The two largest cinema circuits in Canada, through joint venture entity Canadian Digital Cinema Partnership (CDCP), have secured $115m in financing to enable a full upgrade of their combined 1,600 screens to digital by end 2012. Deal closely follows a recent surge in digital activity of independent circuits in Canada also with target end date set for 2012.
CDCP was set up as a joint venture by Cineplex Entertainment and Empire Theatres in April 2011 to plan and implement the deployment of digital cinema equipment as well as secure digital deployment agreements with content providers, in essence functioning much like US exhibitor consortium DCIP. In recognition of the similarities, DCIP itself has agreed to provide both administrative and service support for CDCP screens in Canada. However those services did not extend to VPF deals, as CDCP, has separately entered into long term deployment agreements with three US Studios as at April 2011, including Twentieth century Fox and Warner Brothers
The CDCP finance deal comprises $80m in bank financing plus a further $35m in equity contributions from the circuits themselves. Blackstone Advisory Partners acted as financial advisors while Bank of Nova Scotia was the lead arranger of financing. The deal also follows a new allocation of financing for DCIP, which secured a further $220m in March on top of its initial $660m financing one year prior.
Arrival of the financing is timely for the two circuits as digital screen penetration hit an estimated 950 screens or one third of the market in Canada as at end May 2011. It also follows a surge of activity from other Canadian circuits through deals with key North American deployment entity and digital cinema network Cinedigm. Cinedigm's largest individual deal in Canada was agreed with Cinemas Guzzo to facilitate deployment of its 142 screens in 11 cinemas by end 2012. Guzzo had previously ordered 50 3D systems from MasterImage in 2010 and in June 2011 signed a deal with GDC technology for a repeat order of 62 server units.
Cineplex was initially linked directly with DCIP, but clearly there were advantages or necessities to a Canadian-only exhibitor approach. Both Cineplex (1,338 screens) and Empire (386 screens) are no strangers to digital as each circuit has already equipped at least one quarter of its total screens specifically for digital 3D. The circuits have separate equipment vendor deals under CDCP; Empire has chosen Barco projectors and Doremi servers, while Cineplex has exclusively selected Christie projectors and Doremi servers.
Meanwhile, Cinedigm has also tied up several deals with smaller Canadian circuits in the Quebec region under the Cinema Buying Group (CBG) comprising a total of 106 screens in 15 sites. The deal was signed with the APCCQ (Association des proprietaires des Cinemas Cine-Parcs du Quebec) of which the largest members are Les Cinemas RGFM with 36 screens and les Cinemas Cine Enterprise with 46 screens. Total number of screens that are now contracted under commercial deployment initiatives in Canada now totals over 2,000 or over 70 per cent of the total screen base, all of which have 2012 as target deployment date. This total includes AMC's 160 screens in Canada. With only three VPF deals signed, CDCP may be obliged to hold off on installations until they can sign a further one or two studios. If that happens quickly, this should not affect the desired timing.
The Canadian market is therefore mirroring the current realities of digital cinema in the US, where the largest chunk of screen growth is coming from DCIP circuits as a consortium of the largest circuits, while smaller to mid sized circuits are individually signing up with third party deployment entities, namely Cinedigm. For example, the most recent US exhibitor to sign with Cinedigm was 278-screen Malco Theatres this month. The third layer to this market structure is the collective exhibitor groupings under the CBG, which are also tied up with Cinedigm. DCIP has now upgraded over 8,000 screens or over half of its total screen allocation. Of the DCIP circuits, Cinemark has targeted full deployment of its US screens by end 2011.
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