Regal sees d-cinema breakout imminent

Fox is the first studio to sign on, paving way for upgrade

NEW YORK -- Fox has become the first studio to reach a deal with a group of theater chains, paving the way for the long-delayed $1.1 billion digital cinema upgrade that Hollywood hopes will boost attendance and cut costs.

Fox and the other studios have been engaged in yearlong talks with the 14,000-screen Digital Cinema Implementation Partners -- formed by Regal Entertainment, Cinemark and AMC Entertainment -- to help finance the upgrades.

During a second-quarter earnings call Thursday, Regal executives said they expect to ramp up the exhibitor's rollout of digital screens in the fourth quarter, predicting it could install 200 screens a month once the financing agreement with an "unnamed studio" -- Fox -- is replicated with others.

The conversion can't go forward until at least three other studios sign on. Regal CEO Mike Campbell said DCIP was in "very advanced negotiations" with others; Paramount and Disney are believed to be among the closest to agree.

About 5,000 of the 37,000 cinema screens in the U.S. are digitally equipped, and the ultimate aim is to transform all 125,000 screens worldwide.

Regal posted a second-quarter profit of $13.8 million (including an $11.1 million debt-related loss), down 73.8% from $52.7 million a year earlier, which included a $17 million gain. Revenue dipped 1.1% to $675.8 million.

In the quarter, attendance per screen was off 3.3%, admissions revenue per screen fell 3.9% and concession revenue per screen declined 1.3%.

Campbell cited "Journey to the Center of the Earth" as an example of the strong financials of 3-D releases, which could become a big revenue driver in the digital age. In its first week, the film made four times as much revenue per screen in 3-D than in 2-D, and it dropped only 41% in its second week, he said. Traditionally, 3-D releases have seen 2.5-3 times the revenue per screen, he added.

Leslie Simmons in Los Angeles and Reuters contributed to this report.
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