Thomson Secures Hollywood Studio Support for Digital Cinema Rollout

Christie Digital Systems now has a competitor, as Thomsons Services division has reached digital cinema usage agreements with DreamWorks, Sony Pictures, Universal Pictures, and Warner Bros. to accelerate the deployment of digital cinema systems in North America. In addition, the company is in late stage negotiations with Twentieth Century Fox, New Line Cinema, and The Weinstein Co., and expects these studios to be part of the initial deployment.

Under the separate, long-term agreements, each of the studios has agreed to distribute content digitally throughout the United States and Canada, and pay a virtual print fee for screens equipped with Technicolor Digital Cinema systems, beginning as early as the first quarter of 2006. Studio support for Technicolor Digital Cinema covers an initial rollout of complete digital projection systems in up to 5,000 DCI-compliant screens over the next three-four years. It is the strategic intention of Thomson to deploy at least 15,000 digitally-equipped screens in the U.S. and Canada, through the initial rollout and additional phases, over the next 10 years.

The studios included in this announcement have accounted for over $5.4 billion of the $7.2 billion total year-to-date box office revenue in North America in 2005. Thomson is currently in negotiations with other film studios to expand the range of its non-exclusive content agreements. Thomson is also in ongoing discussions with regional and national exhibition chains to finalize plans to begin the deployment of digital cinema installations in early 2006.

The agreements support Thomsons strategic intent to strengthen its leading role in the services associated with end-to-end digital content preparation, distribution, and exhibition. Thomsons intended role includes the management of the rollout of digital cinema projection systems covered by this announcement, plus postproduction services, network services, including distribution and the supply of equipment.

Thomsons digital cinema plan is a clear example of our customers trust in our ability to deliver the services they need today and in the future, said Frank Dangeard, Chairman and Chief Executive Officer of Thomson. We believe that managing this transition requires a technology shift for the entire industry, a move which Thomson is best-placed to handle. These agreements also support Thomsons strategy of expanding its client base and being a leading service provider to the entertainment industry. Having worked for several years with Hollywood to craft the right launch for digital cinema at the right time, we are also uniquely positioned to support the movie industry in other parts of the world in achieving this shift.

We are pleased to be part of the Technicolor Digital Cinema rollout, said Jim Tharp, head of distribution at DreamWorks. The Technicolor business model makes the transition to digital cinema economically sensible. In addition, we believe that theatre owners and the moviegoing audience will enjoy the vibrant picture and sound available through digital distribution as each subsequent showing will look as good as the first.

This is a significant development in the evolution to digital distribution of our motion pictures, said Jeff Blake, vice chairman of Sony Pictures Ent. and chairman of worldwide marketing and distribution for Columbia Tri-Star Motion Picture Group. The Technicolor Digital Cinema business model was compelling, and this agreement ensures that our content will be displayed with the quality and reliability we require, and consumers demand.

In our continued effort to be proactive in the transition to digital cinema, Universal is pleased to have entered into this agreement along with other studio partners, said Nikki Rocco, president of distribution, Universal Pictures. As digital technology in theaters continues to evolve, we see only great benefits to the movie-going public.

Technicolor has been a trusted service provider to Hollywood for many years and their expertise in both film and digital cinema is unmatched in the industry, said Chris Cookson, president, Warner Bros. Technical Operations & cto, Warner Bros. Ent. We are excited to pursue the next phase of the long-awaited rollout of digital cinema.

We are impressed with the thoroughness of the Technicolor Digital Cinema business plan and are very interested in exploring the future role it could play for the studios, exhibitors and the moviegoing public, said David Tuckerman, president, New Line Cinema distribution. We look forward to being a part of this venture as Technicolor initiates its digital cinema rollout early next year.

Bob and Harvey Weinstein, co-chairmen of The Weinstein Co., jointly said, The development of digital cinema and the broad-based industry support for the Technicolor Digital Cinema plan is good news for filmmakers as it will expand our creative flexibility and exhibition options. We have selected Thomson to be our partner in film, post-production and DVD services and we look forward to finalizing our digital cinema agreement in time for the initial deployment.

Under the business model for the digital cinema rollout, the studios will continue to book films directly with exhibitors, and if a booked screen is equipped with a Technicolor Digital Cinema system, the studio will pay Thomson a virtual print fee for usage of the digital equipment. Current estimates of the total cost of installed digital cinema systems are in the $90,000-100,000 range per screen.

The business model has been structured to allow the rollout to be financed from a variety of sources, including equipment vendors and financial partners. With todays agreements in place, Thomson can now focus on sourcing the optimal financing structure for this rollout.

This announcement comes shortly after the publication of the Digital Cinema Initiatives LLC (DCI) industry specifications for digital cinema. The Technicolor Digital Cinema plan will be technology agnostic, allowing both exhibitors and studios to benefit from the best available technology, including both 2K and 4K projection.

This plan provides an industry-wide digital cinema framework addressing all aspects of the much-anticipated digital cinema rollout: full output long-term content commitments by multiple Hollywood film studios; the widespread deployment of digital projection systems with exhibitors, and a broad industry commitment for the installation, operation and financing of those systems through a proven, experienced service provider.

By launching a program with a plan to convert at least 15,000 screens in the United States and Canada, Thomson further believes it will have the scale to support all interested exhibitors in a move to digital cinema, from large chains through independents. In response to exhibitor and studio requests, Thomson will start its rollout with a beta test to prove DCI equipment operates in a commercial environment at the very high level, which all parties require.

Todays announcement demonstrates Thomsons commitment to enabling the transition to digital forms of distribution for its customers. Thomson will manage revenues flow from both physical/analog environment as of today (print fees and distribution charges), and from the digital cinema environment (virtual print fees and distribution charges). Thomson estimates that the opportunities from the market for digital cinema services are at least as great as from todays $1.5 billion global film print and distribution market.

Thomson (www.thomson.net) provides services, systems and technology to help its Media & Ent. clients content creators, content distributors and users of its technology realize their business goals and optimize their performance in a rapidly changing technology environment. The Group is the preferred partner to the Media & Ent. Industries through its Technicolor, Grass Valley, RCA and Thomson brands.

Since its inception in 1999, Technicolor Digital Cinema (www.technicolordigital.com) has been a pioneer in the enabling and advancement of digital cinema initiatives. By actively working side-by-side with key digital cinema stakeholders as a technology enabler and service provider, Technicolor Digital Cinema is utilizing its breadth and depth of valuable industry knowledge and expertise to develop solutions for technologies and standards that will ultimately facilitate the global commercialization of digital cinema. Headquartered in Burbank, California, Technicolor Digital Cinema offers the most comprehensive set of digital cinema services and solutions, including compression, encryption, key management, secure distribution, storage, scheduling and playback and maintenance and support.

Technicolor Electronic Distribution Services (www.technicolor.com), part of the Services division of Thomson, is a leader in the preparation, distribution and exhibition of digital theatrical content for customers worldwide.