weight. The company, with headquarters in New York and Toronto, has struggled to expand into mainstream movie theaters from its roots in science and history museums. Although it has persuaded some movie studios to release Imax versions of their regular films, Imax has recently suffered loses associated with regulatory inquiries into its accounting methods.

The Newspaper of Record also reveals that this is not a cheap or profitable deal for Imax:

Imax will shoulder the expense of the projectors, which cost about $500,000 each. AMC, one of the world’s largest movie theater chains, will pay to retrofit auditoriums in top-performing movie complexes in 33 cities, reconfiguring the seats and enlarging the screens.

Free projectors!! So AMC is effectively getting massively subsidized as Imax’s first digital 3D customer. What with AMC’s previous deal with Sony for 54 4K digital cinema projectors (free too?), it seems that one of the three NCM and DCIP partners believes in financial salvation through technology. The recent release of ‘Beowulf’ proved, if anything, that the greatest profits are to be made from Imax 3D, rather than the RealD‘s digital 3D (read ‘Why Beowulf spells bad news for digital 3D business‘), despite the RealD screens vastly outnumbering the Imax 3D ones.

Will this deal be enough for Imax to find financial salvation? The Motley Fool isn’t convinced (‘Why Can’t IMAX Fade to Black?‘):

If you think that the screens are big at IMAX (Nasdaq: IMAX), just wait until you see the deficits.

OK, so that’s not much of a selling point. Then again, when your third-quarter loss from continuing operations widens to $0.19 a share from $0.12 a share, you may as well dig into that popcorn tub as you take in the grandiose.

Like your sums in smaller steps? Feel free to bemoan the 4% drop in revenue to $29.8 million.

The website acknowledges that a steadier stream of Hollywood titles makes things sweeter – and this deal should be plenty of cake underneath the icing – but thinks that the best future for Imax would still be a buyout.

What nobody is questioning is whether Imax’s LF digital 3D technology actually works. I’m sure that AMC did not buy into this technology ‘sight unseen’, but pulling off a demo is not the same as making the technology work four shows/365 days a year. Particularly if it is based on LCoS/SXRD rather than the more stable DLP technology. Particularly for digital 3D, which is more complicated than even many industry people realize.

Some bloggers just hate the whole idea behind this. ‘Hollywood Needs Gimmicks to Get You into Theaters – Is IMAX or 3-D the future of cinema? How about better movies instead?’ But ultimately the ticket buying public will decide whether this move will pay off. The indication from “Beowulf” suggests that it might. Perhaps even in a big way. Just don’t expect Imax to keep giving away projectors for free to all exhibitors.