Tag Archives: DCIP

Travis Reid Departs DCIP To Head Up Screenvision

Travis Reid - Screenvision.jpg

Travis Reid

Last Thursday Digital Cinema Implementation Partners (DCIP) announced that Travis Reid, their CEO, had resigned. That same day on-screen advertising giant Screenvision announced that Shamrock Capital Advisors, a private equity fund founded by the late Roy Disney, had finalized the $160 million purchase of the company and had appointed Reid as its new CEO.

At ShowEast, which was just wrapping up at the time, many industry folks I spoke with were surprised to hear the news, though looking at it objectively, the move is somewhat inevitable.

Reid has had a long career in motion picture exhibition that includes his stint as the President and CEO of Loews Cineplex for which he worked from 1991 until 2005 when the chain was acquired by AMC Entertainment. In 2007 he joined DCIP, the deployment entity formed and owned by North America’s largest exhibitors; AMC, Regal Entertainment and Cinemark. Reid has also sat on the boards of Cineplex Galaxy, Yelmo and Fandango among others. As Shamrock’s Managing Director Steve Royer said in Screenvision’s press release:

“Travis has an over thirty-year history in the exhibition space having operated chains and most recently, pioneering the digital revolution for the cinema exhibition industry. He was our ideal candidate.”

Reid led DCIP through a challenging period in its formation and development. Not only did he successfully oversee the companies protracted negotiations with major studios for virtual print fees (VPFs), but just as it seemed digital cinema was taking off, the financial meltdown caused funding for rollouts to dry up for more than a year. Reid and DCIP persevered and in March of this year he secured $660 million in funding from a consortium of banks.

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It’s Official – DCIP Gets $660 Million In Funding

DCIP + Money.jpg

A boisterous cheer erupted this morning during the Inter-Society Digital Cinema Forum (ISDCF) meeting when the proceedings were interrupted with news that Digital Cinema Implementation Partners (DCIP) had just officially announced they had received their financing. Indeed, DCIP published a press release stating that they had raised USD $660 million in financing. The funds will be used to roll out digital cinema in North America’s three largest circuits; AMC Theatres, Cinemark and Regal Cinemas.

As we previously reported when it was still a widely circulated industry rumor, DCIP’s financing will come in the form of USD $445 million in senior bank debt, USD $135 million in junior capital and USD $80 million in equity from the theatre chains themselves. JPMorgan assisted DCIP in raising the money which is being supplied by a who’s who of financial institutions including Bank of America, Barclays Bank, Citi, Credit Suisse, Deutsche Bank, GE Capital, Morgan Stanley and the Sumitomo Mitsui Banking Corporation.

There are sure to be tons of news stories generated by DCIP’s announcement, especially since it will allow media outlets to wave around the trendy “3D” phrase in hopes of attracting a few extra eyeballs. The reports will cite that nearly 14,000 screens throughout North America will be converted to digital by AMC, Cinemark and Regal who formed DCIP as a joint venture in 2007. (Truthfully, it’s probably more like 10,000 screens when all is said and done). No doubt they may even go so far as to pull press release quote from Travis Reid, DCIP’s CEO, which states:

“We are excited that with the continued support of our owners, studio partners and financial advisors we have completed this critical step in our process. Over the next few years, we’ll be aggressively implementing the transition to digital technology in theatres across North America. Guests will enjoy enhanced presentation and additional entertainment options at their favorite theatres as Exhibitors and content providers capitalize on the flexibility enabled by digital technology, including many upcoming releases using digital 3D. Having this substantial financial package and our studio partnerships in place, we’re pleased to launch this new era of technology to guests looking for an exceptional out-of-home experience.”

Check out the way Mr. Reid so adeptly snuck the word “capitalize” into that quote. Pretty slick. It’s funny though, because I always imagined his press release quote would read more along the lines of:

“Phew! That was harder then it needed to be and dare I say it’s about time we landed some money. Thankfully I will no longer have to answer questions every other week about when DCIP will be getting its financing.”

Since the mainstream media will take care of all the cheerleading about how 3D will soon be coming to a theatre near you, I figured it might be interesting to further explain the types of financing DCIP is getting. I mean what’s with all these terms like “senior debt” and “junior capital”? Does the senior debt have offspring named after it? And does the junior capital have a father with the same name? Read More »

More Rumblings About DCIP’s Financing

dcip.jpgLast week both the New York Times and the Wall Street Journal reported that an announcement from Digital Cinema Implementation Partners about their financing was imminent. The opportunity to play 3D content will certainly be welcomed by AMC Theatres, Regal Cinemas and Cinemark, however from the way the two newspapers covered the story you might get the impression it was the only reason. The financing would allow Hollywood studios to “roll out more 3-D movies in the wake of the success of James Cameron’s ‘Avatar’” wrote the Wall Street Journal and the New York Times said the “money would allow future 3-D film releases”.

Both media outlets seem to have gotten their hands on some internal briefings or at the very least seen an early draft of a press release as they have updated some of the details from previous reports about DCIP’s financing. A more exact figure of USD $660 million was cited by both papers which is down from the original USD $700 million rumor which was first floating around. As well, the number of screens has been upped to 14,000 from 12,000 with the Wall Street Journal putting the number of actual theatre sites being converted at 1,100. The New York Times laid out the details as follows:

According to a draft announcement making the rounds in Hollywood, the new financing, arranged by JPMorgan and Blackstone Advisory Partners, would total about $660 million. Of that, $445 million is expected to come from senior bank debt, $135 million from what is described as “junior capital” and $80 million from equity contributed by the member theater circuits. Nine banks, including Bank of America and Citibank, are part of the lending group. Blackstone raised the $135 million from other investors.

I always find it amusing to see how mainstream media covers the transition to digital cinema in reporting such news. The Wall Street Journal piece states:

In a digital conversion, theaters rip out old celluloid film projectors, and stop receiving weekly shipments of large film canisters. They instead use fiber optic lines to transfer huge digital film files.

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JPMorgan Finds $700 Million For DCIP

dcip.jpg That collective sigh of relief you may have heard over this past weekend no doubt came from the North American motion picture exhibition and distribution industries. The Los Angeles Times report that investment bank JPMorgan was finally able to round up roughly USD $700 million for Digital Cinema Implementation Partners must have come as some relief.

Heaven knows we’ve been hearing about DCIP’s quest for financing for well over a year now. It seems at every ShoWest, Cinema Expo or Show East for the past 18 months we’ve been told by investment bankers that money is on the way. Though let’s face it, if the staggering amount of money being sought wasn’t enough to cause a delay, the worldwide credit crunch certainly didn’t help. Financing hasn’t been easy to come buy in any business sector and no matter how lucrative the project.

Of course, DCIP is the deployment entity founded by three of the world’s largest exhibitors; AMC Theatres, Cinemark and Regal Cinemas. With anonymous sources close to the negotiations confirming that DCIP’s financing will be announced in the next two weeks, the company can finally begin the rollout digital cinema technology on 12,000 screens across the United States and Canada.

Back in 2008 JPMorgan, armed with virtual print fee agreements from the studios, went looking for USD $1 billion for DCIP to convert 14,000 screens across all three circuits. Since then, AMC has gobbled up Kerasotes adding another 900 odd screens to the mix. There was no word on which screens or theatres will be converted or what will happen to those screens which don’t make it into the first 12,000. Nor was a time frame given to complete the transition, though it has been widely expected to take three years.

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DCIP Closer To D-Cinema Funding

The announcement the entire exhibition and distribution industry has been waiting for has finally happened; Digital Cinema Implementation Partners (DCIP) will finally get funding to roll out d-cinema equipment on over 15,000 screens at U.S. exhibitors AMC, Regal and Cinemark.  Some may view it as a non-announcement as this doesn’t mean the money is in the bank yet.  At the very least though, DCIP’s financing is looking more probable than it did earlier this year when the global financial meltdown was holding up any potential funding.

The Hollywood Reporter is stating that investment bank J.P. Morgan has set out to raise $525 million from brand name lenders before seeking additional sources of cash from private equity firms and the exhibitors themselves. So, while funding is not readily at hand, with a heavyweight such as J.P. Morgan in their corner it hopefully won’t be long before DCIP will be seeing some cash to jump start its efforts. Read More »

Daily Cinema Roundup-Monday 18 May

regal-entertainment1–Sony and Regal released a press release this morning, officially announcing that Regal will install the Sony 4K digital projections systems across its entire circuit. (See Celluloid Junkie’s Friday post below on this news).
According to the release, the installation of the systems is expected to take 3-5 years, but the financing is being handled through DCIP. So the question is, when will installations start?
There is still no word on DCIP securing the needed funding to begin its planned wide rollout. DCIP represents AMC, which also plans to deploy Sony technology; as well as Regal and Cinemark.
images1Sony also reported that approximately 1,500 of the Regal screens will be outfitted for 3D using Sony’s dual-lens adaptor technology.
Amy Miles, Regal Entertainment Group’s incoming chief executive officer, is quoted in the press release as saying: “The rollout of these Sony 4K systems gives Regal the opportunity to utilize the latest technology to provide our patrons the best available presentation. Sony’s state-of-the-art 4K systems produce the highest levels of resolution, contrast and overall image quality.”

–Another example of the growing interest and potential of alternative content, The Financial Times is reporting that a June 25 production of Racine’s Phèdre at London’s National Theatre is to be screened live in 170 cinemas worldwide. Dame Helen Mirren stars in the production, which according to the article is nearly sold out in the d-cinema venues. See the complete article, titled “British Theatre to be Seen Around World,” here

–An interesting feature on CNN Money/Fortune titled “Every Blog Becomes a Cinema” examines a new model of distribution, as well as advertising. SnagFilms aims to distribute documentaries—which have always been challenged to find a theatrical release—on the Internet. The article is here

smpte_logo1–Call for Papers: SMPTE is seeking proposals for technical papers and tutorials for the 2009 SMPTE Technical Conference & Exhibition, 27-29 October in Hollywood.
The organization is seeking papers on a range of topics including digital cinema exhibition, d-cinema production and post, advancements in film technologies, content security and stereoscopic 3D Imaging.
Interested parties are invited to submit a one-page abstract, no later than June 12. Further details on how to submit a proposal are here

image003Call for Entries: The Hollywood Post Alliance has issued a call for entries for the Engineering Excellence Award, part of the 4th Annual HPA Awards. The call for entries is now open and will run through July 1. Entrants will be given the opportunity to present their technology during the Engineering Judging Day.
The HPA Awards also accepts entries in categories for compositing, DI/color grading, editing, audio post, as well as for the new Judges Award for Creativity and Innovation in Post Production. For more, see the website here

Sony Pictures VPF Deal With Regal & AMC Makes Warner Bros The Only Hold-Out Studio

sony-pictures-logo Sony Pictures has become the next-to-last  Hollywood studio to sign a virtual print fee (VPF) agreement with DCIP, the digital cinema integrator representing the three largest US cinema chains (AMC, Regal and Cinemark). This should help DCIP re-start the intended 3 1/2 year roll-out of digital cinema to all of its screens as of this summer, when credit is predicted to start flowing again. Variety only did a brief item on the announcement, covering the bare basics:

Sony’s deal with the Digital Cinema Implementation Group, a consortium repping Regal, AMC and Cinemark, means that Warner Bros. is the odd man out. Every other major, as well as Lionsgate, has already signed its own agreement with DCIP.

DCIP intends to use the studio deals as collateral in securing a multimillion-dollar line of credit that theaters can use to pay for the cost of the conversion. Those efforts have been sidelined by the economic crisis.

THR.com went a little more in depth with the analysis and implications, particularly as to why Warner Bros might be holding out:

“We’re in the middle of negotiations,” Warners domestic distribution president Dan Fellman said. “We’re close. So we might be the last one, but we’re going to get there.”

Sony signed its VPF pact with Digital Cinema Implementation Partners several weeks ago, but the news was delayed pending internal review of the formal announcement.

Through VPFs, studios volunteer to pay the equivalent of print costs for years after switching to digital distribution as a means of defraying most exhibitor costs to convert auditoriums. Sony refers to its VPF as a “digital conversion fee.”

For Warners, set to release more films this year than any other distributor, the cost of a VPF is likely to run considerably higher than that for studios with lower annual output. Sony also is among the most prolific film distributors.

Neither of the two articles makes an explicit link between the SPE-DCIP deal and the earlier announced deal between DCIP member AMC and Sony Electronics to equip its cinemas with SXRD 4K projectors. While the SPE deal would not have been contingent on the AMC-4K deal, it most likely didn’t hurt and may have acted as a sweetener.

So what does WB have to hold out for? Noit much. Coming in last amongst all the studios means that the it will benefit from whatever best terms have been previously agreed under the Most Favoured Nation (MFN) provisions that states that DCIP cannot offer a better deal to a future studio unless those terms are offered retroactively to those already signed.

This means that DCIP will be resisting getting squeezed on VPF terms by WB, who in turn (as the biggest releaser of 35mm prints) will have seen the price of celluloid prints [acetate prints actually, as true celluloid was phased out decades ago, only 'Acetate Junkie' doesn't sounds as good; Ed.] drop significantly as Kodak offers cheaper and cheaper film stock prices to maximise what is left of the film print stock business. Why pay a VPF of, say, $725, when a print has dropped to, say, between $600 and $500. Particularly in these times of plunging DVD sales.

If DCIP want to blame anybody for the delay in Warner Bros signing a VPF deal, the telephone number for Kodak’s switchboard in Rochester, NY, is 1-800-621-FILM. See how far you get arguing with a sunset industry.

DCIP Reaches VPF Agreement With Fox

Digital Cinema Integration PartnersAfter industrywide speculation and concern over the absence of any news about virtual print fee (VPF) agreements being signed by Digital Cinema Implementation Partners (DCIP) the company finally announced their first deal which rumor has it is with Twentieth Century Fox. The news was reported by Reuters and has not yet been made official by DCIP, however the company’s CEO, Travis Reid was quoted as saying:

“A party has signed a deal and we think it won’t be long until we have multiple studios.”

There are no details yet about the terms of the deal, nor any confirmation that it is with Fox, though during a conference call on Thursday Regal Entertainment’s CEO confirmed that a VPF agreement had been reached with at least one studio:

“We can’t disclose which studio, but we consider it to be a major milestone. It is always difficult in getting someone to be willing to be the first.”

Paramount is also rumored to be close to announcing a deal with DCIP, as is Walt Disney Studios.

DCIP was formed by North America’s three largest exhibitors – AMC Entertainment, Cinemark and Regal Entertainment – to manage and finance the rollout of digital cinema equipment and technology within each circuit. With 14,000 screens between them it is easy to see why the industry eagerly awaited news that the studios had come to some form of agreement with DCIP to subsidize the cost of installing digital cinema equipment. Due to the large size of the rollout, such a deal was viewed as a bellwether for the types of VPF deals other exhibitors would be able to get. Recent VPF deals announced by other integrators such as AccessIT in the United States and XDC in Europe did little quell everyone’s anticipation over news from DCIP.

No doubt even DCIP was getting a little anxious over the lack of progress on their VPF agreements they were able to make public. The company was founded in February of 2007 by the three theater chains and had hoped to wrap up their negotiations with studios over VPFs by the end of last year. As almost anyone working in or following the industry now knows, the studios began playing hardball with integrators such as DCIP on the contractual terms of the VPF agreements, haggling over every last detail including usage fees for alternative content and the length of the deal. XDC’s VPF with Hollywood studios is reportedly only USD $850 per film, per run.

And there’s one main reason that the rollout of digital cinema has stalled at around 5,000 screens in North America (out of 37,000); rolling stock prints range from USD $1,200 to $1,500 so even with VPFs the the distributors save heaps of money, whereas exhibitors are forced to pay for expensive digital cinema equipment they claim won’t save them any money or increase their revenue. That the standards for this equipment are still being determined by SMPTE and DCI hasn’t helped matters either.

However, in 2009 Hollywood studios plan to release upwards of 11 movies in digital 3D which will require the equipment to be installed on a broader scale. Presently the number of screens equipped for digital 3D in North America hovers around 1,300, making it difficult to release two such films into the market at the same time. News of the DCIP deal may be a relief for a few studio executives have otherwise to struggle to find enough digital screens to place their 3D releases on. Studios have actually begun to push some of their 3D releases back into 2010 to make certain they will have enough screens to put them on.

The thinking within the industry is that once DCIP starts announcing VPF agreements the rollout of digital cinema should ramp up soon thereafter. Michael Lewis, chief executive of 3D systems provider RealD, told Reuters:

“When the DCIP deal drops, then digital cinema is really on its way.”

Here’s to hoping Mr. Lewis is also fortune teller.

XDC Nabs Those Elusive VPF Deals – Including WB

XDC in Cannes 2008

There will be champagne rather than rose wine or Belgian beer being poured, toasted and drunk tonight in Cannes as XDC announces that they have secured VPF deals with four of the Hollywood studio, including the one that has eluded others, namely with Warner Bros. From Forbes.com:

Broadcast equipment manufacturer EVS said its unit XDC has signed agreements with Warner Bros. Entertainment Inc., Paramount Pictures Corp., Twentieth Century Fox Film Corp. and The Walt Disney Studios to invest up to 600 million euros in the deployment of up to 8,000 digital cinema installations in Europe.

The roll-out period under the agreement – which will see more than 65 percent of the value of projectors, servers, applications and services being co-financed — will last for a maximum of 5 years, with each digitised screen co-financed over a period of maximum 10 years.

The group also said agreements with two other studios, Universal Pictures and Sony Pictures are in a very advanced stage and are expected to close shortly.

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Regal’s 1,500 screen deal with RealD for 3D comes with BIG caveat

Audience 3D horror Regal likes 3D and is showing it in a big way by promising to install no less than 1,500 of its screens with RealD’s technology, meaning that more than one in ten of all its auditoria would be stereoscopically enabled. But this big hangs on a bigger IF that most of the press seem to skip over. Here is how a fairly long article on the Financial Times starts of:

Regal Entertainment, one of the largest US cinema chains, has struck a deal to install new technology that will sharply lift the number of screens capable of showing 3-D films and give Hollywood studios a more profitable outlet for their new releases.

Regal has signed an agreement with RealD, which makes 3-D projection technology, to install more than 1,500 3-D screens. The deal will lift the number of 3-D screens operated by RealD to more than 3,500.

With cinemas able to charge higher ticket prices for 3-D titles, Hollywood studios are clamouring to release their films in the new technology. DreamWorks Animation will release all of its films in 3-D starting next year with Monsters vs Aliens . Walt Disney will also release 3-D films in 2009, as will Universal Pictures with James Cameron’s Avatar .

But what the FT confines to the fine print at the bottom of the article, Carolyn Giardina has the nous to highlight in the first paragraph of THR.com’s article about the deal:

Regal Entertainment Group and RealD have inked a deal to install 1,500 RealD 3-D systems in Regal theaters in the domestic market. Consummation, however, is contingent upon digital cinema deployment arrangements.

In order to have digital 3-D, a theater first requires a digital cinema installation. Digital cinema deployment deals generally rely on a virtual print fee model through which studios contribute an agreed fee per screen, per movie to offset exhibitors’ installation costs. However, many of these deals remain at an impasse.

So if DCIP does not get the VPF deal in place there will be no 1,500 RealD screens. And that is still a very big ‘if’. The $1bn+ deal that was supposed to have concluded by late 2007 now looks likely to miss the Q2 2008 deadline. As Pamela McClintock notes in Variety:

At one point, the consortium — Digital Cinema Implementation Partners — wanted all the major studios to agree. Now, it appears that the consortium is prepared to move ahead with only three of the studios aboard: Walt Disney, Paramount (which distributes DreamWorks Animation titles) and Fox. Insiders said they expect Sony and Universal to follow suit eventually, while Warner Bros. and DCIP are said to be far apart on terms.

Disney has been the pioneer in digital 3-D, although it is Katzenberg who has become the public ambassador of the fight to convert more.

This would be one studio less than even AccessIT’s second VPF deal. Once again it seems that Warner Bros is sitting this one out, have so far signed no VPF deal with either AccessIT, DCIP or Arts Alliance.

Moreover, no one is asking the question about how the 1,500 3D screens will get rolled out, particularly if it is to happen in time for the Monster/Avatar 3D movies of 2009. The preferred way to convert cinemas is a whole multiplex at a time, which is how Christie/AIX tackled Carmike, with swarms of engineers and installers settling on multiplexes in one town like locusts, finishing the job and moving on to the next one.

But 3D installs will be sprinkled a handful of screens (two or three per Regal multiplex by my estimate) in each site. So if the digital cinema and 3D install it s to go hand-in-hand then installers will have to return to convert all the non-3D digitla screens at a later point, which is neither cost effective or efficient, much like Arts Alliance is has converted CGR in France to-date. Remember that the upgrade of the entire DCIP circuit (Regal, AMC and Cineark is going to take at least three years if not longer.

Digital 3D will be a long time coming yet, it would seem.

UPDATE: Some of the best analysis comes once again from Screen Digest courtesy of analyst  Charlotte Jones:

Once the DCIP model is finalised, Regal could start conversion at (previously announced) rate of about 200 screens per month. There are now just 10 months before the release of Dreamworks Animation’s first 3D effort, Monsters vs Aliens in March 2009 and assuming roll-out began next month, this would give Regal, around 2,000 basic d-cinema screens of which an unspecified proportion would be 3D-enabled by this calendar benchmark. This scenario would be on top of the 134 3D screens Regal had deployed at end first quarter 2008.
While we do not believe that 3D’s incremental production costs, are a substantial issue for the US Studios, a slower take up then the 4,170 digital 3D screens we are predicting in the US market by end 2009, could result in a reduction of the premium revenues attainable from 3D screens or a further rescheduling of titles. The deal has been reported on a revenue-sharing basis with RealD, whereby initial capital costs are lowered or removed, in return for a share of premium revenues. In this respect, maintaining higher ticket pricing for 3D screenings will be essential to this arrangement.

It looks that, as with the fate of HD DVD vs. Blu Ray, the fate of DCIP, digital cinema and digital 3D currently rests with Warner Bros.