China readies for digital cinema

State-run venture plans 2,000 screens by end of '08

State-run moviemaking giant China Film Group Corp. plans to build about 2,000 digital cinemas in a new joint-venture partnership with the country's leading steelmaker, Shougang Steel, company executives said Wednesday.

Dubbed China Film Group & Shougang Digital Cinema Building Co. Ltd., the joint venture, unveiled to local media last week, believes the use of digital cinema technology will help stem China's rampant movie piracy problem.

Last year, about 93% of the DVDs sold in China were illegal copies, costing moviemakers upward of $2.6 billion in lost ticket sales, according to MPA estimates.

"The goal of our cooperation is to build digital cinemas across the country," CFGC board chairman Han Sanping told the official Xinhua news agency. "We will build about 2,000 new digital screens before the end of 2008."

Zhang Wenxi, Shougang's culture department chief, confirmed the China Film partnership in an interview but declined to offer financial details of the deal or detail how the joint venture plans to achieve its goal in a year when Beijing is set to host the Summer Olympics.

A ban on construction in the capital is expected to go into effect before the games begin Aug. 8, 2008.

China now has about 3,000 modern movie screens, only 124 of which were digital in 2005, according to a recent report from the Nielsen Co. and Screen Digest. The number of digital screens in China rose from 93 in 2004, with growth led by China Film, with 91 digital screens, and Stellar Film, with 27.

China Film's digital screens account for roughly half of their total 180 screens, a total that makes it the second-largest distributor in the country after Shanghai United Cinema Circuit, the report said.

Both groups began installing digital cinema systems in 2002 once the government's plan to encourage digital cinema began to take shape.

CFGC released 39 digital films in 2006, earning 120 million yuan ($15.4 million) at the boxoffice, company data shows.

In June, China Film signed an exclusive 30-year deal with Archer Entertainment Media Communications to digitize screens across China, the Nielsen report said. As part of the deal, Archer gained rights to redevelop cinema venues and to control all aspects of digital production, distribution and exhibition.

In November, Warner Bros. International Cinema pulled out of China after four years when new government rules limited the company to holding a minority share in the theaters they were building.

It was not clear how the China Film deal with Archer will relate to the new partnership with Shougang, which, according to GM Wang Qinghai, is expanding into electronics, architecture, shipping, finance, media and culture, Xinhua reported.

The China Film-Shougang deal is not the first pairing of unlikely partners in China's burgeoning media and culture business.

Last week at the Festival de Cannes, JA Media, a wholly owned subsidiary of alternative energy firm the Jian Group, said it will begin shooting its first five feature films in the summer (HR 5/20).
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