Studios reach digital cinema upgrade deal

LOS ANGELES (Reuters) - Five Hollywood studios have reached a long-sought financing deal estimated at over $1 billion with a group of theater exhibitors to digitally upgrade 20,000 U.S. and Canadian cinema screens.

Travis Reid, chief executive officer of the Digital Cinema Implementation Partners (DCIP), formed by Regal Entertainment Group, Cinemark Holdings Inc and AMC Entertainment Inc, told Reuters that Blackstone Group LP and JPMorgan Chase & Co would lead the financing.

Studios involved in the deal include Walt Disney Co, Viacom Inc’s Paramount Pictures, News Corp’s Twentieth Century Fox, General Electric Co’s Universal Pictures and Lions Gate Entertainment Corp.

“Our initial goal is to convert the existing theaters of our owners, AMC and Cinemark, and Regal, which operate a little over 14,000 screens in the U.S. and Canada,” Reid said, noting he expected an additional 6,000 screens could also be converted during the upgrade.

Reid said the DCIP estimated it could complete the conversion within 3 to 3-1/2 years from when it starts early in 2009.

It costs around $70,000 to outfit a screen with digital projectors, he said.

Long delayed by debate over who should pay for the system, digital cinema offers a potential solution to declining movie attendance at a lower ongoing cost.

Hollywood and the exhibitors are hoping the long-sought digital cinema deal will boost attendance, cut costs and enable more 3-D viewing.

DCIP was formed over a year ago and first hoped for a deal by late 2007, but the talks hit snags over terms requiring studios, exhibitors and content providers to pay usage and other fees to help pay off loans provided by institutions such as JPMorgan to buy and install new digital equipment.

The upgrades will enable studios to send movies digitally to theaters, saving them billions of dollars in print and delivery costs. Once outfitted with digital projectors, theaters can add 3-D capabilities.

Hollywood has a lot riding on the conversion, with studios like DreamWorks Animation SKG Inc and Disney aggressively planning to roll out 3-D films. These studios will need enough 3-D screens to support their slates.

Hollywood and theater chains believe 3-D will not only boost attendance, but also command higher ticket prices.

About 5,000 of the 37,000 cinema screens in the United States are digitally equipped and the ultimate aim is to transform all 125,000 screens worldwide.

There are around 1,300 3-D screens in the United States.

Time Warner Inc’s Warner Bros studio and Sony Corp’s> Sony Pictures are not involved in DCIP at this