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Author Topic: Having a look at the Paramount direct VPF contract.. James B Gardiner Film Handler Posts: 91 From: North Altona, Victoria, Ausrtalia Registered: Feb 2009 posted 03-08-2009 04:42 AM                     J. Sperling Reich at http://celluloidjunkie.com has posted a draft of the Paramount VPF with a good overview of the contract. Interesting. Find it Here. . James  |  IP: Logged Steve Guttag We forgot the crackers Gromit!!! Posts: 12814 From: Annapolis, MD Registered: Dec 1999 posted 03-08-2009 07:43 AM                     That is a very interesting document and post. There are definitely poison-pills in the Paramaount deal. One item that he notes...the LMS/TMS thing...I know Dolby has pretty much solved that as a single DSS100 can serve as a LMS/TMS for up to 3-screens...so a small complex is covered. I believe all Paramount is looking for there is a single point of entry to the complex. He also felt the need to point out that the distributor must be informed about a server swap...well-yeah...who has a DCinema system running doesn't know the importance of always keeping your server/projector serial numbers current...that is how KDMs are made. If you change either the player or the projector, your existing KDMs won't work anymore...forget about the $100 that Paramount would want for not informing...worry about the movie that won't be playing so no money will be generated! I hear the FIPS level 3 thing is going to be a costly one for the projectors and is one reason Barco is declining to offer a 1.2" full-frame triple-flash projector since one would need to upgrade again. What the DCI folks are really missing on...if they want early adoption...exhibitors should feel confident that they DON'T have to upgrade...they should only need the security/performance features of the day they install it. It is one thing that after a feature becomes available to require FUTURE installs to have it...however DCI really needs a Grandfather clause. A number I'm hearing for upgrading projectors is between $15K-$20K. That is freakin' huge. I also noted that the VPF is less than $1,000...27.5% less for 2D..even 3D, which costs a lot more to equip, maintain and run, only gets you an extra $100. Also what is noted is that this is not a 10-year deal...this was a maximum 10-year deal with a common end date for all. It is now, if signed today a 9-year, 11-month deal and counting down. Thus your potential VPF to pay off your system will be getting smaller, the later you join. However, once you join, you have another clock ticking to get a substantial investment going...1/2 the complex in 6-months and the balance within 3-years. Which they give you more incentive for...you loose your VPF if they need to strike you a print to run in your complex...after all, it isn't a virtual print if they need to make a real one. Fair is fair. Steve  |  IP: Logged Mark Gulbrandsen Resident Trollmaster Posts: 16657 From: Music City Registered: Jun 99 posted 03-08-2009 09:29 AM                     Steve... I'm somewhat surprised you haven't seen the VPF Agreement yet, its been around since late last year... of course the whole Paramount paper while being important to the conversion is only the needle in the haystack. You only get paid if you run Paramount Product! There is not enough Paramount product out at one time to cover the screns in a 16 plex... a 10 plex.... a 6 plex... or a 3 plex for that matter. All of the other studios will need to follow suit for all this to work... if an exhibitor has $$ comming in from 5 different studios at once it makes conversion really practical as there will be an actual cash flow generated by the VPF's... DCIP recently announced that they've got an agreement with Fox which was a major step in them getting theor conversion under way. They have to pay back Wall Street the millions somehow! Once DCIP starts conversion of the three chains the quantity of film prints produced will dwindle quite rapidly since the total of these three chains represent the majority of screens in this country. All of this VPF stuff is slowly being worked out and will ultimately happen, it takes time. I think we can assume the Paramount/Exhibitor contract to be a model of what the other studios will persue except probably for Disney. They always have a contract thats twice as long with ten times more stipulations in it!! Mark  |  IP: Logged John T. Hendrickson, Jr Jedi Master Film Handler Posts: 889 From: Freehold, NJ, USA Registered: Apr 2001 posted 03-08-2009 03:48 PM                     It is my understanding that there is a "most favored nations" clause in the Paramount contract. What this means, simply, is that if you agree to receive a LESSER VPF from another distrib, then you will only receive that amount from Paramount FOR ALL FUTURE contracts. To date, has any other studio announced that they will pay VPF's directly to exhibitors? I also understand that if you commit to this contract, you must convert 50% of your screens to digital within a certain amount of time (can't remember if it was six months or a year), or you will lose your VPF's.  |  IP: Logged Steve Guttag We forgot the crackers Gromit!!! Posts: 12814 From: Annapolis, MD Registered: Dec 1999 posted 03-08-2009 04:45 PM                     There are several things in the contract that make it bad... Yes, you have 6-months to convert 1/2 of your screens to DCinema. 3-years to convert the rest. There is a 3D clause that is a bit confusing...one can interpret it to mean you HAVE to have at least 1 3D screen or it may mean you can have the contract by only having 1 3D screen for that screen. While Mark is right that Paramount alone can't make this a good deal...it is still a crappy deal if every studio jumps in. The money offered does not cover the difference in cost between film and digital equipment. Furthermore, the Most Favored Nation clause means the deal you sign today may be worse tomorrow, depending on what other studios are willing to do. The fact that it is not a 10-year deal...it has a common termination clause means the deal gets worse with time. The Uber-Stupid clause about if any deployment firm takes over the VPF deal, then Paramount would need to be repaid for all payments to date. Whereas Paramount would have saved on striking prints for the complex during that period of time, Paramount (or any other studio) has no grounds for wanting a repayment The "you must keep up" clause should be a deal-breaker for every exhibitor out there...the deployment firms should have passed on that one too. Since none of the projectors out there now are fully "DCI Compliant" they are going to require you to spend quite a large amount of money to keep up...The lowest price I've heard for the FIPS Level 3 is $15K....Do the math, if you have to pay that to keep up, it will negate over 20 titles to pay for that one screen alone! These deals NEED a grandfather clause if they want to encorage people to invest now. Why are they hell bent on punishing those that started the DCinema movement. If those people had not started it, we would not be where we are now. NATO is really doing their membership a disservice if they don't encourage their membership to insist on Grandfather clauses and pass on Most Favored Nation clauses. Nobody from the studios tells an exhibitor how to run their film cinemas. Why would they surrender this control for digital? To sum it up...it is a bad deal that leaves the exhibitor vunerable for a lot of money that never really is paid back in any manner.  |  IP: Logged Julio Roberto Jedi Master Film Handler Posts: 938 From: Madrid, Madrid, Spain Registered: Oct 2008 posted 03-08-2009 05:01 PM                    I agree it's not the deal I wanted to see. A bit stiff with the $ amount. A bit unforgiving with old equipment. A bit pushy on upgrades. And depending on what others offer to set their prices? Ridiculous. Up the amount at least 10% (better 20% if you want people to jump in). Open a 6 months window where everybody gets a 10 years contract for that time (i.e. also 10 years for those signing 6 months from now). Forget the worst nation clause. Make your offer firm. Lock the minimun DCI specifications and push MANUFACTURERS, not exhibitors, to comply. REWARD the compliance and updates, don't PENALIZE those that don't have access or $$$ to spend in extra security and stupid stuff like that which should have been settled years ago. I don't know. It's not a bright start and I have the bad feeling the rest of the deals will be even worse, so digital may indeed come to a stall after the early adopter's and new openings are over with it and they realize the math doesn't add up.  |  IP: Logged Scott Norwood Film God Posts: 8146 From: Boston, MA. USA (1774.21 miles northeast of Dallas) Registered: Jun 99 posted 03-08-2009 05:14 PM                        Agreed that it is a bad deal, unless you believe that will increase ticket sales. The biggest problem for me is that, at the end of this not-quite-ten-year deal, the exhibitor is left with equipment that will be obsolete (or soon to be obsolete) and in need of replacement. What happens then? He can only hope that the replacement equpment will be substantially cheaper in 2019 than it is now. Still, I give Paramount credit for offering something directly to exhibitors. I like the idea that a theatre owner should be able to go to his regular dealer and purchase equipment that meets his needs, rather than being subject to the whims of whatever some middleman-type organization thinks is best. I do believe that the industry is better served by this type of agreement than by directing all VPF payments through a middleman (who came up with the term "integrator" anyway?). I'm curious about the six-month/50% requirement. This seems as if it might be difficult to meet, either due to exhibitor scheduling or equipment/installer availability (to say nothing of cost). Also, does this deal obligate Paramount to provide a DCI copy of any Paramount title that the theatre books that isn't subject to one of the exceptions listed? It does not seem to make any exception for repertory titles. This could get very expensive for Paramount very quickly if an art house or rep house were to take them up on this deal (unlikely, but possible). In any case, this is all mostly a curiousity at this point. The economics don't work, and no one else is offering a similar or better offer to exhibitors, so I can't see any theatre owner actually taking them up on this deal.  |  IP: Logged Steve Guttag We forgot the crackers Gromit!!! Posts: 12814 From: Annapolis, MD Registered: Dec 1999 posted 03-08-2009 05:22 PM                     Scott, Unless I misread it...the contract specifically exempts Paramount from HAVING to provide anything in terms of content. Distribution and movie deals will continue as normal. So signing up does not get you a golden ticket to Paramount titles. Again, the only way a deal could really work is if it covers ALL stuidos. The presumption then is you are playing "someone's" title at all times on all screens. Remember too, Paramount and other studios write off the cost of prints as complete losses within 2-weeks...There is a reason they don't want to pay any more in VPFs than absolutely necessary, their real costs for film prints are not as high as many many think they are. Steve  |  IP: Logged Scott Norwood Film God Posts: 8146 From: Boston, MA. USA (1774.21 miles northeast of Dallas) Registered: Jun 99 posted 03-08-2009 05:32 PM                        Section 6(b) says that they will provide a DCI copy, with four exceptions. I don't see anything that would exclude repertory bookings, as long as the other conditions are met.  |  IP: Logged Julio Roberto Jedi Master Film Handler Posts: 938 From: Madrid, Madrid, Spain Registered: Oct 2008 posted 03-08-2009 05:37 PM                    quote: Steve Guttag their real costs for film prints are not as high as many many think they are That would be the only logical explanation for such stiffness. I mean, $100 more than they are offering and it would still be the bottom I would've guessed they were gonna do. Then again, perhaps in markets like the USA they indeed have a reduced print cost, due to the sheer number of copies, the reduced transportations/taxes, etc. In Europe, for prints with soundtracks (Dolby/DTS, crapcode, etc) in small-ish countries (i.e. runs of 1000 prints or less), I would've guess a $1200 minimun (in 2009) for a not-too-long print even for majors. More for Watchmen Much more for independents. Then again, everything in Europe is more expensive than in the USA  |  IP: Logged Bill Enos Film God Posts: 2081 From: Richmond, Virginia, USA Registered: Apr 2000 posted 03-08-2009 09:09 PM                     A coworker who has a cousin who is a business law attorney sent the attorney this thing. She says she would advise a client not to sign it.  |  IP: Logged Anslem Rayburn Master Film Handler Posts: 476 From: Yuma, AZ, USA Registered: May 2002 posted 03-09-2009 02:59 AM                     quote: Scott Norwood Section 6(b) says that they will provide a DCI copy, with four exceptions. I don't see anything that would exclude repertory bookings, as long as the other conditions are met. But section 6(a) says that the decision to license any film is up to the studio, and the studio only. So if you request an old title and they haven't created a digital version, they can just refuse to license the movie to you in the digital format. If they have a digital version, and wish to allow you to license it, then they will provide it. Unless I'm misunderstanding the question or what the paperwork says.  |  IP: Logged Scott Norwood Film God Posts: 8146 From: Boston, MA. USA (1774.21 miles northeast of Dallas) Registered: Jun 99 posted 03-09-2009 06:15 AM                        If you interpret 6(a) as saying that they can refuse to license specific titles because no DCI version is available, then signing this agreement sounds like a great way to ensure that a significant number of titles will never play at your theatre. It would be interesting to see what the lawyers would say, but Paramount really should clarify this issue.  |  IP: Logged Lyle Romer Phenomenal Film Handler Posts: 1400 From: Davie, FL, USA Registered: May 2002 posted 03-09-2009 09:45 AM                     According to that write-up, if a projector is installed before 12/31/09 (10 more months) then they don't have to be upgraded to FIPS level 3.  |  IP: Logged Steve Guttag We forgot the crackers Gromit!!! Posts: 12814 From: Annapolis, MD Registered: Dec 1999 posted 03-09-2009 11:42 AM                     Section 4 states that equipment that is not DCI compliant when it is installed (due to lack of available DCI compliant equipment), will have 6-months to upgraded, AT THE EXHIBITOR'S EXPENSE, to make it conform to DCI spec. There is a later clause to deal with changes in DCI spec over time where such upgrades can be negotiated. However, if Paramount were not to get its way on such changes...what can the exhibitor do? Paramount could deam an impass and terminate the contract.  |  IP: Logged

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