WEEKLY CineBUZZ REPORT - 23 February 2012

Highlights of this Week's Report

- China Opens Release Window - A Crack
- U.S Boxoffice - So Far/So Good
- CGM's "Oscar" Picks
- In-Home Theatres Become Passe'

China and U.S. Ink New Movie Release Agreement

Last week, U.S. VP Joe Biden and Chinese VP Xi Jinping (the odds-on favorite to become China's next President) announced an agreement which will ease (slightly) the current restrictions on U.S. movie distribution in China.

Under the new agreement, China will allow an additional 14 movies (including 3D and IMAX films) to be released bringing the total annual allowable releases to 34. Although the Obama Administration and the Motion Picture Association of America were touting this as a great step forward, it is really a token gesture on the part of the Chinese government.

The pact also increased the limit on a studio's box office take to 25% from the current 13%.- which is in stark contrast to the 50-55% of box office grosses the studios grab from U.S. exhibitors. On the important issue of piracy, nothing was agreed to regarding DVD or BluRay sales, or China's rampant movie piracy and copyright infractions.

In a private agreement with the Chinese Government, Warner Bros. became the first studio allowed to offer a pay-per-view service in China and DreamWorks announced it had formed a joint venture with two Chinese media companies, called Oriental DreamWorks.  Based in Shanghai, the company will create animated and live-action movies and TV shows targeting a family audience and is scheduled to release its first production in 2016.

Recently completed Chinese National Film Museum

The Chinese want and are building up their own modern cinema industry, which will produce and distribute their own brand of movies.  The major U.S. studios, I believe, will use the less expensive Chinese movie production facilities more and more for post-production, special effects, and digital design and animation production.

U.S. Boxoffice Looking UP

Includes Navy Seals in Cast

Year-to-date, the U.S. box office , at $1.45billion is up 17.7% over 2011 - a very good start for the year.  Being pushed by new as well as holiday holdovers this year's box office, thus far, has been resilent and spread across a number of films vs. one or two blockbusters.

This Sunday's Oscar awards should give a boost to grosses as well. Also opening this weekend are Act of Valor (Relativity) the action, Navy Seal quasi-reality flix should do very brisk business.  It is accompanied by the comedy Wanderlust (Universal) and Gone (Summit), an action thriller (which I believe will be a sleeper and do very well).  Openers for March look promising. The Lorax (Universal), John Carter (BA), and the documentary Bully (Weinstein) are best bets.

First quarter grosses should surpass 2011 by at least 10% and provide a good cushion going into Spring, which can always be dicey. Also, there will be the Summer Olympics and Presidental election to contend with.  Tickets sold thus far: 185.6 million - slightly up from last year.

CMG'S "Oscar" Picks - Silence and the Ladies

For openers, we are only going to predict on the top awards, and our feeling this year is that Silence is golden and the Ladies rule. Lets get to it:

Best Picture: The Artist
Best Actor: Jean Dujardin, The Artist
Best Actress: Viola Davis, The Help
Best Supporting Actor: Christopher Plummer, Beginners
Best Supporting Actress: Jessica Chastain, The Help
Best Director: Michel Hazanavious, The Artist
Best Music: Ludovic Bource, The Artist 

So, we are predicting that Tinseltown's big night will be all about history.  The way Hollywood used to be and a slice of social/racial life in the U.S. during the mid-1990's.

Note: In a deal signed yesterday (with the Weinstein Company) Netflix reported that The Artist, will make its pay-television debut exclusively on Netflix rather than on traditional premium cable TV.  This deal also includes the upcoming docu-flix, the Bully.

In Home Theatres Go Out-of-Fashion

According to the National Association of Home Builders, the large and elaborate Home Theatre is a design tread that has seen its day. A must-have in many homes just a few years ago, has quietly and quickly become passe.  The hugh projection screen, theatre seating with cupholders, and mood lighting has given way to large flat panels and smaller (yet just as powerful) sound systems.  In today's home the entertainment is in every room with devices that move with each family member.

The U.S. homebuyer of today is practical, value-oriented, and knows the technology.  The need for a home theatre or large, media-viewing gathering place is no longer needed. According to the NAHB, other once popular home trends that are on the wane: Outdoor kitchens & fireplaces, Sunrooms, Two-story foyers, Master-planned developments, Formal dining rooms, and Whirlpool tubs.

Best and Happy Movie Going!
Jim Lavorato

DIGITAL CINEMA Goes LASER

In its decision to abandon analog 35mm film and embrace digital projection the Hollywood studios, supported by several exhibition chains and NATO (National Association of Theatre Owners), trapped the cinema industry into ever evolving technological cycles which are the hallmark of the digital domain.  These changes are impossible to stop, impossible to control, and doom users to continuous adoption and expense.

Kodak's Laser Projection System

Case in point: Laser Projection Systems - the next development in content projection, laser based projectors will replace the current xenon based Digital Cinema projectors currently being adopted by the cinema industry.

Why?  Because laser projection delivers a vastly improved on-screen image with more contrast, a much wider color palette, a brighter image, and over time are more economical to operate.  For example, for 3D movies, laser based projectors are twice as bright as conventional xenon based D-Cinema projectors because laser light is already polarized and does not require filtering - which consumes half the light generated by the xenon projector.

Kodak first demonstrated a laser-based cinema projection system last spring to rave reviews. Unfortunately, Kodak didn't have the financial wherewithal to bring its prototype to market so had to license its.  First license purchaser, IMAX which is now working with Kodak and have stated that the projector will be in use at IMAX Theatres in 2013.

Barco Laser Projector

Last month, at the Digital Cinema Symposium, held in Galveston, TX, Barco premiered its laser driven cinema projection system. Touted as, "the brightest projector on the planet for digital cinema", the Barco 4k resolution projector produced a 70ft. wide on-screen image, which according to observers "stunned the audience".  Dave Keene, of NewBay Media Systems, stated "it's impossible to describe, the combined effect of very high light output, higher contrast, and 4k resolution produced the best image I have ever seen on a large screen."

Chinese Built Laser Projector

Like all digitally based technology improvements the cost of laser projectors will decrease in price, will be adopted, and will become the next "must have" for cinemas - because it's a better mouse trap.

Barco estimated that its laser projector will be available commercially in 2-3 years and the other D-Cinema projector manufacturers will join Kodak and Barco, as they must.  And Hollywood will embrace laser projection, as they must.  And cinema operators will have to acquire the technology, as they must. 

The solution to this problem is for the Hollywood studios to simply announce that they are going to keep distributing movies on 35mm film.  The old technology is controllable, reliable, and, most importantly, doesn't continuously evolve into new and better technology that must be embraced.

Best and Happy Movie Going!
Jim Lavorato

WEEKLY CineBUZZ REPORT - 12 February 2012

Disney's Bob Iger

DISNEY'S IGER SPEAKS OUT on RELEASE DATES & ULTRA-VIOLET

Last week Bob Iger, President & CEO of Disney spoke in a webcast regarding the release window for movies and other topics, here's what I learned.
Bob, what are your feelings about the current state of release windows?
Currently after the theatrical release the movie is sold via DVD and pay-per-view. Then to Internet streamers like Netflix and Hulu.  However, we want Redbox, the kiosk based movie distributor, to wait 28 days after the DVD release before it can buy new movies for rental.

Disney no-go on UltraViolet

We feel this would be a wise thing for us to do. Don't forget, under the First Sale doctrine , companies like Redbox can by DVDs from third-party distributors (ie. Walmart) if they do not want to honor release window delays.
Isn't this exactly what Redbox is going to do?
Probably, they are doing that now with Warners Bros. that has imposed a 56 day hold-back on sale of their DVDs to Redbox.

Disney's KeyChest

What about Disney's position on UltraViolet?  Note: UltraViolet is the cloud-based technology that allows consumers to have individual "lockers" with stored entertainment content such as movies, TV shows, etc. (see CMG post "The Moola Report", July 11, 2011).
We are the only major studio not committed to the UltraViolet consortia. I have no plans for Disney to join the Group and as you are aware we are developing our own digital locker technology - KeyChest. I don't want to sound too critical, but we're taking a wait and see approach on UltraViolet. I'm not suggesting that we're not open-minded about it, but so far I'm not sure that it's proven to be as robust as we expected or as consumer-friendly as hoped.
Thanks Bob, I'm sure we'll be hearing a lot more on both subjects.

WHERE HAVE ALL THE YOUNG MEN GONE ?

This is the burning question being asked by both movie distributors/exhibitors and TV broadcast and cable companies.  According to media research company, Nielsen, American males, ages 12-34, are spending less time going to the cinema or in front of their TV sets.
Last week, Nielsen released a study on media use. The study revealed that Internet videos, social networks, mobile devices, and video games - alternatives to the cinema and television - are taking up ever larger slices of the young American males' attention span.  They are still watching the same movies and TV shows but they are streaming them on computers, tablets, and cell phones to a greater degree than any other segment of society, and if this trend continues the long-term implications are huge.
Echoing the Nielsen findings, several major media companies, have stated that their own research affirms that there has been a drop-off in overall young male viewership of TV and visits to the cinema.
For cinemas, as behavior shifts, there is likely to be a scramble as cinemas re-script themselves. They don't want to get tagged as stodgy, un-hip, low-tech places to access entertainment.

JUST THE RIGHT AMOUNT OF WRONG !
For some time now (years actually) I have been talking about the U.S. cinema's down-slide. 2011 witnessed a decrease in admissions just shy of 5% as movie-watchers continued their gravitation to less expensive movie downloading, rental, and streaming.
Additionally, the cinema exhibition business has become a summer business with the majority of box office grosses being realized in the May - August time frame, and as we reported in the above post, the 18-35 male demographic is becoming a no-show at cinemas.
Has Hollywood become to same-old in terms of story lines, actors, sequels and even in animation - last year only Cars 2 made it into the top 10 highest grossing films.  Tinseltown's only salvation appears to be the international cinema, which has been growing each year, in stark contrast to the U.S. market.  Unfortunately, if the overseas cinema goes the route of the U.S. box office and it gets saddled with the expense of digital conversion the same fate will befall it.
The U.S. cinema has been going in the wrong, lock-step direction for some time.  The studios have and are still making crazy quilt decisions regarding content and their relations with exhibitors. For their part, movie theatres are in need of  a strategic deep-tissue massage, as their only answer to their problems seems to be higher pricing.

Cheers,
Jim Lavorato

WEEKLY CineBUZZ REPORT - 1 February 2012

Exhibitors will pay tax on VPF payments

IRS WILL RULE "VPF" IS INCOME TO EXHIBITORS
It is almost a given that the IRS will rule that the Virtual Print Fee (VPF) that the studios pay exhibitors (through companies called integrators) will be subject to and will be considered as ordinary income to exhibitors receiving the VPF.
Revenue Canada, the Canadian equivalent to the IRS, has already ruled that the VPF will be reported by exhibitors as income.  Additionally, in Canada, there will be no VPF associated with second-run films.  I have not heard, as yet,  if the VPF will be offered to U.S. second-run cinemas; although a $300/print fee was rumored.
The VPF scheme, is just that - a scheme to entice exhibitors into digital  conversion - but as one delves more and more into the details the scheme becomes less and less attractive in view of the stipulations associated with it.  And yes, I hear the lament of exhibitors saying, " well it's better than nothing", but is it?  Each exhibitor should take a hard look at the VPF program.  What is its duration? How much do you receive in fees? How and under what circumstances can the studios void the contract? How much control do you have to cede to the studios regarding the operation of your cinema?  Are there additional operational or equipment costs in adopting the VPF? Under the VPF who owns what?
A VPF of $800 or $300  - after integrator fees, "other" expenses, and taxes - what is the exhibitor left with and how long will it last? Given the studios' current barbarian bean-counting mentality, to me its a one-sided game, because if it wasn't Hollywood would have paid for the industry's conversion long ago

Tech Kings Win Anti-piracy Battle

HOLLYWOOD LOSES PIRACY BATTLE TO INTERNET KINGS

As report is the CTC Flash this past Monday (1/30) Hollywood lost its fight for new and enhanced anti-piracy legislation in both houses of Congress last week.  What had once been considered a shoe-in for the entertainment industry and associated labor interests crumbled as the Internet mavens put the pressure on legislators in both the Senate and House of Representatives forcing them to renege on their prior commitments to Hollywood and its cohorts.

This was a major blow to Hollywood and is an indication of their weakness and diminished clout in battling the tech Kings.


CINEMA TRAINING CENTRAL KICKS OFF 2012

New Workshops & Seminars of 2012

CTC has a new website and Guidebook for viewing at www.cinema-training.com .  This year seminars and workshops will be offered in April and October, and we are anticipating increased attendance given the situation confronting cinema exhibitors and their need to bolster customer service and marketing, and enhance operations and technical capabilities.

Best and Happy Movie Going!
Jim Lavorato