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TOPIC: Did NATO fail small theatre owners?

Re: Did NATO fail small theatre owners? 17 Mar 2012 19:25 #38072

  • rufusjack
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leeler wrote:
I sure don't feel like anything but one of the smallest operators there is. I have a single screen theater which seats 140 in the county seat (population 1400) of a county with no stoplights. When I got into this business in 2003 I knew at that point that film was going to go away soon (back then it was estimated to be "about five years away"). So, I scouted out who could help and learned about NATO and quickly joined (the dues are really low for a single screen, so why not). I went to some regional meetings, heard Fithian and others speak and joined the CBG (again, why not, the dues are CHEAP). They encouraged me to sign up with Cinedigm for what they referred to as weekly VPFs, which I did, and now my single screen has been getting VPFs for about a year now. Help me understand the disconnect. Were any of you not able to join? If not, then exactly how did NATO fail you? I understand if the studios don't want to pay VPFs if you don't gross enough, but that is hardly the fault of NATO/CBG. Frankly, if they signed the contract and then went back on their word about fulfilling the terms of it, then I would get NATO to intervene on your behalf which they have said they would.

Leeler,
You single screen is far from typical. We have shared numbers privately and believe me you are in the top of your class. For every theater like yours, there are 20+ more not like you who do currently make money but do not have the grosses you do. Your grosses are fantastic. How good? You were first one to sign a move-over VPF deal right? A studio seldom if ever loses money on you. Personally I have a theater and know many more like me that lose money for a studio as much as 20-25% of the time.

Nato/CBG failed because they said no one would be left behind right Mike?
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Re: Did NATO fail small theatre owners? 17 Mar 2012 20:03 #38073

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....but you signed up and were denied entrance or you didn't sign up?

in my mind there are two issues at hand here. The first is if you signed up to get assitance from NATO/CBG or not. If the answer is no, you didn't, then NATO did not fail you. If so, then how is that working out for you with regards to VPF payments and if you were denied prints. That is the studios issue, not necessarily NATOs.
"What a crazy business"
Last Edit: 17 Mar 2012 23:55 by leeler.
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Re: Did NATO fail small theatre owners? 17 Mar 2012 20:39 #38074

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The only test for whether a theatre (or screen) should get VPF's is how much film rental that theatre has paid to the distributors in a given defined period. I would think that a rolling average over the last two years would be fair test.
Certainly the amount of film rental that a theatre pays is relevent since the distributors are using a portion of that film rental to pay the VPFs.

Beyond that whether you are second run, move-over, only play certain films on the break, a seasonal operation and/or all the rest of the nonsense we have heard should not be a factor in determining VPFs at all. The current VPF system is discrimination pure and simple. Nothing anyone can say can justify the way the thing has turned out.
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Re: Did NATO fail small theatre owners? 18 Mar 2012 13:52 #38077

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Leeler,
If I do decide to continue in this business next year, it will using probably either Film-Tech services or Christie. I did not join as I have stated many times in other threads.

Did CBG fail small theater operators (defined as seasonal first-run/move-over/discount or generally a theater averaging less than $50,000 per screen)? Yes. How?

* Communications/marketing
I am involved in 4 different industries: tanning, video stores, inflatables (bounce houses, slides, etc.) & movie exhibition. The other 3 all have or had significant presence on forums frequented by operators in those industries. The video forum and trade association do not exist anymore for obviously reasons. But when it was going members including BOTs like myself were active on them. None of these other treat these folks with nothing but hugs and kisses. There is spirited debate.

NATO owns its own magazine. I looked at issues from 2009, not one ad or marketing piece to promote CBG membership.

Facebook: guess which trade group does not have Facebook a page?

2010 Showest: when the time to enroll was still open I was told? No big camapign to gain members. At the final video trade shows we have big booths with everyday store owners like myself there to talk to prospective members.

No email or other help in communication with the studios. I did receive a few emails from a couple of studios about converting to digital but nothing from CBG. Every theater has to communicate regularly with the studios to stay in business. I am shocked that this avenue was not used by CBG.

*The VPF Deal
In theory it sounded great. You will play the same movies as you were with film but now you will be paid a VPF to help pay for the equipment. But reality and theory often take different paths. Why would a studio pay an exhibitor a $250 vpf if that exhibitor only generates $200 in film rental? Yes there are many theaters out there grossing only $600 a week on a 4 week old movie. not every theater out there can gross $2000 per week on 4-5 week old movies. Obviously those will get the VPF b/c they make the studios money. Those are few and far between.

*The used equipment deal
It was put out in 2007, according to my old booker and a 3 hour meeting with Mr. Anderson at the time: "Seasonal First-Run / Move-over and Discount Theaters:
Since these theaters occasionally or rarely play a first-run title on the national release date, they will not qualify for a virtual print fee. So…how and when will they be converted?
Eventually, the digital equipment that is being installed today is going to become outdated as the technology will, of course, improve. (Think of the computer you had five years ago…and the one you have now). When the larger first-run markets start to upgrade that equipment, the digital suppliers will then be able to move those units to the move-over and discount theaters…thus continuing the digital transistion. This is, of course, IF they are a member of the CBG. So yes…you may be joining this group…but not be converted for another 8 to 10 years. But…this will be cheaper than trying to buy the used equipment yourself from one of the suppliers.
"

Reality:
Most big chains & companies do not upgrade equipment unless they have too or they are just flush with cash. So the amount of used equipment that will become available will be slim to none. And to only think that the CBG will have this equipment was another flaw. 8 years would be 2015.

Did they fail $80,000 - $100,000 per screen exhibitors. No.

From that same letter in 2007 mentioned earlier: "However, the CBG is very confident that ALL THEATERS (especially SINGLE screen theaters) will be able to be converted prior to the end of film. "

Maybe operators who do no business should not be in operation.
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Re: Did NATO fail small theatre owners? 18 Mar 2012 17:17 #38080

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there needs to be a less expensive alternative
Michael Hurley
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Re: Did NATO fail small theatre owners? 19 Mar 2012 13:05 #38085

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I guess what I'd be interested in knowing is if somebody signed up with NATO/CBG/Cinedigm and then experienced an inability to book movies because of the VPF or were flatly refused to being able to sign up because they didn't gross enough.

By the way, the answer as to why a studio would pay out a VPF when they may likely not be able to recoup it is because they signed a contract. Could they weasel out of it? I think we all know the studios well enough to be able to answer that question.

I agree about the lack of communication on this issue. It was horrible for those that weren't members.
"What a crazy business"
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Re: Did NATO fail small theatre owners? 19 Mar 2012 16:10 #38089

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leeler wrote:
I guess what I'd be interested in knowing is if somebody signed up with NATO/CBG/Cinedigm and then experienced an inability to book movies because of the VPF

Mike has stated that is the case and I was told point blank by 2 studio reps that it would be a problem as well for my theater as well. Like I have mentioned before, digital theaters without VPF agreements have been able to book a movie after being told "no" after they remind their studio rep that they do not receive VPFs.

This scenario is real.
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Re: Did NATO fail small theatre owners? 19 Mar 2012 18:32 #38092

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I am a NATO member and have been for the entire time of + 16 years and I continue to be a supporter of NATO: this issue aside and who knows, maybe NATO will improve on this issue. Just saying....

Bottom line: you sign up for a vpf deal because you need the VPF payment. If they suddenly lower the print run from what was wide release for the longest time and drop the bottom 15% of theatres and instead of getting a VPF on 35 first run pics (about normal in a 3 screen) and you drop to 25 first run VPF's you will be in serious trouble. That hasn't happened to date but there's no reason it wouldn't. It would even be a surer way to kill theatres, there is no guarantee anyone serve you. The place I have heard the problem is at the smaller distribs and in particular art film distribs who have always been pretty god supplying films to smaller grossing pics. Again: it is all very murky and there are no guarantees other than you will owe the money regardless of whether you are given films that qualify for the VPF's you were counting on. :(
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Re: Did NATO fail small theatre owners? 19 Mar 2012 20:02 #38097

  • Elin TW
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If you didn't join CBG, you just made a dumb business decision.
The cost for membership is $150/year.
And........
....by joining you were under no obligation to accept their VPF deal.
But, you would be included if you were first run.
They've upheld their promise to small-towns WHO JOINED!

Quite honestly, if you didn't join, stop complaining.
If you are going out of business because of it, it's your own fault.

Elin

-Town of 8,800; county of 40,000.
-Successful 5 screen theatre
-Town does NOT have a RExall, bookstore, or Video Rental place
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Re: Did NATO fail small theatre owners? 19 Mar 2012 22:06 #38101

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Elin TW wrote:
If you didn't join CBG, you just made a dumb business decision.
The cost for membership is $150/year.
And........
....by joining you were under no obligation to accept their VPF deal.
But, you would be included if you were first run.
They've upheld their promise to small-towns WHO JOINED!

Quite honestly, if you didn't join, stop complaining.
If you are going out of business because of it, it's your own fault.

Elin

-Town of 8,800; county of 40,000.
-Successful 5 screen theatre
-Town does NOT have a RExall, bookstore, or Video Rental place

Elin,

You did not need CBG either as you have 5 other VPF options available to you. You probably gross at least $80,000 per screen as well, probably $100,000 or more per screen based on the information you just gave.

Mike is a member. He asked a question and I answered his question. If he signs a VPF deal, he may very easily be limited product. The two studio reps that told me at a VPF will hurt are not the ones that Mike has mentioned. These are two of the top 6 grossing studios.

There are plenty of locations that average less than $50,000 per screen that are profitable right now. Many more averaging $35,000 that are only opened 3-4 days a week. They run 1-2 shows on those days and pay the bills. if you do not believe this just long on to your boxoffice.rentrak.com account and see how many low grossing theaters there are out there. Do not know how to see that? Go to bookmarks and add theaters to create a group.

They can't very easily afford payments of $1000 a month per screen and very few studios will offer a movie with VPF to them. Why can't some of you see that? Can you afford 15-20% of your gross sales as a new expense without some sort of offsets?

Think about it. Small grossing theater gets film print of The Vow at a cost of zero to Sony. Sony makes money no matter what the movie grosses. The theater grosses $600 (typical number), film rental of $210 to Sony at 35%. But if it is a digital print with a VPF, all of sudden they have a cost of $200 or more. Can you see the problem?

Turn that into a 1st run movie and numbers may be against a small theater as well.

Elin, is Mike a horrible business person based the scenario spelled out in the post before his?
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Re: Did NATO fail small theatre owners? 20 Mar 2012 11:49 #38114

  • leeler
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my disconnect with this situation is the contract. The studios signed a contract with Cinedigm saying they would pay a VPF. Now you're telling me they're getting around that by not giving out the movie to the theater. I'm no legal scholar but that sounds like a breach of the contract. Having said that, I have not read the contract between the studios and cinedigm and maybe that's a false assumption, but that was my understanding of it. the bottom line is that is not how the system was designed. Maybe it has been bastardized and that is how it operates today....
"What a crazy business"
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Re: Did NATO fail small theatre owners? 20 Mar 2012 12:28 #38116

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leeler wrote:
my disconnect with this situation is the contract. The studios signed a contract with Cinedigm saying they would pay a VPF. Now you're telling me they're getting around that by not giving out the movie to the theater. I'm no legal scholar but that sounds like a breach of the contract. Having said that, I have not read the contract between the studios and cinedigm and maybe that's a false assumption, but that was my understanding of it. the bottom line is that is not how the system was designed. Maybe it has been bastardized and that is how it operates today....

My guess is that there is no specific language in any of the VPF contracts between the studios and the intergrators covering that issue as the language is probably written in the favor of the studios. Plus who is going to enforce a provision if there is? An integrator? Is it a good business practice to sue to help 5% of your revenues and jeopardize the rest?

If you just think about it a second. How many businesses will gleefully spend $200 to get $200 knowing that they have equal chances of getting less as well as slightly more? That assumption which was planted by CBG is the heart of the problem. None of the other 5 integrators as ever said that.
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Re: Did NATO fail small theatre owners? 20 Mar 2012 13:39 #38117

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I have a single screen and converted the end of 2008. I had my financing in place before the credit market froze up. I decided against the VPF mainly because I didn't understand it and I wasn't going to sign anything that had a period of 10 years. Without a VPF I have had access to almost all titles. I have had the smaller distributors tell me they can't get me a digital print until I tell them I don't take a VPF. I will tell you digital is a financial burden for me, my theatre grosses in the 80,000 - 100,000 range and it takes everything the theatre makes to pay for the digital. I have not had a trouble free experience either. I have lost more shows in the short time I have had digital compared to the 15 years of film prior. I lost an entire week of Despicable me, probably $7000 in sales and a lot more damage in pissed off patrons because of a security error no one could figure out. I've probably lost at least another dozen shows due to other projector and server issues. The only things in the projector that have not been replaced are the light engine and power supply. The server has replaced once. Most of theses things happened under warranty, but it has been something every year. There is no way this equipment will last 10 years and will need to be replaced again at great cost. If you are a small operator really truly think hard about your options. As much as I love this business, I am less and less enthused about it's future.
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Re: Did NATO fail small theatre owners? 20 Mar 2012 14:03 #38118

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Thanks for the population qualifier.

I do respectfully disagree with the "if you are going out of biz it's your own danged fault" re digital cinema but often that is exactly why people do go out of business. Especially small businesses that hinge on one or two persons entire suite of management skills. There's a reason 80% of small biz's fail in 5 years.

We are members of CBG and have signed NDA with them and GDC and Christie so we will not be revealing details here.

Signing with CBG, if you are a significantly small town, would not help you as what they offer does not enable you to purchase and pay for the equip. It's not about smart or stupid: it's about big vs. small. It's about the cost per screen vs what you can gross vs the VPF. Which is either not available or nonexistent or so small you cannot borrow the per screen equip cost with a straight face.

This is a great conversation. Thanks to all of you for engaging.
Michael Hurley
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Re: Did NATO fail small theatre owners? 20 Mar 2012 14:04 #38119

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I'm not saying they would be gleeful about it. I signed a contract with the studios too and I'm not gleeful about paying them their high rental fees either, but I still do it. It's a contract and I honor it or I won't be in business very long. We all pay for things that don't make the most financial sense, but we are obligated to do it, so we do. Just because it doesn't make sense for a studio to pay a VPF financially, it still is what they said they would do in the contract (at least, I think it says that). You don't get to not pay it because you'd be losing money by doing so...the whole idea behind the VPF model was that the studios would be paying for equipment so that they wouldn't have to produce film. The idea of the VPF for after the break theaters was that part of the revenue stream from that film came from that lower grossing theater down the line and that part of the cost of that film should paid for with their rental fees. The fact that they are cutting a check to the integrator (and then they to the exhibitor) rather then paying it out to a film lab is supposed to be the only change for the life of the VPF program (ten years).


Strand, I am sorry to hear about your experiences. You were one of the earliest adopters that I knew of. We gross similarly and I have had no troubles booking either, even with my weekly VPF. I have had very few issues (knock on wood) so I think, for whatever reason, either you have had poor luck with yours or I have had exceptional luck with mine. the only good news is that I believe when it comes to replacing either yours or my system it will be quite a bit cheaper then it was the first time around.
"What a crazy business"
Last Edit: 20 Mar 2012 14:09 by leeler.
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