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TOPIC: NATO estimates 10-20% of theatres will close

NATO estimates 10-20% of theatres will close 13 Oct 2011 16:47 #37188

  • Mike
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This is a pretty disturbing press release. NATO and CBG announce they have converted 1450 screens for 88 CBG members. There are still 20,000 unconverted screens. The VPF is set to expire in 11 months. And NATO predicts that 10-20 percent of theatres will close. I feel sick to my stomach. This is the theatre owners representatives and they seem proud to be witnessing as many as 800 or more theatres across North America go bust. Is it just me or is this nuts? Read on. Mike


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.
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Re: NATO estimates 10-20% of theatres will close 13 Oct 2011 19:35 #37193

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I hate to say --repent the end is at hand -- is all to real.
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Re: NATO estimates 10-20% of theatres will close 13 Oct 2011 21:45 #37196

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The thing that seems to be missing in all these Nato/ CBG releases, is the fact that unless you were a member 2 years ago (I don't know the exact date) none of the CBG- Cinedym deals are for you.
Without that information, these memos always look to me like a membership drive for CBG.

I have not yet found any VPF program that applies to me. (2 screen theater with around 22 movies on the break per year). I guess I'm in the 20%.

Jay

OT: For other reasons I am trying to become a CBG member for 2 months now. Despite numerous phone calls/ E-mails I have yet received any information. E-mails just stay unanswered. Check was cashed of course. Very frustrating.
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Re: NATO estimates 10-20% of theatres will close 13 Oct 2011 22:43 #37198

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All of this is going to get much more intense. As I have predicted and still do...this will be fought with legal action by states and probably the feds. The whole thing stinks of what antitrust legislation was created to stop. This was a deal that works for the top and mediums and absolutely was engineered to liquidate and exterminate small theatres.
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Re: NATO estimates 10-20% of theatres will close 14 Oct 2011 00:52 #37199

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I still do not see what right any business has to stay in business. So I am at a loss to what the government can to do to protect some right to be in business. I would sure as hell like to have my profitable video stores left from a few years ago. but what right do I have to them?

What do you want NATO/CBG to do?

What I hope happens is a better understanding about what we need to do to get a movie. Why can't the studios say the following: You convert to digital and as long as you do not receive a VPF, you can have a movie for a $500 guarantee. Or a $1000 guarantee. Knowing what movies we could have 4-6 weeks out would be huge for us. If we decide to play the movie for just one week we pay 70%. Keep it two weeks and pay 60%. Keep it 3 weeks pay 54%.

As far Cinedign working hard......they are horrible at returning phone calls and emails. Pretty simple thing in my book. But they probably do have to spend a great deal of time talking to each person individually about their terms. God forbid this stuff be shares among eople. Would it be nice to see the terms for everyone on their website?
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Re: NATO estimates 10-20% of theatres will close 14 Oct 2011 01:37 #37200

  • Keweler
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I would like a bailout. No, seriously I don't expect anything from the government.
CBG - it would be great if they could go back and negotiate for their new members as well. I don't expect that though.
Nato- Totally different thing. I expect that they don't stop working until every last theater has the possibility to convert with VPF's. Don't be content with getting a deal for CBG members from 2 years ago.

Jay
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Re: NATO estimates 10-20% of theatres will close 14 Oct 2011 13:24 #37201

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Mike - I believe that your hope (for lack of a better word) that the courts will step in to help save small theatres is way off base. Here's why:

First of all the effectiveness of many of the federal anti-trust laws was emasculated first by the government (the Regan white house) and later by the federal courts in the mid to late 1980's - all the in the name of free market capitalism and the expanding globilization of the worlds economies.

Secondly, what is happening here (loss of small theatres due to technological changes) in not what anti-trust laws were designed to protect. The basic premise of anit-trust laws is to make sure that a given product is available in a given defined market area at a resonable price.
Here the "product" being sold is the film itself and not the theatrical exhibition experience. The availability of alternative content delivery outlets (eg. VOD, online computer streaming etc) means that the product (the film) is still available in a given market. The studios are not saying you cant have our product - merely that it will be available only in a certain format and it is up to you (the theatre owner) to purchase the necessary equipment to exhibit our product.

Thirdly, the federal copyright laws - and federal law always trumps state law - allows (and has been upheld by various federal courts in film licensing cases) a studio to license its film product anyway it chooses and to any such theatres as it chooses. In other words, a studio doesn't even have to make its product available on 35mm film at all if it does not choose to do so. (And there have been direct-to-video releases for years).
Last Edit: 14 Oct 2011 13:35 by muviebuf.
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Re: NATO estimates 10-20% of theatres will close 14 Oct 2011 15:09 #37202

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I am not going to try and make legal arguments for why I think there will be government action because I am not a lawyer. I saw a theatre chain forced by a states attorney general to stop from tearing down a theatre and forced to sell it so as not to be killing off the competition. I can foresee a lot of action. I think the real dire fate of hundreds of theatres across this country with a myriad of state legislatures, governments, and not to mention congressman and senators will shortly spawn a reaction. I am working with a county in Texas that owns a theatre and I can tell you they are ticked off about the current status. So who knows... I do not believe you will see 800 theatres with 10,000 screens quietly go belly up.
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Re: NATO estimates 10-20% of theatres will close 15 Oct 2011 16:36 #37205

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There is a big difference between bringing political pressure to bear and filing anti-trust or similar lawsuits.

Do small communities (or any community for that matter) want to see their local theatres close? Of course not.

But in the current economic environment where nearly all local governments are struggling to pay for essential services - compounded by runaway municipal and school district pensions - and many now faced with weather related disaster problems - there are simply no $$$ available to help the cause. Heck where I live in Central Pennsylvania the city of Harrisburg (our state capital) filed for bankruptcy this week.
Last Edit: 15 Oct 2011 16:38 by muviebuf.
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Re: NATO estimates 10-20% of theatres will close 15 Oct 2011 22:10 #37207

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there is no money: govs aren't all that broke though they love to say so. I don't think political pressure will play much but who knows... lets see. This is probably why Sen. Chris Dodd was hired as head of MPAA.. to help head off the flack.
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Re: NATO estimates 10-20% of theatres will close 17 Oct 2011 17:43 #37209

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Keweler wrote:
The thing that seems to be missing in all these Nato/ CBG releases, is the fact that unless you were a member 2 years ago (I don't know the exact date) none of the CBG- Cinedym deals are for you.
Without that information, these memos always look to me like a membership drive for CBG.

I have not yet found any VPF program that applies to me. (2 screen theater with around 22 movies on the break per year). I guess I'm in the 20%.

Jay

OT: For other reasons I am trying to become a CBG member for 2 months now. Despite numerous phone calls/ E-mails I have yet received any information. E-mails just stay unanswered. Check was cashed of course. Very frustrating.

Have you looked at the Christie program? What about the GDC program? Sony?
You are saying NONE of these will work? You are flat wrong. I know at least one of these "other" programs will take anyone.

As to the larger discussion, NATO has worked their a$$ off getting this stuff in place. But, they can't hold your hand and get you signed up. Even if you aren't CBG, there is a Cinedigm deal. It may not take everyone, but you don't have to be CBG to get Cinedigm. Mike -- do you expect NATO to just come up and hand you digital projectors? Get real. Exhibitors have to do some leg work too. They have to sign an agreement and put in projectors. NATO isn't going to do it for you. Of the 10-20% that will close, I'd bet 80% of them would have closed anyway.
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Re: NATO estimates 10-20% of theatres will close 17 Oct 2011 21:59 #37214

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"Mike -- do you expect NATO to just come up and hand you digital projectors? Get real. Exhibitors have to do some leg work too. They have to sign an agreement and put in projectors. NATO isn't going to do it for you. Of the 10-20% that will close, I'd bet 80% of them would have closed anyway."

Gee whiz.... Nice way to cheer on the extermination of your fellow exhibitors who have been quietly running theatres for 100 years.... I can afford to convert and I'll be doing it. But I pick fights in life and when I do I like to stand up for the little guy getting bullied.

Good question buried in there.... and thank you for asking. What should NATO do? I think an organization that purports to represent theatre owners and not just the largest theatres but all the theatre owners should not be in the business of writing off the 10 to 20% with +/- 10,000 screens and I am quoting NATO here. I do not expect NATO to help pay in any fashion whatsoever but coming up with a deal that if this was a movie and this was Titanic the plot would go like this: "Okay all of the richest people followed by the toughest strongest men get in the lifeboats. Ladies and children.... unless you are wealthy will have to die."

I do not consider this much of a stretch for NATO to have accomplished. Having a expiration date of 11 months away for VPF, excluding smaller theatres in a myriad of ways, and seemingly carrying the water for the largest and strongest exhibitors in cooperation with the MPAA smells like a load of horse*&^%. Perhaps I am remiss in my understanding: how has any of the negotiations helped smaller theatres? If the policy all along has not been "Convert or die." but actually it's "Can't afford to convert... then die." Throw in the undercurrent of film companies not giving VPF's to smaller theatres and if you do convert it may be an act of financial suicide. If there is no VPF or no prints if you have one it redefines Catch 22.

Bottom line: if I ran NATO I would not be looking the other way while theatres closed with no help from NATO.

I do not expect miracles. I am a member of NATO since our first theatre of 95. But I do expect more.
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Last Edit: 18 Oct 2011 13:59 by Mike.
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Re: NATO estimates 10-20% of theatres will close 18 Oct 2011 01:32 #37217

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You are saying NONE of these will work? You are flat wrong. I know at least one of these "other" programs will take anyone

You are right. I should have made it clear that I am in the process of getting information from everybody and only the first 3 weren't suitable for me.

As to Nato having worked there asses off.... what Mike said
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Re: NATO estimates 10-20% of theatres will close 18 Oct 2011 02:34 #37219

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Elin TW wrote:

Have you looked at the Christie program? What about the GDC program? Sony?
You are saying NONE of these will work? You are flat wrong. I know at least one of these "other" programs will take anyone.

Just because they will take you does not mean that it is in your best interests. Especially in light of recent anecdotal evidence of theaters who receive VPFs not getting a movie when non-VPF receiving theaters do.

Again, the simple answer would be for studios to say when we can "buy into" a movie. Less than 3000 locations we pay a guarantee with no VPF for example. Or release of more than 3500 locations will trigger a VPF to you. Just spell it out so we know what we are getting 4-6 weeks out vs waiting till the last minute.
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Re: NATO estimates 10-20% of theatres will close 18 Oct 2011 13:56 #37220

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another movie analogy: if this was "NATO SEAL TEAM SIX: Convert or die. "All right! Listen up..... Rule number one: when the sh&* hits the fan we leave the weak and the wounded behind. Just so you know where you stand and how much you mean to us.

Or don't forget the apropos line from Independence Day... "What do you want us to do?" ...... "Die."
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