Theaters, studios see $1.1 billion upgrade deal in Q2

By Sue Zeidler

LOS ANGELES (Reuters) - Several theater chains and studios are nearing an estimated $1.1 billion financing deal to deploy in cinemas digital technology that promises to boost attendance and save Hollywood billions of dollars in annual print and delivery costs, industry officials said on Sunday.

"We're hopeful that in the second quarter we will get it all arranged," said Travis Reid, chief executive of Digital Cinema Implementation Partners. DCIP is wholly owned by theater chains Regal Entertainment Group, Cinemark Holdings Inc and AMC Entertainment Inc, which collectively operate over 14,000 screens.

The long anticipated upgrade at an estimated cost of $70,000 to $75,000 per screen is expected to be a key topic this week at ShoWest, the annual Las Vegas gathering of movie exhibitors that begins on Monday.

DCIP, formed about a year ago, first hoped to clinch the deal involving six major studios and third party financiers by the fourth quarter of 2007, but market volatility and issues related to equipment procurement, performance criteria, standards and usage fees prolonged the talks.

"Unfortunately, anytime you need to bring consensus on that basis, it's going to take time to get it done. It is literally front burner," said Jeffrey Katzenberg, chief executive officer of DreamWorks Animation on a February 26 conference call.

Katzenberg, a huge 3-D and digital cinema proponent, said he expects the DCIP deal to be done in the next 30 to 45 days.

The studios involved in the talks include General Electric Co's Universal Pictures, Time Warner Inc's Warner Bros, Viacom Inc's Paramount, which distributes DreamWorks films, News Corp's Twentieth Century Fox, Sony Corp and Walt Disney Co.

According to sources familiar with the talks, the deal would require studios, exhibitors and content providers to pay usage and other fees when using the equipment. These fees would go toward paying off loans that will be provided by financial institutions, including JP Morgan, to buy and install the equipment.