More Rumblings About DCIP’s Financing

By | February 28, 2010 11:31 pm PDT

Last 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.

Sure it would be great if delivering digital cinema content to theatres via fiber were actually possible on a large scale, though the reality most films will be delivered on hard drives and in some cases satellite. In fact, their story even contains two pictures; one of film canisters and the other of a hard drive stuffed into a Pelican case. They went on to write:

Studios currently pay $1,000 to $1,500 per screen for a celluloid print—and then must pay to replace that print when it wears down after about six weeks. Under this venture, studios will agree to pay Digital Cinema Implementation Partners, a fee for every booking of the film. That fee will be about $850 per booking, according to people familiar with the matter.

I’m not sure how many exhibitors actually request a second print after the first print has “worn out” in six weeks, but I’d bet it’s not a lot. As for the $850 virtual print fee, this seems about right, though the actual amount DCIP’s VPF deal has never been made public, and is likely to remain private. They went on to point out that Warner Bros. was the only studio not to have signed a VPF agreement with DCIP but cited inside sources who say the studio was close to “finalizing” their deal. (That would indeed be news if it turns out to be true).

Another moment of levity came when the Wall Street Journal wrote that the pending announcement would be a “boon to Sony of Japan and Belgium’s Barco” without mentioning it would also help Texas Instruments, which makes the DLP chip found in Barco’s projectors. Since AMC and Regal have announced deals with Sony and Cinemark has said publicly they are going with Barco, it was probably safe to leave out Christie and NEC, two additional d-cinema projector manufacturers. And I suppose mentioning Doremi, Cinemark’s chosen d-cinema server, would have been a little to techy.

One key point both newspapers may have overlooked is that the financing is for VPFs, which usually don’t cover the cost of 3D technology. Granted, the three circuits will no doubt upgrade a large percentage of their screens to 3D, however the way the stories are reported makes it seem as if the financing will mean every screen which is converted will be 3D capable, which may not actually wind up being accurate.

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