The Cinema Buying Group Turns Five
By many accounts more than half of the movie screens in the United States have converted to digital cinema. The critical issue now is the fate of the remaining twenty thousand or so screens. Five years ago this month the Cinema Buying Group joined forces with the National Association of Theatre Owners to help small and independent exhibitors make the transition to digital. As of September 88 CBG member companies representing 1650 screens have signed deals with Cinedigm and are in various stages of the installation and operation process. While there is more work to be done, after five years and by any measure, the CBG has been a success. The ongoing concern is that digital cinema is not a viable option for many theatres; predictions on the number of U.S. theatres likely to close range from ten-twenty percent.
The main challenge now is second run theatres and art houses. One industry expert predicts that installations in the United States will taper off after next year, when the virtual print fee rollout periods end. He prefers not to be identified because he’s directly involved in many negotiations. Conversion will continue, but at a much slower pace, he says, adding that the slower pace and the new relationship between Deluxe and Technicolor will keep film print costs down for another five years.
“Art houses are more interesting,” he says. “I think boutique film production will continue much longer for art houses. The release window is completely different, and doesn't require that many film prints, as they can rotate from city to city. Which is why art house distributors don't feel digital cinema saves them that much, and consequently, there's not much savings to re-invest in digital cinema equipment for art houses.”
NATO president John Fithian says Bill Campbell, the managing director of the CBG and his predecessor J. Wayne Anderson have both devoted long unpaid hours assisting independent exhibitors through the digital process. He also had words of praise for Cinedigm saying, “Cinedigm has worked aggressively to sign up as many CBG members and screens as possible.”
The first challenge was completing successful and unique agreements with the major studios to create a special VPF scheme for smaller theater operators specifically for the CBG. The NATO, CBG, and Cinedigm leadership spent more than three years negotiating those deals. These agreements will enable thousands of screens of independent operators to survive the digital transition who would have otherwise not been able to afford digital equipment.
“The CBG negotiated specific provisions for off-break VPF payments for those exhibitors that play many movies off of the national break date,” he says. “This provision only applies to CBG members, and therefore makes the CBG-Cinedigm plan the only way many off-the-break cinemas can receive enough VPFs to qualify for financing.”
Fithian says a much higher percentage of CBG members could get financing under the CBG-Cinedigm plan than would be possible under any other VPF plan in existence today. Each of the six major studios signed agreements with Cinedigm that provide specific concessions to the CBG and that offer supplemental provisions specific to the CBG. Particularly for smaller, often off-break cinemas, the CBG VPF formula is unique.
“And the work goes on,” says Fithian “as NATO and the CBG are now engaged in negotiations with the studios for specific provisions to enable our drive-in theater operators to make the transition to digital; we are lobbying the smaller, independent distributors to support the VPF scheme adopted for the CBG by the majors; and helping CBG members through the process.”
“Finally, beyond the scope of the U.S. and Canada where the NATO-CBG operates,” he says, “we are helping independent exhibitors in other territories by sharing ideas and fostering buying groups overseas. The United Kingdom has established a successful group, and Australia has a group negotiating as well.”
The unfortunate reality is that a number of exhibitors will not survive the digital transition. How many that is and how much longer the film era will last is something that no one can accurately predict. No one understands this better than Fithian.
“It is true that a small number of exhibitors who play movies very far off the break, or in discount houses, will not qualify for VPF plans from Cinedigm or any other plan,” he says. But he makes clear that the CBG and NATO will do everything they can to keep that number as low as possible.