Digital Cinema Implementation Partners (DCIP) is a joint venture of AMC, Cinemark, and Regal Entertainment. It is chartered to finance and rollout digital cinema to the over 14,000 screens owned by these three circuits. In October of this year, DCIP announced the signing of a 20,000 screen VPF deal with four major studios. (Not Sony, not WB.) The 20,000 screen count opens the door for other circuits to join in. Preferences for such deals are expected to be given to those already signed up with NCM for cinema advertising.
DCIP has had a difficult history. It first attempted, but failed, to establish a long term subsidy from studios designed to achieve cost-neutral exhibitor operations, including replacement costs. It had hoped to bring the cost of digital cinema equipment down to that of film systems through volume purchasing, and while it succeeded in getting lower pricing, it did not get the prices it wanted. It pushed studios for high VPFs so that the exhibitors would pay nothing for their equipment, and it notably got such concessions from the studios that wanted 3-D installations to grow in 2009. But the studios who have not signed up, WB and Sony, very likely have lower film print costs than their competitors, which places a lower cap on their maximum VPF. (See http://mkpe.com/faqs/ to learn how VPF financing works.) If so, this will delay negotiations and subsequent financing while DCIP reevaluates its position.
How could DCIP get into this spot? Early in the year, DCIP negotiated a $1B credit line with JP Morgan for the purchase of equipment. It was to have access to the $1B when four studios signed up, which would provide considerable incentive to the other studios to join the party. With the credit crunch, however, the table turned around. Now it is expected that all six major studios will be needed to sign a VPF deal before funding can close. This puts Sony and WB back in the driver seat, and could end up requiring the exhibitors to put cash in the game.
My prediction for 2008 was that DCIP would sign with five studios by year end, and that Travis Reid would retire from his duties. While it did sign with five studios (but only 4 of the majors), it appears Travis still has a lot of work on his plate and is in no position to move on.
From a technology point-of-view, DCIP’s primary role is to smooth the way for the integration of NCM cinema advertising systems. NCM, however, does not expect to use digital cinema servers for its content in the near future, which leaves the TMS as a potential intersection for advertising communications. Since the TMS is the central point for other business processes as well, exhibitors and service providers would greatly benefit from all kinds of standards in TMS communications. DCIP has had plenty of opportunity to drive such standards, but its attempts at setting standards in SMPTE have not been well managed. Instead, the company has sought ways to have intellectual property in TMS communications, working closely with companies such as Technicolor to define TMS communications under NDA. It’s not clear at this stage if the final work will remain proprietary or will be opened up for competitive vendors. Certainly, several segments of the industry would benefit if such work was opened up.