Archive for April, 2008
In response to analysts' questions during the company's Q1 earnings conference call, DreamWorks CEO Jeffrey Katzenberg unloaded a multi-dimensional pile of frustration at the pace of digital cinema indtallations (and consequently, the 3D installations that depend on them).
"In the last 30 days, things have not progressed as well as I had hoped, expected and, quite frankly, been committed to, by all the parties involved," Katzenberg said in response to an analyst's question. "It's ongoing as we speak literally now, but in terms of getting the big three (exhibitors: Regal, Cinemark and AMC) on board and actively moving forward, I feel as though things have dragged along, and it's been pretty disappointing."
Exhibitors and distributors are in the midst of tough negotiations over Virtual Print Fees (VPFs), both how many and how much the studios will contribute toward each VPF.
"If these guys don't get their act together very quickly in the next 30 days, they're not going to be able to achieve that goal," (Katzenberg) said. "Every week that goes by, it'll be several hundred less screens that manage to be rolled out in the time frame."
This line of reasoning sounds strangely familiar:
Katzenberg's accusations come just a couple of weeks after National Assn. of Theater Owners prexy John Fithian made similar remarks from the other side of the bargaining table during the Digital Cinema Summit at NAB. "If the studios want this to happen in time for 2009, the deals have to be struck, and they have to be struck right now," Fithian said at the time.
Despite the opportunities for increased profits from additional 3D screens, in the earnings call Katzenberg asserted that "what we are confident of being installed will pay for our investment."
You can listen to the entire DreamWorks conference call here.
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The L.A. Times Josh Friedman ("The Projector") lays it out in a fair and thoroughly researched Sunday Business section front-pager:
Week in and week out, Projector exposes the often-bitter truth about Hollywood. On one point, though, he must back the industry line with gusto. Call Projector creaky, but nothing matches the moviegoing experience or offers a better entertainment value. Consider:
* Since Projector lined up with a horde of other freckly nerds for the original "Star Wars" in 1977, when the average U.S. movie ticket cost $2.23, the price of admission has climbed less than the rate of inflation. That same ticket, in today's dollars, would cost $7.86 -- or well above the latest norm of $6.88. These averages include rural theaters and matinee, senior and child discounts; in L.A., the price of movies, like almost everything else, runs higher.
* Contrary to the whiny drumbeat of the nostalgia crowd, the product is as good as ever, especially for those who look beyond the top of the box-office charts. Projector's recent favorites include "Pan's Labyrinth," "The Bourne Ultimatum," "Juno" and "The Bank Job."
* Theater owners have crowed for years about what a bargain movies are compared with such events as concerts, which in 2007 commanded $62.07 for the average ticket, and baseball games, which went for $22.77. This spring the exhibitors' trade group, the National Assn. of Theatre Owners, calculated that watching films also costs less per minute than laser tag and bowling -- even if fans don't get the opportunity to rent those cool shoes.
Best of all, Friedman doesn't just take NATO's word for it. He takes the Times' money and actually checks it out.
The price of fun
On a recent date night, a couple spent $31.25 at the movies -- excluding baby-sitting and other costs. How does that compare with other entertainment options?
* Baseball game at Dodger Stadium: Two infield reserve tickets, plus online "convenience charges," parking, hot dogs and sodas. Tab: $100.50
* Laser tag at Ultrazone in Sherman Oaks: Two $23 "unlimited game" packages on a Friday night, plus pregame Red Bulls. Tab: $50.78
* Marty & Elayne at the Dresden restaurant in Los Feliz: Dinner for two (pepper steaks with Caesar salad or French onion soup), followed by cocktails (Blood and Sands) at the piano lounge, with tax and tips. Tab: $111.94
* Paint ball at Warped Paintball Park in Castaic: Two basic packages on a weekend afternoon, including goggles, compressed air and Tippman 98 semiautomatic paint ball guns. Tab: $90
Read it all. The man loves him some movies and turns in a fun and funny article.
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Our friends in the U.K. are running a cinema trailer compiling scenes from some of the big movies hitting the theater this summer. Courtesy of the Film Distributors Association.
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Get cracking, people. We've got a $4 billion summer to beat.
Read the rest of this entry »
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Or is it the cart before the horse?
While the 3D grosses of Beowulf and Hannah Montana have distributors and theater owners hungry for more 3D content and seem to be driving the appetite for digital cinema installations, NATO's president, John Fithian, suggested at the National Association of Broadcasters' Digital Cinema Summit, that 3D may actually be a speed bump instead of an accelerator.
With at least ten 3D features slated for next year, including James Cameron's Avatar and DreamWorks Monsters vs. Aliens, Fithian noted
"We are at an extremely critical juncture in the transition to digital cinema, but the (deployment) deals have to be done. (...) We are at an impasse over the financials."
The deployment deals generally rely on a virtual print fee model through which studios contribute an agreed fee per screen, per movie to offset exhibitors' installation costs.
"Unless digital cinema deals are made in the next one to two months, we will not have time to (deploy the screens) for 2009," Fithian said.
Despite that, some of my friends at the studios are insisting that they should pay lower VPFs (in current negotiations) than they did in the first round of deals," he said, asserting that the model worked in the first round. "3-D cannot be an excuse for lowering VPFs."
There are currently fewer than 1,000 3D screens in North America. It is estimated there will need to be more than 4,000 to support 2 major 3D releases at the same time. There are currently only 4,600 digital cinema screens in the region.
Whatever the potential for additional box office for 3D - and it is, currently, just potential (Hannah Montana's $67 million on just 680 screens may be less of a demonstration of the power of 3D than it is the power of 9-year old girls.) - the one certain financial benefit of the transition to digital cinema is the roughly $1 billion dollars per year the studios will save on prints forever, infinity-eleven.
In a separate panel at NAB, NATO's D cinema consultant Michael Karagosian pointed out that none of the VPF agreements have been signed by all studios, possibly increasing exhibitors' share of the latest round of VPFs from 20% to 32% or more, depending on how many digital releases come from non-signatory studios. Furthermore:
(t)he costs for an exhibitor to transition to digital cinema compared with film is 200%-300% higher in a 25-year period, Karagosian estimated. This includes the costs of installation, maintenance and other operational expenses.
There are some problems to be solved if there are going to be enough 3D screens to support the studios' ambitious plans for 2009 and 2010. If they aren't solved soon, there won't be enough time to install the screens - even if Jeffrey Katzenberg installs them himself.
Variety's take is here.
Update, 8:21 pm: Dave Poland gets it.
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Michael Brush, financial analyst for MSN Money, takes a historical look at box office performance during hard times and, despite what some analysts conclude, comes up with some hard numbers:
Some industry analysts, including Hal Vogel of Vogel Capital Management, dispute the link between economic pullbacks and rising movie attendance. But for me, the evidence is strong:
- In 1974 and 1975, as the economy contracted 0.5% and 0.2%, respectively, after 5.8% growth in 1973, the annual box-office take rose 25% and 11% as Americans sought refuge from reality in hits like "Jaws," "The Towering Inferno" and "Blazing Saddles." Movie-theater attendance rose 16.9% in 1974 and 2.2% in 1975.
- In 1982, the economy contracted 1.9%, after 2.5% growth in 1981. Box-office takes shot up 16.4% as hits such as "E.T.: The Extra-Terrestrial" and "Porky's" offered escapes. The number of moviegoers was up 10%.
- In 2001, economic growth slowed to 0.8% from 2000's 2.7%, but box-office spending on movies such as "Monsters, Inc.," "The Mummy Returns" and "Ocean's Eleven" rose 9%. This was also the year the "Harry Potter" and "Lord of the Rings" film franchises were launched. Then, the box-office take rose 14% in 2002 as economic weakness lingered, growing only 1.6%. Movie-theater attendance went up 4% in 2001 and 11% in 2002.
All told, box-office spending went up during five out of the seven recessions or pullbacks over the past 40 years, according to the National Association of Theatre Owners. The pattern is so consistent that you can't write it off by saying moviemakers just happened to release better films.
If it is not the particular mix of films that accounts for the upswing in box office during recessions, what does? Sony's Jeff Blake suggests
"Movies offer something completely separate from what you are dealing with day to day. So they really become worth the money when money counts."
Lionsgate's Michael Burns concurs, saying
"When things are tough it is nice to be able to go into a dark theater and get lost in great entertainment, to be moved or scared and all those great things."
So weigh in if you're so inclined. Why do movies do well in bad economies? Is it the movies? The price? A desperate need to escape a stack of bills on the kitchen table?
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The Cinema Buying Group announced today it has chosen AccessIT to be the digital cinema system integrator for the more than 8000 independent screens under the group's umbrella.
Wayne Anderson, CBG managing director, complimented the quality of submissions from all vendors in the CBG’s Request for Proposal process. In the end, he said, “AccessIT offered the winning package of extensive experience, exhibitor choice, and competitive cost. Our mission is historic: ensure that independent cinemas survive and thrive in the digital age—and AccessIT proved its skill and determination to make that happen.”
More, from the press release:
The CBG began as a small buying program for independents—but mushroomed quickly into its current size and significance when it became an advertised vehicle for independents to acquire digital cinema equipment and service. NATO’s vice president and general counsel, Kendrick Macdowell, said, “NATO’s commitment to the broadest possible digital deployment for our industry is well-known. We’re proud to have worked with a man of Wayne Anderson’s stature to ensure that the march of digital cinema does not leave behind the vital independent segment of exhibition.”
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