Q&A
About NATO’s
‘New’ Cinema Buying
Group
Program
by G. Kendrick Macdowell
NATO General Counsel &
Director of Government Affairs
On Thursday, Oct. 26, members of the Cinema
Buying Group LLC convened for the last time. They voted
to terminate their for-profit corporate entity. When these
folks get together again, it will be as the reconstituted
Cinema Buying Group - a program of the National Association
of Theatre Owners. As we witness the birth of digital cinema,
perhaps no program is as important to the viability of
independent theatres as the Cinema Buying Group. I address
below some of the questions you may have about CBG's transition
to a NATO program.
Why did the Cinema Buying Group LLC vote to become a NATO
program?
Continuing as an independent for-profit entity would have
been very costly — for example, in obtaining necessary
insurance and paying substantially greater costs for accounting
and legal work. Managing director Wayne Anderson sought
independent legal advice from a specialist in taxation
and tax-exempt organization law. The specialist recommended
that CBG use the existing 501(c)(6) non-profit trade association — NATO — and
thereby greatly simplify CBG’s organizational and
financial burdens.
Did the CBG LLC follow legal and contractual requirements
to terminate and become a NATO program?
Yes. First, at the annual meeting in Dana Point, the NATO
board of directors voted to accept the CBG into NATO. Second,
at a special meeting of CBG members convened during ShowEast,
CBG members voted to terminate CBG LLC, become a NATO program,
and transfer CBG assets to the NATO program. CBG managers
determined that a 2/3 vote of all CBG members was necessary
to terminate CBG LLC. Counting proxies, the vote well exceeded
the 2/3 requirement. (Indeed, only one person voted no.)
What happens to the assets of the CBG?
CBG assets will be transferred to NATO — but placed
in a separate account that will not be employed for any
purpose other than administration of the CBG program. The
arrangement is similar to the arrangement for the camcorder
reward program operated by the MPAA and NATO. NATO has
a separate account for the program, and the program is
entirely self-sustaining. NATO neither contributes funds
nor uses the camcorder reward program funds for any purpose
other than the camcorder reward program. CBG will continue
to be a self-sustaining program.
What happens to the shareholder agreement that CBG members
must sign?
As an independent for-profit entity organized under Delaware
law, CBG had an operating agreement (sort of an organizational
charter, akin to bylaws), and also entered into contracts
(the Shareholder Agreement) with each CBG member. Many
of the issues covered in these documents are no longer
relevant (for example, detailed provisions on distributions,
events that trigger dissolution of the company). Some provisions,
however, remain highly relevant (for example, the provisions
specifically addressing digital cinema equipment). Essential
and relevant provisions of the operating agreement and
shareholder agreement will therefore be distilled into
a much shorter document, which CBG members will sign, just
as they signed the original shareholder agreement. We do
not anticipate that any substantive rights and responsibilities
will materially change.
Will NATO now run the Cinema Buying Group?
No. NATO will exercise nominal oversight, consistent with
its obligation to ensure quality membership services
and financial integrity. But the program will be run,
and decisions made, by CBG’s managing director
(currently Wayne Anderson), officers, and membership
as appropriate.
Will NATO decide on digital cinema vendors for the CBG
members?
No. NATO will not participate in any respect in the selection
or promotion of any vendors, including digital cinema vendors — other
than to support the general goals of the CBG program. All
decisions concerning vendors will be made by CBG’s
managing director, officers, and membership as appropriate.
How can I join the Cinema Buying Group?
Go to the CBG website: www.cbgpurchasing.com. Read about
the program. Follow the instructions and fill out a membership
application. Or you may contact the Cinema Buying Group:
Cinema Buying Group
c/o R/C Theatres Management Corp.
P.O. Box 1056
Reisterstown, MD 21136-7056
(800) 416-0077
Do I have to be a member of NATO to join the Cinema Buying
Group?
No. Participation in NATO’s CBG program is open to
any exhibitor, regardless of membership in NATO or any
regional association. As is customary with trade association
programs, however, NATO members may be eligible for a discount
on CBG dues. Decisions on CBG dues and discounts will be
made by CBG’s managing director, officers, and membership
as appropriate.
Who should join the Cinema Buying Group?
Every independent theatre owner in North America. There
is strength in numbers — a fact never more important
than today, with relatively complex questions of digital
cinema technology and financing. 
