Digital financing gets spirited debate at ShoWest

By Sarah Sluis

FJI Executive Editor Kevin Lally continues his report from the annual ShoWest Convention in Las Vegas.

All the pieces seemed to be in place to make 2009 the year the transition to digital projection finally happened in earnest. The big studios were counting on it, preparing an ambitious slate of 3D productions that could only be shown with the new digital equipment. Then, in the fall of 2008, the financial markets plummeted, and a credit freeze dramatically impacted those grand conversion plans.

Some exhibitors with healthy balance sheets have been exploring the avenue of self-financing digital installations for the coming 3D wave, rather than being beholden to a bigger third-party integrator. The decision to self-finance was the topic of a surprisingly lively and substantive panel discussion on Wednesday at ShoWest in Las Vegas, with a sometimes outspoken group of participants representing a diverse range of viewpoints.

Moderated by G. Kendrick Macdowell, VP, general counsel and director of government affairs at NATO, the panel featured two studio execs who have pledged support in the form of virtual print fees to individual exhibitors. Mark Christiansen, executive VP of operations at Paramount Pictures, deemed his studio's plan "incredibly easy�something you can do now." But Fox exec VP of digital exhibition Julian Levin, who is also reaching out to individual cinema owners, bluntly criticized the streamlined Paramount offer document as having "a lot of holes," contrasting the Fox approach as that of "a grown-up business."

Even more contentious was exhibitor George Solomon, CEO of Southern Theatres. Dismissing the role of third-party integrators like Cinedigm and Digital Cinema Implementation Partners, he declared, "I believe that mid-size circuits should be able to negotiate virtual print fees directly or have their own consortiums� I don't believe in giving a cut to an integrator."

The plain-speaking Solomon, whom Macdowell at one point compared to a crafty Southern lawyer, proved not much of a champion of the digital revolution. "35mm is still better," he contended. "What's the difference between a hard drive and 35mm film? Forty pounds!" Arguing that the benefits of digital accrue mainly to the studios, he challenged, "If distribution wants 2K, give us the money!"

Fox's Levin quickly countered that a digital platform has great benefits for exhibition, including the growing business of alternative content and the higher per-screen revenues from 3D. He warned, "I don't know if Fox will be there forever to help with financing� You may not get these VPFs if you're waiting for certainty."

Everyone on the panel seemed to agree on one fundamental: that the commitment of two distributors to VPF deals is not enough to warrant individual exhibitor investments in digital equipment, that "a critical mass of studios," in Levin's words, is needed.

Also on the panel was Bill Campbell, the new managing director of NATO's Cinema Buying Group for smaller exhibitors, who took the most conciliatory role, seeking "multiple options" and a way to "make it all fit."

On a positive note, the panel's rep from the banking industry, Andrew Sriubas, managing director of JP Morgan Investment Banking, forecast a significant unfreezing of credit by this summer. If that proves true, perhaps the 3D product coming in the second half of 2009 will get the wide rollout that was always part of the plan.