Regal Gets Real but What Does it Mean?

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Tue, 06/10/2008 - 20:00 -- Nick Dager

June 1 2008 - Regal Entertainment Group and RealD 3D have announced a partnership to convert some 1 500 screens to 3D. The deal when completed the key phrase here would bring the total number of 3D screens in the US to well over 3 000. But the deal will not take effect until the major studios and the Digital Cinema Implementation Partners come to terms. So the question is what does this all mean? The answer lies in the fact that the studios either by happenstance or by design are taking a very passive-aggressive approach in their negotiations with DCIP. Several studios are demanding higher virtual print fees which exhibitors insist they can’t afford. Other studios are demanding that exhibitors convert to digital now in order to justify the costs of the 3D features due out next summer. In some cases that passive-aggressive attitude exists in the same studio. In interview after interview Jeffrey Katzenberg CEO of Dreamworks Animation has led the charge all but demanding that exhibitors waste no time in converting to digital this of course so that his 3D movies can make more money. Yet his long-time partner Steven Spielberg tried to block the digital release of Indian Jones and the Kingdom of the Crystal Skull. In a recent story on the topic reported in the Chicago Tribune Spielberg is quoted as saying “Making a film on celluloid as I like to do with all of my pictures but then transferring it and releasing it and projecting it digitally is a very inferior image.” Meanwhile it’s been reported that Spielberg is shooting his next movie Tintin digitally. Do these guys ever do lunch together? Dreamworks company picnics must be tense affairs. John Fithian president of the National Association of Theatre Owners says the situation has placed exhibitors squarely between a rock and a hard place. Several studio leaders currently hope to reduce substantially the virtual print fee support they are willing to provide for the digital cinema transition at the same time that several other studio leaders demand that exhibition install many systems rapidly for the 3D slate in 2009 ” he says. “And at the same time one of the industry's filmmaking icons refuses to release a big summer picture on digital cinema screens except for locations where that is the only option. So should we or should we not move faster with the digital roll out? How do they possibly believe that exhibitors will do anything less than push back? Maybe they should get their act together first before they try to tell us what to do. All of which begins to explain why Regal one of the DCIP partners is putting forth an enthusiastic announcement while at the same time all but admitting that for now its hands are tied. According to several insiders this situation is likely to remain in a stalemate for quite some time. No one was willing to speak on the record about the current negotiations between the studios and DCIP. A top executive at a major Hollywood post-production facility says that at the moment the contract talks with the actors’ unions is the main thing on the studios’ minds and nothing will move forward until those issues are settled. Another factor stalling things is the fact that not all of the studios have 3D releases due out next year and they are in no hurry to help their main competitors who do have 3D movies coming make more money. That fits the view from another man who has knowledge of the DCIP talks. He says the banks and the troubled economy are a major issue. “A few studios are ready to sign ” he says “but with the financial markets averse to risk the banks probably want all six major studios to sign VPF agreements and very likely will not allow any agreement to be signed until there's a commitment from all six. The banks want their guarantee of movies as collateral. I don't expect this deadlock to end soon.” And finally one industry insider who was privy to the negotiations with the Cinema Buyers Group suggested that there is perhaps a legitimate problem with the current Virtual Print Fee. “What I think happened ” he says “is that [in the first round of negotiations] the studios set the VPF at the level that AccessIT used to do their original deals.” Which brings us back to the rock and the hard place. That insider suggests that the AccessIT-set figure is lower than some of the studios are willing to pay and at the same time is still too high for many of the smaller independent theatres. “I don’t think this deal is going to get done this summer ” that insider says. “I don’t think it’s going to get done until at least the fall.”