At the outset of CinemaCon this past Monday Steve Perrin gave an interesting presentation titled “Harnessing The Power of the VPF”. As the Chief Executive of Digital Funding Partnership (DFP) Perrin is in a position to know a thing or two about virtual print fees. He’ll have some help in this department now that DFP has entered into an agreement with XDC for the deployment of digital cinema in theatres throughout the United Kingdom.
The Cinema Exhibitors’ Association created DFP in 2009 to help small and mid-sized theatre owners in the UK secure funding for digital cinema conversions. The group is a legal entity consisting of approximately 400 screens at 130 mainstream and specialized cinemas operated by more than 100 theatre owners.
Perrin spent more than a year studying the country’s booking patterns, box office receipts and endless market data in an attempt to determine whether VPF deals would work for independent cinemas in the UK. In doing so he confirmed that VPFs work best for large theatre circuits which play mostly mainstream content. Smaller cinemas showing less mainstream content at varying turn rates are not as attractive to local or international distributors, making it difficult, if not impossible, for theatre owners to gain access to VPF deals.
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Odeon & UCI Cinemas Group took another step forward in their digital cinema rollout this week by announcing their selection of Unique Digital’s software suite to help them manage digital content and equipment in converted theatres.
With 1,802 screens spread across 202 venues in seven countries, Odeon is Europe’s largest cinema circuit. They are so large in fact, that Odeon struck their own virtual print fee (VPF) agreements with Hollywood studios. Rather than rely on a deployment entity such as Arts Alliance Media or XDC, Odeon is handling the rollout all on their own.
However, it wouldn’t make much sense for Odeon to build their own digital cinema management software. That’s where Unique Digital comes in. [Full Disclosure: I have ongoing business dealings with Unique]. Odeon has selected to deploy Unique’s Rosetta Bridge, a theatre management system (TMS) and Cinema Accord, a back office system focused on managing digital content, keys and VPF agreements.
Based in London, and with offices in Dublin, Ireland and Bergen, Norway, Unique is one of Europe’s leading providers of software and network solutions that give motion picture exhibitors the ability to manage and support their cinema operations, including all content and equipment. In February, Unique was selected by Norway’s Film & Kino to help convert 90% of the country’s movie screens to digital.
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Late last week Vue Entertainment, the United Kingdom’s third largest movie theatre chain, was sold to a private equity firm. Doughty Hanson & Co. will reportedly cough up GBP £450 million (USD $730 million) to take over the circuit. The news was picked up primarily by business and trade publications, though depending on how events play out it could actually prove to be rather significant.
Based in London, Vue began it’s life in 1998 as SBC International Cinemas. With backing from Boston Ventures, co-founder and chief executive Tim Richards had opened six theatres by 2003. That was the year SBC pulled off a huge coup by acquiring the much larger Warner Village Cinema chain for £221 million (USD $353.6 million) and rebranding the company as Vue Entertainment. With 42 venues and 384 screens Vue became the third largest exhibitor in the U.K.
Then in June of 2006, Vue announced a management buyout of the company. The Bank of Scotland helped finance the deal which was estimated at £350 million (USD $644 million). By that time Vue had grown to 544 screens across 55 cinemas. Vue’s executive team took a controlling 52 percent share of the company with Coller Capital Ltd. taking a 29 percent ownership and Och Ziff Capitam Managment Group holding a 19 percent stake.
Today Vue operates 68 cinemas accounting for 678 screens throughout the U.K. and Ireland. Over last several years the company has been responsible for about half of all the multiplexes built in the U.K. They also own one theatre in Portugal and another in Taiwan. But that number could soon grow quite rapidly. Bloomberg suggested that Vue might use some of the cash from the Doughty Hanson sale to buy the U.K.’s largest circuit, Odeon, or possibly Cineworld. Another scenario has Vue scooping up a European theatre chain outside the U.K. Of course, they could always expand by opening new cinemas.
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With the start of Cinema Expo International only a week away Arts Alliance Media wasted no time in throwing down the gauntlet for major announcements at this year’s event. Earlier today AAM, one of Europe’s leading digital cinema deployment entities, made public two important deals they have undoubtedly been working on for some time.
The first bit of news was that AAM has entered into an agreement with Cineworld Cinemas, the second largest movie theatre chain in Europe, to convert 100% of their circuit to digital. That’s 790 screens at 77 venues throughout the United Kingdom and Ireland. And the kicker is Cineworld will finance the entire digital cinema conversion with their own cash and financing with a schedule that will see the project completed in the next three years.
That news alone would have been worth its own press release, but on top of that AAM announce they had closed on EUR €50 million (USD $61 million) in financing with Sankaty Advisors. AAM will use the money to fund the digitization of 1,000 screens for exhibitors they’ve previously entered into agreements with. AAM already has 700 screens deployed with an additional 2,300 in the pipeline.
So let’s take a step back and examine each of these announcements in more detail starting with Cineworld.
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Pan-European digital cinema integrator XDC has found a local implementation partner in the United Kingdom (and Ireland?) in the form of Sound Associates. No word on whether XDC have had any more luck in signing up UK exhibitor clients than rival Arts Alliance Media – or whether they have finalized any VPF deals for that matter – but if and when it looks like they will be ready to serve them well. From the press release:
Jerry Murdoch, Sales & Marketing Manager for Sound Associates, said: “Initially, Sound Associates will provide sales & marketing support to XDC in UK. Once a contract is signed, we will carry out the site inspections and detail any related necessary infrastructure work. We will then install the equipment (including any stereoscopic (3D) systems), and provide on-site training, on-site annual maintenance visits and of course, if necessary, call-outs. The helpdesk and monitoring support will still be serviced by XDC as their staff is fluent in English. We are delighted to collaborate with XDC … we have known them for a long time, and they have built the most comprehensive digital cinema service entity in Europe.”
Some will remember that SA were the installation partner for AAM in the first phase of the Digital Screen Network deployment, before AAM dispensed with their services and went it alone for phase two. Perhaps not surprising that SA should throw in its lot with XDC.
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