ShowEast 2012 is Latin America’s Last Chance for VPF Deals

This year’s ShowEast cinema trade show is likely to be the last one where any significant virtual print fee (VPF) deals are still on the table. Not only will there soon be no more actual 35mm prints to replace with fees for  virtual ones, following the winding down of film operation by Fuji and Kodak. But Hollywood studios too are rapidly winding down their funding mechanisms. This is particularly bad new for Latin American countries, which have the lowest digital cinema penetration numbers for any continent bar Africa. This was highlighted at the recent 2nd International Conference on Digitisation of Cinemas in Bogota, Colombia, which “focused on the difficulties being experienced by Colombia and Latin America in general in finding the financial model and public funds to help the region convert its cinemas to digital technologies adhering to the global standard.”

With approximately 13,500 systems installed around the world (over 10,000 in North America and over 3,000 in the rest of the world), Sony is intent on pushing its global market share up from the current one tenth of all world-wide screens. Hence Sony’s decision to extend its VPF scheme, most likely by agreeing to lower terms with the Hollywood studios in return for longer lead time. As quoted in THR:

“[Some] VPF deals for the U.S. and Canada ran out at the end of September. Ours are available until March 31, 2013,” reported Gary Johns, senior vp, digital cinema solutions at Sony Electronics. The deadline to sign up for Sony’s program in international markets extends even further out.

Sony is also using the ShowEast opportunity to showcase its newest SRX-R515P projector designed for small and medium auditoriums, as well as its Entertainment Access Glasses for hearing and visually impaired cinema patrons.

ShowEast has traditionally been the cinema trade show for Latin American countries and there is no more pressing issue for that region than the imminent end of 35mm prints and the do-or-die conversion to digital in less than a year. As such, it should come as no surprise that third-party digital cinema integrators, consultants and VPF brokers from across the world are homing in on Latin America. The most recent operator, India Scrabble, has just announced a deal for three territories:

The company has signed separate non-exclusive agreements with Hollywood studios Warner Bros Pictures International, Universal Pictures International, Walt Disney Motion Pictures International and Sony Pictures Releasing International Corporation… The roll-out of the technology will begin from 2013 and will initially be launched in Brazil, Mexico and Chile.

Note that 20th Century Fox and Paramount are missing from the list of studios. While neither of these two will get a free ride on the equipment installed by Scrabble under the terms with the other studios, it highlights the difficulty of getting VPF deals in place this late in the day. Other operators were already present in the region. Cinedigm signed a deal last year with Contenido Alternativo for satellite delivery of DCPs and alternative content, under which it would also “collaborate with theatres in Mexico to bring digital cinema deployment and Virtual Print Fee management services to the region,” on as-yet unsepcified terms. Cinedigm has more recently signed a deal for 290 screens out of the 437 operated by Caribbean Cinemas (pdf) in Puerto Rico, the Dominican Republic, Aruba, St. Lucia, St. Maarten, Antigua, St. Kitts, St. Thomas and Trinidad.

Cinedgim has also signed a deal (pdf) with Brazil’s DGT for the deployment of its software solutions suit, “in preparation for its VPF program roll out later this year.” Similarly, Arts Alliance has contracted with Mexico’s Cinemex for the deployment of its software, though the exhibitor is “negotiating its own VPF (Virtual Print Fee) deals directly with the studios” for its 2,000 screens. Yet the largest obstacle to digital cinema installations in LAtin American territories is not Hollywood studios refusing VPF deals but high tariffs and restrictions on imports of digital cinema equipment. Brazil recently reduced its import duty, but it won’t be until analog screens start going dark for lack of 35mm film that governments across the continent are likely to wake up. Come ShowEast 2013 it will be a very different picture for the continent.