Re: Selection of AccessIT as CBG Digital Integrator
By now, all of you have seen our press release or read about CBGâ€™s selection of Access Integrated Technologies, Inc. (AccessIT) as CBGâ€™s digital integrator. For those of you who have sent congratulations and well wishes, we thank you most kindly, as a great deal of work went into the Request for Proposal process and the evaluation of the vendor proposals. For those of you more inclined to anxiety in your responses and questions to us, I hope this memorandum will clarify what we know now and what work remains to be done.
As Wayne Anderson said in our press release, â€œAccessIT 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 ageâ€”and AccessIT proved its skill and determination to make that happen.â€ However, while much work has been done -- much hard work remains to be done before we will cement the terms of a digital deal as applicable to our diverse membership. I want to make clear that the selection of AccessIT does not mean we have already written a master contract or worked out all of the particulars of implementation. Indeed, we selected AccessIT, in part, precisely because we needed to get down to one integrator, partner with that integrator, and together undertake the hard work of final negotiations with studios. Only those studio negotiations will yield the necessary details of Virtual Print Fee (VPF) financing, as applied to our members, and only then can we move toward negotiation and execution of a master agreement applicable to CBG members.
On that score, the good news is that Wayne, John Fithian and I sat down in seven separate meetings with studios two weeks ago and concluded a series of very constructive and promising talks. The studios understand our mission and have all indicated enthusiasm for working with us to ensure that the more financially challenging profile of our membership does not derail access to digital cinema for independents. You may have noted that Disney, Fox and Paramount agreed to be quoted in our press release. I hope and trust weâ€™ll see this historic transition augmented by genuine studio enthusiasm for ensuring the survival of independents in the digital age.
Here are a few things we already know about AccessITâ€™s plan. During ShoWest, AccessIT announced the conclusion of new â€œPhase 2â€ VPF agreements with Disney, Fox, Paramount and Universal for 10,000 screens. That announcement put AccessIT way ahead of any other contender in executed VPF agreements.
We expect these Phase 2 VPF Agreements will likely accommodate a significant number of our members. For those members not covered by the Phase 2 VPF Agreements, it will be necessary for AccessIT and CBG together to engage in further studio negotiations to iron out financing arrangements that could accommodate the remainder of our diverse membership. (And of course, AccessIT Phase 2 VPF Agreements still remain to be finalized with two of the six major studios.)
As we have emphasized from the beginning (see, for example, your Participant Agreement), financing digital equipment is much more difficult for some types of exhibitors, and our membership includes many of these challenging categories. There may therefore be different classes with different terms. But our goal remains, as stated in the Press Release, â€œto the best of our ability, to negotiate a deal that provides some access to digital equipment and service for all members in good standing before film ceases to be available.â€
A few additional points on our mission:
If you joined after November 2, 2007, then, as you know, the foregoing goal does not apply to you on the same terms. That does not mean you will definitely be excluded from the digital deal -- only that we have not required integrators to describe a plan that would accommodate late-joining CBG members.
Additionally with any financial transaction of this magnitude, your access to financed digital equipment depends upon lender approval. All CBG members will be subject to creditworthiness checks, as you would fully expect before installation of such expensive equipment.
As many of you have inquired recently, while the actual pricing and financing details still need to be resolved, you can expect that there will be an exhibitor contribution to the cost of the digital system. There is a very limited allowance to accommodate â€œnew buildsâ€ which will also require a higher exhibitor contribution than for converting existing complexes.
It is our intention, once studio negotiations are successfully concluded and the financing terms are resolved, to negotiate a master agreement with AccessIT that will be broadly applicable to all CBG members. Our intention is to enable AccessIT, and you, to save money on legal and accounting fees by avoiding 600+ separate contract negotiations. Once the master agreement is executed, AccessIT can tailor individual agreements according to specific circumstances -- but that process will be substantially easier with a master agreement in hand.
Unfortunately, we cannot yet give you a time frame. Too much remains uncertain or beyond our immediate control to attempt a prediction of when implementation will begin. We can say, however, that we selected AccessIT precisely to expedite this process, and to move toward implementation as promptly as possible. We will continue to keep you advised as additional details become available.
Thank you for your patience, your passion for independent exhibition, and your membership in the Cinema Buying Group.
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