NATO held its annual members meeting this month. This was the first time that NATO’s new Advisory Board met. In the past, the entire membership was on the Board of Directors, which made it complicated to get things done. A reorganization took place this past year, with the general membership now populating the new Advisory Board, and a much smaller BOD handling core business more efficiently.
The failure of CBG to deliver has left NATO is in an awkward position with its smaller members. Coincidently, Kendrick Macdowell, NATO VP and the executive leader behind CBG, resigned from NATO the end of the month. In my dialogs with Kendrick, his departure was solely for personal reasons. However, Kendrick’s exit provides momentum for a change of course. It’s time for NATO to rethink it’s direction with CBG.
While solid box office receipts say there’s much to be happy about, NATO’s meeting this year had a lot of unhappy campers. Exhibitors find themselves having to buy digital 3-D projectors out-of-pocket to keep up with competition, and no acceptable options on the table to recoup costs through VPFs. While Cinedigm now offers an exhibitor financing option with recoupment of 80% of equipment costs through VPFs, exhibitors are not keen to trade their credit lines for a circuit full of digital equipment. In order to raise its own capital, Cinedigm may be counting on DCIP’s success to build momentum in the capital markets. However, Cinedigm’s existing debt burden and poor stock performance may be a tough handicap to overcome. Other deployment entities also offer VPF-backed financing, but require equipment choices and maintenance contracts that are not acceptable to many exhibitors.
NATO’s Cinema Buying Group (CBG) originally promised that bigger circuits would pull in the VPFs to cover equipment costs for the little guys. A key tenet was that no one would be left out. If a business plan was drafted in support of this promise, it didn’t lead to a direct negotiation of deployment agreements. To some, it appears that through DCIP, the biggest circuits negotiated a rich VPF for themselves, and left scraps for the little guys. All-in-all, NATO underestimated the effort needed to succeed in an equitable US rollout of digital cinema, promising more to its members than it could deliver.
The failure of CBG to deliver has left NATO is in an awkward position with its smaller members. Coincidentally, Kendrick Macdowell, NATO VP and the executive leader behind CBG, resigned from NATO the end of the month. In my dialogs with Kendrick, his departure was solely for personal reasons. However, Kendrick’s exit provides momentum for a change of course. It’s time for NATO to rethink its direction with CBG.
