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TOPIC: Avatar, 3-D, financing and you

Avatar, 3-D, financing and you 24 Nov 2009 09:36 #32863

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USA Today
Some theaters trapped in 2nd dimension by credit freeze
By David Lieberman, USA TODAY
Hollywood executives likely will credit director James Cameron if his megabudget sci-fi film Avatar strikes gold for Fox next month.


But there's a ready scapegoat if it disappoints: When the credit markets froze more than a year ago, banks and other lenders didn't invest in the digital-projection technology needed to show films in 3-D. That was a setback for Avatar, which was designed to showcase 3-D's artistic potential.

The film should appear in 3-D domestically on nearly 3,500 screens, Fox distribution chief Bruce Snyder guesses. "They're still putting (3-D systems) in as we speak," he says.

But Cameron hoped for 5,000 screens two years ago. The movie will also run in conventional 2-D.

The shortfall means that "people may have to wait until the second or third week to see it (in 3-D) at a theater near them or ...drive a little further," says Bud Mayo, CEO of digital cinema services firm Cinedigm.

All eyes will be on Avatar's ticket sales. It will show whether "there's something for 3-D beyond animation and PG films," says SNL Kagan analyst Wade Holden.

Studios and exhibitors bickered for years about who should pay for digital projectors that cost as much as $100,000 per screen, Mayo says. It takes as much as $40,000 more for tweaks and software to handle 3-D.

That could add up to tens of millions of dollars to equip large theater chains. "Not many theater operators have that much dry powder," says GE Capital Vice President Michael Rhea.

Studios agreed to pay the bulk of the costs: They could save $1 billion a year by distributing movies on small hard drives instead of large reels of celluloid. Distributors pay a fee for each digital film.

The cash goes to lenders who buy digital projectors and lease them to theaters.

But when the credit markets froze, lending for digital cinema slowed to "a trickle," Mayo says.

Digital Cinema Implementation Partners – a studio and theater-backed consortium – is struggling to raise $525 million to bring digital projection to about 15,000 screens.

"They keep telling us it's expected to happen any day," Snyder says. DCIP did not return calls for comment.

But Cinedigm just raised $100 million from GE Capital and Société Générale for 2,100 digital systems.

If that continues, ticket sales will be "more in line with what studios anticipated when they put (3-D) films into production," says Imax CEO Richard Gelfond.
Michael Hurley
Impresario
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