Five Hollywood studios have agreed to help pay for a US$1 billion-plus rollout of digital technology on about 20,000 movie screens in North America, a precursor to showing movies in 3-D.
Digital Cinema Implementation Partners, a consortium of major theatre chains, announced the deal Wednesday. The U.S. and Canadian rollout, covering about half of all screens, is planned to start early next year.
The studios in the deal include The Walt Disney Co., Viacom Inc.’s Paramount Pictures, News Corp.’s Twentieth Century Fox, General Electric Co.’s Universal Pictures and Lions Gate Entertainment Corp.
To help offset the consortium costs—about $70,000 per screen—the studios plan to pay the consortium slightly under $1,000 per movie per screen, roughly the same amount it costs them to print and ship a celluloid film copy.
Adding digital equipment is the critical first step in the technological upgrade to being able to show 3-D movies.
More than 20 3-D movies are set to hit theatres through 2010, but only 873 locations in the U.S. and Canada—with a combined 1,264 3-D screens—are available now, according to The Walt Disney Co., a signatory to the digital rollout. Disney plans to release five 3-D movies next year.
The digital expansion will help convert more screens to show 3-D movies, which have packed theatres and commanded higher ticket prices than their 2-D counterparts.
“It should ultimately improve the grosses,” said Chuck Viane, president of domestic distribution for Walt Disney Studios Motion Pictures. “People will just fall in love with the medium.”
Viane expected that 1,500 to 2,000 locations, many with multiple screens, would be able to show 3-D movies by the end of 2009.
JPMorgan Chase & Co. and the Blackstone Group are leading the financing but will have to tap the turbulent credit markets in the fourth quarter, said consortium chief executive Travis Reid.
“We’ll be needing to execute in the debt markets and we hope to do that during the fourth quarter,” Reid said. “We don’t believe that the markets will be closed forever.”
Regal Entertainment Group, one of the consortium’s founders, announced in May that it would set up 1,500 3-D screens with RealD, contingent on the digital screen rollout.
“We…consider this a major milestone in our ongoing digital conversion and strategy,” said Regal CEO Mike Campbell in a statement.
AMC Entertainment Inc., Cinemark USA Inc. and Regal Entertainment Group formed the original DCIP consortium in February 2007. The studios each negotiated separately with DCIP to pay for the rollout, which delayed a deal for many months.
Reid said the group hopes to sign several other studios by the end of the year, including Sony Corp.’s Sony Pictures, Time Warner Inc.’s Warner Bros., The Weinstein Co. and Metro-Goldwyn-Mayer Studios Inc.
The rollout is expected to take more than three years.
