Brazilian Exhibitors Join to Negotiate Mass digitalization With Hollywood Studios

New legislation enables digital updating and new theaters in small towns.

BUENOS AIRES – Sixteen Brazilian exhibition companies owning around 40% of all theaters in the country are teaming up to negotiate a mass transition to digital projectors together with Hollywood studios and distributors, reported Folha newspaper.

The move is a consequence of the new bill the Brazilian Senate passed last week, which pushes for the modernization of film theaters across the country through tax exceptions, and enables the Program Cinema Close to You, a move to promote the building of film theaters in small towns with up to 100,000 inhabitants. Reformulated last September, the original bill had been anounced in 2010 by former President Lula da Silva, and aimed to support the building of 600 film venues as a way to reduce concentration in large urban centers. Today, half the country’s cinemas are located in state capitals.

The official aim is to sign agreements with state and local governments to support the creation of government- owned theaters managed by private hands. Two different lines of credit will be enabled, which together will distribute around R$ 800 million (USD 440 million).

"Together with other initiatives by Cinema Close to You, like credit and finance lines, the new tax regime will contribute to an expanding number of Brazilian exhibition facilities and the digitalization of nearly 1850 cinemas across the country which now operate without the possibility of digital projection”, stated Manoel Rangel, president of the Brazilan Film Agency (ANCINE) on the institution’s website.

Acoording to numbers by Filme B, today there are 2,377 film theaters in Brazil, out of which only 514 (21%) are digital. The program is a major push forward for replacing 35mm projectors with digital equipment, which would drop their costs by 30% thanks to federal tax exceptions. Acquisition of equipment and materials for the creation or modernization of film theaters will be tax-free regardless if they go through the internal market or the import business.

Faced with that agenda, local exhibition companies are associating to negotiate the transition with Hollywood studios and distributors, and expect to finance the process sharing costs through a VPF (Virtual Print Fee) mechanism, combining it with State funds. VPF redistributes the savings realized by studios when distributing digital material instead of film prints.

Once the new legislation receives the Presidential go-ahead, around 1,000 theaters are expected to be digitalized in the next two years.

According to numbers by ANCINE, Brazil is today the largest Latin American film market in terms of box office revenue, with 143 million tickets sold in 2011, and a gross revenue of 1,44 billion reais (USD 770 million), an industry record. Last year’s numbers for local films –almost R$ 18 million tickets, and over R$ 163 million (USD 90 million)– placed 2011 among the top 3 of the last 10 years in industry growth.