How do you burn through $16.5M as a deployment entity whose role is to raise funds and install systems? Certainly, there must be experts at DCIP on this subject. According to Cinemark’s most recent 10K filing, that’s the total sum invested in DCIP by its owners to date. To be sure, there’s a few programs to be written to manage VPF billings and to track equipment location and its digital certificates. But show me the IT manager who couldn’t do these things for under $1M.
Extravagances aside, the prime question remains when will DCIP get its funding? If it was only able to get a bond rating near junk level, interest rates will be very high. This would not be conducive to a rollout. If DCIP was counting on 5% financing, and could only get 10% in today’s market (these are conservative figure), it would add at least a year to its recoupment schedule. If its deployment agreements cap the interest rate at a rate below that which it can obtain, then the exhibitors are on the hook for the additional expense, which would not be small. This is the most likely dilemma that is causing DCIP to delay. Such delay could go on for a long time, as the interest rate factor is unlikely to resolve itself soon.
This brings up the question as to how long the big three exhibitors will stay with DCIP. AMC being the only exhibitor that’s not a public company, and the first to announce a deal with Sony, is highest on the list of possible defectors. Cinemark may not be far behind. It is hard to imagine that these exhibitors will miss DCIP’s IT department. However, Regal, who has the closest ties to DCIP, would be least likely to depart.
Cinemark, with approximately 3700 screens, paying 80% of $70K per system, would be able to rollout with $200M in financing. AMC would need $265M. These sums, while significant, are much less than the $1B DCIP is attempting to raise. Depending on the minimum rollout quantities that they each negotiate with studios, they could probably start collecting virtual print fees (VPFs) with their current deployments. That, of course, depends on how willing studios are to go direct with an exhibitor. For more insight on that front, see the section on Cinedigm in this report.
