D-cinema gets $525 mil boost

Consortium's fund will bankroll 15,000 conversions

Stop the presses! Digital dollars are finally on the way ... and should arrive in November.

JP Morgan next week will send out briefing books for a $525 million financing of up to 15,000 d-cinema installations over the next five years at the nation's three biggest movie circuits. The circuits -- Regal, AMC and Cinemark -- will add 3D equipment at many of the sites.

The 3D embellishments will carry considerably lower costs, which will be borne by the theater chains or in some cases 3D vendors. The heftier expense of first converting screens to digital is being defrayed in large part by commitments from the major studios.

The studios previously signed off on so-called virtual print fee deals, which guarantee payments to exhibs for years after studios cease having true film print costs. But the upfront costs of the conversions are so big as to require help from Wall Street, so JP Morgan is arranging a $325 million bank syndication and $200 million in equity-based contributions from private-equity firms and the circuits themselves.

The industry's rollout of digital and 3D hardware was stalled by the nation's protracted credit crunch. So though the syndication will take a couple months to complete, word that the rollout soon can resume comes as qualified good news for distributors struggling to market 3D releases despite the paucity of 3D screens.

Third-party integrators help channel d-cinema funds to exhibitors, and Digital Cinema Implementation Partners will serve as conduit for funding to Regal, AMC and Cinemark. Other domestic integrators include Cinedigm, which like DCIP has been hampered by financing issues.

Originally planned in early 2009, a DCIP syndication first was delayed until summer before lingering credit difficulties pushed its launch beyond Labor Day. The funding impasse -- which dragged on for the better part of a year -- has had studios with 3D releases competing furiously for a paltry base of 3D movie screens, both domestically and abroad.

Things grew so tense that the Big Three circuits got started on some of the DCIP conversions even before the financing is arranged, with the promise of repayment once the syndication closes. The early expenditures could top $60 million.

There may now be fewer than 2,000 noncompetitive 3D auditoriums in the U.S. and Canada. New installations could push that number above 2,500 screens by year's end and hundreds higher by the end of 2010.

The additional 3D screens are desperately sought by studios planning extra-dimensional campaigns the next several months. Those include Fox, which has scheduled the high-profile release of Jim Cameron's 3D sci-fi actioner "Avatar" for Dec. 18.

"As far as Fox is concerned, the sooner the better," Fox distribution president Bruce Snyder said. "More units should be out there for both Thanksgiving and Christmas, and time's a-wasting."

There are now fewer than 7,000 movie-quality digital screens in the U.S. and Canada. Once fully funded, DCIP aims to convert an additional 500 screens per month to digital projection, meaning the likelihood of 12,000-13,000 digital screens in operation by the end of 2010.

In about two weeks, JP Morgan reps will begin meeting with a dozen top lenders and then will seek to broaden the syndication in October. A November closing is targeted.

Funding for a resumed international rollout of digital hardware also is expected in coming months as global financial markets rebound. D-cinema integrators in Europe and elsewhere are primed to roll out thousands of additional digital systems once banks are lined up to cover costs, and studios will press international exhibs to equip as many of those auditoriums as possible with 3D capability.
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