Thomson Secures Wide Ranging Hollywood Studio Support for Significant Digital Cinema Rollout
DreamWorks, Sony Pictures, Universal and Warner Bros. Sign Agreements to Utilize Digital Projection Systems from Technicolor Digital Cinema in 5,000 Screens in the United States and Canada; Twentieth Century Fox, New Line Cinema and The Weinstein Company in Negotiations to Support Venture; Thomson Plans to Deploy at Least 15,000 Screens
PARIS, France and BURBANK, Calif., — November 10, 2005 —Thomson (Euronext 18453; NYSE: TMS) today announced that its 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 Company 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 3-4 years. It is the strategic intention of Thomson to deploy at least 15,000 digitally-equipped screens in the United States 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.
Today’s agreements support Thomson’s strategic intent to strengthen its leading role in the services associated with end-to-end digital content preparation, distribution, and exhibition. Thomson’s 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.
“Thomson’s 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 Thomson’s 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 movie-going 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 Entertainment 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 theatres 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 & Chief Technology Officer, Warner Bros. Entertainment “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 movie going 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 roll out early next year.”
Bob and Harvey Weinstein, co-chairmen of The Weinstein Company, 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.”
Business Model and Financing
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 today’s 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.
Today’s announcement demonstrates Thomson’s 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 today’s $1.5 billion global film print and distribution market.
Certain statements in this press release, including any discussion of management expectations for future periods, constitute “forward-looking statements” within the meaning of the “safe harbor” of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements due to changes in global economic and business conditions, consumer electronics markets, and regulatory factors. More detailed information on the potential factors that could affect the financial results of Thomson is contained in Thomson’s filings with the U.S. Securities and Exchange Commission.
About Thomson — Partner To The Media & Entertainment Industries
Thomson (Euronext Paris: 18453; NYSE: TMS) provides services, systems and technology to help its Media & Entertainment 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 & Entertainment Industries through its Technicolor, Grass Valley, RCA and Thomson brands. For more information: http://www.thomson.net.
About Technicolor Digital Cinema
Since its inception in 1999, Technicolor Digital Cinema 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. Additionally, the division is working closely with studios to support current digital cinema releases. Technicolor Digital Cinema is an operating unit of Technicolor Electronic Content Distribution Services, part of the Services division of Thomson. Since 2000, Technicolor Digital Cinema has managed and distributed 100 titles for eight studios, covering more than 280,000 digital presentations worldwide. For more information: http://www.technicolordigital.com.
About Technicolor Electronic Content Distribution Services
Technicolor Electronic Content Distribution Services, part of the Services division of Thomson, is a leader in the preparation, distribution, and exhibition of digital theatrical content for customers worldwide. Its operations include those of Technicolor Digital Cinema. In addition, Technicolor Electronic Content Distribution Services provides managed services to enable content distribution over Internet protocol (IP) networks that allows customers to deliver a differentiated content offering. For more information: http://www.technicolor.com.
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