Digital Cinema In Flanders (DICIF) Call for proposals

Digital Cinema In Flanders (DICIF) Call for proposals 1 Purpose of this document This document sets out the aims and objectives of Digital Cinema In Flanders (DICIF) and explains the requirements it has of a service and supply partner in view of realising these goals. It invites potential partners to put forward proposals on how they might help those needs. The document describes the assessment process for applications and what will happen after these have been considered. Applications are welcomed from appropriately qualified and experienced companies, or from a consortium of companies who have decided to work together and whose collective approach may more fully meet the needs and requirements of DICIF. The deadline for responses is Friday 18 November 2011 at 17.00 CET. The document puts forward three scenarios, i.e.: 1) Installation of digital equipment in all participating cinemas (with or without financing solutions); 2) Installation of digital equipment in all participating cinemas and VPF collection (without financing solution); 3) Installation of digital equipment, VPF collection and financing solution. The applying company or consortium may put forward a proposal for one or more of these three scenarios. The applicant is invited to structure his response following the modules that are included in annex. 2 Background and context Digital Cinema In Flanders aims to facilitate the digital transition of Flemish film exhibitors. The observation that the Flemish (and, by extension, Belgian) cinema landscape is already largely digitised, has put further emphasis on the need to accelerate the completion of the digital rollout in the region. Producers, distributors and exhibitors will all benefit from a reduced transition period, which is not only cost intensive but which raises concerns as to the continued availability of films in 35mm format. However, existing market digitisation models especially those based on the Virtual Print Fee (VPF) prove difficult to access for certain cinema types. Faced with these pressures, Digital Cinema In Flanders brings together the small and arthouse exhibitors that risk to suffer from a further delay in the installation of digital equipment in their venues. By following a common approach, these cinemas cumulate knowledge and negotiating strength in order to better navigate the technical, legal and financial complexities involved in the digital transition. This call for applications follows an extensive process of consultation between the exhibitors, the Flemish Institute for Visual, Audiovisual and Media Art (BAM) and the Department of Culture, Youth, Sports and Media (CJSM) of the Flemish Community. In 2010, CJSM commissioned the SMIT research centre (Vrije Universiteit Brussel) to provide a state of the art report on this subject. Based on the recommendations included in this report 1, it was decided to proceed with the project of a buying group entity at a sector round table in July 2011. This group entity, Digital Cinema In Flanders, functions as a forum for debate and common decision- making by the exhibitors. DICIF has received expressions of interest from 15 cinema owners representing 16 sites and 43 screens. The type of cinema joining this initiative varies and includes mainstream independents, firstrun arthouse cinemas and cultural venues whose overall offer includes cinema and film. Some of the parties are profit organisations while others function on a nonprofit basis. All are 1 Cf. http://www.cjsm.vlaanderen.be/cultuur/downloads/wso_digitale_cinema_eindrapport20110301.pdf 1

frequent cinema exhibitors (socalled cultural centres, which programme films less frequently in a local setting, have been excluded). 3 DICIF: details and characteristics 3.1. Strategic approach: the three scenarios The group is composed of exhibitors with varying programming profiles and organisational structures. Individual turn rates also range from low to mediumhigh levels (from 0 up to 20). The group as a whole will base its decision on the way the benefits of different transition models for the group as a whole compare to the individual benefits the various members would have in case of an individual transition. Therefore, it is imperative that the group gains an optimal insight into the level and type of exhibitor investments that are associated with different transition models and what the impact of a VPF deal could be. As a result, this call for applications distinguishes between three possible scenarios for a transition. 1) Installation of digital equipment in all participating cinemas (with or without financing solutions); 2) Installation of digital equipment in all participating cinemas and VPF collection (without financing solution); 3) Installation of digital equipment, VPF collection and financing solution. The applying company or consortium may put forward a proposal for one or more of these three scenarios. 3.2. Membership details The precise number of members of the buying group cannot be established at the moment and will partly depend on the outcome of the tendering process. However, a total of 15 players expressed their interest in joining the buying group, representing 16 sites 2 and 43 screens. The venues involved include mainstream independents, firstrun arthouse cinemas and cultural venues whose overall offer includes cinema and film. Some of the venues have already (partly) digitised their screens 3, but none have struck VPF deals with a third party integrator. Given the heterogeneous composition of the group, we distinguish between subgroups depending on the relevant scenario for transition. This explains the smaller total number of screens (36) in Scenario 1. An overview of the number of screens and turn rate is given in the table below. A detailed list of the exhibitors is also included in Annex III. As noted, the exact composition of the group is not fixed yet. Therefore the applicants are requested to make use of the following parameters in their responses: Number of screens: o Scenario 1: Please make use of the total of 36 screens, but also explain how the proposed model would vary in case the group would count 10 or 60 screens; o Scenario 2 and Scenario 3: Please make use of the total of 43 screens but also indicate possible changes to the model in case of a total number of 25 and 65 screens. Average annual turn rate per screen (for the group): The provisional group turn rate currently stands at 10 4. Please make use of this parameter but also explain how the proposed solution would be affected in case of a final turn rate of 8, 11, 12 or 14. 2 Note that Actor s Studio and Styx are both owned by CNC (Coopérative Nouveau Cinéma). 3 Roxy (Koersel) has digitised 2 of its 3 screens, Cinema Koksijde has 4 digitally equipped screens and Actor s Studio will digitise one of its screens early November. 4 Please note that the turn rate has been calculated using the following strict parameters: films programmed for at least 7 screenings, before or during the first week of a film s national release. 2

Characteristics Scenario 1 Scenario 2 Scenario 3 Participating exhibitors Actor s Studio (for 2 screens) Buda (3) Cartoon s (3) Cinema Central (2) Cinema De Keizer (1) Cinema Koksijde (for 2 screens) Cinema Zed (1) Flagey (2) KASK Cinema 5 (1) Lumière (3) Nova (1) Roxy (for 1 screen) Sphinx (5) Styx (2) Vendôme (5) Cinema Zuid (2) Like Scenario 1, to which the digitised screens of the following exhibitors are added: Actor s Studio (1 screen); Cinema Koksijde (4 screens); Roxy (2 screens). Number of screens 36 43 43 Turn rate of the group n.a. 10 10 Like Scenario 1, to which the digitised screens of the following exhibitors are added: Actor s Studio (1 screen); Cinema Koksijde (4 screens); Roxy (2 screens). 3.3. Set up and organisation of the buying group The DICIF group functions as a forum for a common approach towards the digital transition. It is supported by the Flemish Department for Youth, Culture, Sports and Media (CJSM) and the Flemish Institute for Visual, Audiovisual and Media Art (BAM). Sophie De Vinck (researcher at IBBTSMIT) assists the buying group with the elaboration of a sound transition model and is the contact person for this call. 4 Key principles and requirements 4.1 Different modules for the assessment of the proposals Taking into account the need to find a quick solution and the heterogenous composition of the group, the buying group acknowledges that a successful digital cinema strategy can take on a number of forms, varying in terms of the following elements: Revenue funding via VPFs and transparency in reporting to VPFpaying distributors; The amount of financial contribution required from the exhibitors; Access to capital finance; Equipment characteristics; Installation and operator training services; Maintenance and equipment monitoring (e.g. via remote National Operating Centre); In particular, the idea of VPF mutualisation will be more or less feasible depending on a number of variables including the proposed speed of transition and the financial contribution required from the exhibitors under the varying scenarios. Therefore, for each of the scenarios for which it chooses to apply, applicants are requested to provide relevant information relating to each of the modules above so that the buying group may consider which of the strategic approaches offers the best solution for its members, i.e. a mutual VPF solution, a common equipmentonly approach (without common VPF) or some hybrid form. It should also enable the buying 5 Please note that KASK Cinema is a new exhibitor and has started its cinema activities in 2010. 3

group to differentiate between those options that include thirdparty financing solutions versus those in which each exhibitor raises its own financial contribution. We clarify the key elements that contribute to each module in Annex I. Applicants are invited to structure their application around these modules and to respond to each of these separately as appropriate to their proposals. 4.2. Public support Even within a VPF model (mutualised or not), some or all of the participating exhibitors may find themselves unable to access sufficient financing in order to pay their share in the costs. The number of venues that could find themselves in this situation may vary depending on the scenario chosen by the buying group (e.g. whether the VPF can be mutualised or not). In parallel to this tendering process, CJSM has looked into the potential of indirect or direct financial support from the Flemish Community with the aim of further fostering a swift and complete rollout. While the modalities are still being worked out, the following results of this exercise can already be pointed out with regard to potential bank guarantees and/or direct funding for the members of DICIF. Bank guarantees A number of existing mechanisms may be accessed by the exhibitors. These include in particular the credit facilities set up in the framework of the Participatiefonds 6 and the guarantees provided through the ParticipatieMaatschappij Vlaanderen (PMV) 7. No specific guarantees or credit mechanisms will be provided in view of the digital cinema transition. Direct funding A budget of 500.000 has been provided by the Minister of Culture, Joke Schauvliege, in order to support the digital cinema transition of smallscale and cultural exhibitors. The modalities of this support are being established at this moment and cannot be disclosed yet. However, the support is aimed at assisting a number of locally based exhibitors that, because of their programming or business profile, cannot sufficiently access the existing market transition models (VPF in particular) as well as those exhibitors that have a clear role in terms of guaranteeing a diversity of supply of films, in particular European films. Support will in any case be targeted directly and individually at the relevant exhibitors and cannot benefit third parties. The Flemish Community moreover stands in close contact with the Frenchspeaking Community in order to exchange information and assess potential areas of cooperation. The indirect and direct support mechanisms that are (put) in place are not directly linked to the common negotiation of a rollout contract by DICIF. The group of support beneficiaries will not necessarily overlap with DICIF group membership. Nevertheless, the applicant should indicate for all scenarios whether and in what ways the existence of one or both of these mechanisms affects the various modules (cf. Appendix I). 5 The assessment process Schedule The initial assessment team will consist of the members of the DICIF Steering Group, which is composed of representatives of the exhibitors concerned. They may be assisted by external experts if deemed appropriate. Assessment will commence on Monday 21 November 2011. Applicants will be informed within two weeks of this date whether their application will be taken further. This information will be provided by phone and/or email, with a followup confirmation by letter. These applicants will then be invited to make a fuller presentation to the DICIF Steering Group, during which both sides will be free to seek further clarification on potential issues. This presentation will take place within 2 weeks of this invitation. 6 For more information, see http://www.fonds.org 7 For more information, see http://www.pmv.eu 4

If necessary, selected applicants may be invited to submit a refined proposal. Following the presentations (at the latest on December 23, 2011) selected applicants and their models will be discussed during a round table with all members of the DICIF group, during which the members of the assessment team will put forward a recommendation for selection. The aim of DICIF is to complete the selection process by the end of 2011 beginning of 2012, with installation of digital equipment starting as soon as possible in 2012. Criteria All applications will be assessed against a range of criteria, centring on the following aspects: The references and experience of the applicant in the relevant field; The quality of the application; Pricing and financial terms offered by the applicant; The implementation arrangements and timing of the proposed model. A more detailed, indicative evaluation grid is included in Annex II. 6 Practical details Ownership and duration of the bid The bid submitted and the related documents remain property of the requesting party and will not be returned to the applicant. The bid tendered shall remain valid for a period of 90 calendar days from the date when the bids are opened. Delivery Respondents are asked to provide their solution to one or more of the scenarios, organised per Module (as described in Appendix 1) in both hard copy and electronic format. The style of the response is left to the discretion of the applicant and may take the form of written documents, PowerPoint presentations, spreadsheet data or a combination of these. All applicants should include a draft standard contract outlining the terms and conditions to which the applicant would require the DICIF and/or its individual members to agree. Responses should be drafted in English. In case companies wish to apply as a consortium, the response should detail the companies involved and indicate the lead company with whom DICIF may interact. The deadline for delivery of all responses is Friday 18 November 2011 at 17.00 CET. These should be addressed to: Digital Cinema In Flanders (DICIF) c/o Patrick Deboes Sphinx Cinema Sint-Michielshelling 3 9000 Gent An electronic copy should also be sent to dicif.call@gmail.com. This e-mail address is accessible by the initial assessment team members (cf. supra). 5

Questions & clarifications Applicants are welcome to contact Sophie De Vinck, who assists DICIF with the tendering process, for further questions or clarifications on any aspect of this call. Contact should be made in the first instance via email, directed at dicif.call@gmail.com and sdevinck@vub.ac.be. Clarifications should be sought as soon as possible after receipt of the invitation to apply. All possible efforts will be made to assist applicants in the timeliest manner under the circumstances. Queries that cannot be dealt with by phone or email may necessitate a facetoface meeting, with every effort being made to accommodate the needs and convenience of the applicant. 6

APPENDIX I: Contents of the bid: Needs and requests, organised by module MODULE 1: Applicant information Please provide DICIF with a short but complete overview of the company, including: Basic contact information Business activities Company structure Management and quality insurance references (certificates or general quality control mechanisms) Financial status Short and midterm forecast of business evolutions Applicants are asked to specify the terms and conditions (general and e.g. user) that are applicable to their own services and those related to the digital equipment. If available, please provide your latest annual report. MODULE 2: Equipment It is important that the members of DICIF are provided with reliable dcinema equipment, which conforms to DCI specifications and the cinema standards as they continue to be established within SMPTE and ISO. The equipment must be certified as DCI compliant. The proposed equipment should also be interoperable as established within relevant global standards and reference bodies. The applicant cannot include any regulations that will prevent open access in terms of programming. Use of the equipment must be open to any kind of digital content. The applicant may have links to certain manufacturers under which preferable prices can be offered. Yet it is also desirable that the exhibitors in the group have sufficient choice of equipment for their particular situation. The proposed solution must take into account the diversity of the DICIF members. For scenario 2 and 3, the group comprises a few additional members that have already digitised (part of) their screens with dcinema equipment. None of these members have signed a VPF deal yet. The applicant should specify in what way and under what conditions these exhibitors can be included in the VPF deal proposed. The applicant is asked to provide quotes for the basic equipment needs included in a digital cinema environment. This includes, but is not limited to: Projector and lens; Server; Operating software; Cabling, stands, racks etc. Warranties: please specify both the product liability and more extensive warranty options available. Please indicate how the latter affects the proposal, in particular in terms of price. Please provide a complete list of materials needed for the successful installation of equipment together with the prices for each, based on the volume and type of screens described in this document. Please also specify prices for addon equipment, such as 3D, Theatre Management System (TMS), satellite reception equipment, library servers etc. Please indicate the ability of the basic equipment to cope with the addon of 3D (e.g. in terms of light capacity). Define and specify interoperability. Define and specify digital content that is regulated for non open access. Please specify the range of choice of equipment where applicable. 7

MODULE 3: Exhibitors contribution The exhibitors will contribute to the installation and maintenance costs. The amount of the contribution however may vary according to the selected scenario. Likewise, the exhibitors contribution could be envisaged as one to occur upfront, through instalments or a mix of both. Please provide a description of your overall business model insofar as it affects pricing, especially those for exhibition. Describe, possibly graphically, how the overall package is built up with reference to equipment costs, finance costs, overhead and profit margins. Using the screen numbers and turn rates provided in this document, please indicate the required exhibitor financial contribution as appropriate. Specify how it is possibly affected by VPF contributions to the overall cost of equipment, based on these turn rates (cf. also module 5). Please describe the staging of payments of these exhibitors contributions, i.e. how much due upfront and the period allowed for the balance. MODULE 4: Installation and training The potential partner will be responsible for site surveys, installation and onsite operator training services. The rollout planning will be drafted in close cooperation with DICIF representatives. The rollout should start and be completed as soon as possible. Please indicate how you envision the rollout process, including the time frames necessary: o The different stages of the process and their estimated time frames; o Proposed installation strategy for multiscreen cinemas (e.g. staggered installation or not); o Proposed timing strategy between the different types of exhibitors (e.g. first the profit cinemas or other considerations); o Estimated time from contract signature to actual installation; o Overall time estimates for the complete process; o Who (and how many) will be responsible for the different aspects of the installation (e.g. subcontractors). Please specify the costs involved with installation (per screen) and how they will be charged (e.g. flat fee or variable); Please indicate whether onsite and/or offsite training is offered to the cinema operators on installation and/or on an ongoing basis. Specify whether these services come with extra charges. Please specify the prerequisites for the installation of digital equipment, including e.g. required size of the projection booth, availability of airconditioning, Internet access etc. MODULE 5: Maintenance and service Please provide proposals for maintenance and service associated with the equipment installation. These should include: Cost per screen by level of service; A description of the various service levels provided; Who will carry out the maintenance (subcontracting party or not); Emergency procedures; Ongoing remote monitoring services via national operating centre or similar facility; Method of payment, e.g. annually in advance, quarterly, monthly etc. MODULE 6: Distributor relationships and VPF funding Please list those distributors with whom long term VPF agreements have been established and specify the length of these agreements. Given the importance of independently distributed films for a large number of the exhibitors included in the buying group, the relations and contracts between the applicant and independent distributors will form an important element of consideration and evaluation. Please specify the steps that 8

have/are being made to reach agreements with remaining distributors. It is encouraged that the level of VPF and/or the conditions of payment are differentiated for films that are distributed independently, e.g. following a staggered or limited release. Please indicate the different types of content for which VPF payments are required and which types (could) fall outside of this system. Please indicate how the proposed model fits with secondrun and/or cultural cinema venues whose programming strategies may differ from those types of cinemas for which the VPF system was initially developed. Most of the exhibitors included in the group programme a substantial amount of socalled alternative content, including onetime screenings, film festivals, school programming etc. Please indicate the compatibility of your VPF system with these programming profiles. In the scenario of a VPF mutualisation, the total VPF contributions are levelled out over the entire group of participating exhibitors for the recoupment of digital equipment costs. Please specify how a VPF mutualisation affects the individual members of the group in terms of the level of their exhibitor contribution. Please indicate the extent in which you would be willing to rediscuss relevant issues with current distributors if necessary. Please specify whether any proposal made in relation to this or other modules might need to be amended subject to ongoing distributor negotiations. Transparency and detailed reporting towards VPFpaying distributors and the DICIF group entity is mandatory. Please describe what arrangements, timetables and information flows you have in place to fulfil any contractual commitments to distributors and/or DICIF with respect to programming reports, VPF reception etc. MODULE 7: Finance The diversity of the group translates to their financial capacity and funding structure. Some of the exhibitor members are profitbased and/or receive local, national or transnational funding for their activities. Likewise, some exhibitors will have less or more difficulties in accessing external financing individually, e.g. bank loans. Please outline the financial assistance you can provide, including for example: The conditions for access to it (e.g. bank checks and other prerequisites); The overall additional cost (over the basic equipment cost) that the financing will incur; The length of the finance agreement; The current interest rate to be charged to the exhibitor and its potential evolution over time; How the financing arrangements will affect the ownership of the equipment. MODULE 8: Additional information We kindly ask you to give feedback upon any matter not covered in this document and that you deem relevant to a successful operation of the DICIF project. Please provide any further information that you feel may support your application (such as track records; other services; partnerships etc.). 9

APPENDIX II: Indicative evaluation grid Selection Criteria References and experience of the applicant Pricing and financial terms Implementation and timing Quality of the application and other criteria Indications Level of experience in digital cinema and the rollout of equipment, including maintenance and after-sales service; The degree to which the applicants have reached VPF agreements with distributors (if applicable) and their relationship with independent distributors. The overall estimated input of distributor contribution over the agreement period expressed as a percentage of total equipment costs (if applicable); The amount of exhibitor advance contribution and the method of payment (lump sum or other); The cost of equipment as evidenced by a detailed price list; The per screen cost of installation; The annual maintenance cost per screen by level of service provided; The overall cost of finance for the funding period agreement. The time frame required to carry out site surveys and pre-installation inspections; The estimated time to complete the roll-out (including the availability of equipment); The procedure proposed by the applicant; The number of qualified engineers available to carry out the work. The degree to which the applicant has understood and addressed the nature of DICIF and its objectives; The degree to which the application demonstrates the flexibility required to ensure the success of the project. 10

APPENDIX III: Technical details of the DICIF members 8 Venue Town Number of screens non equipped Number of screens DCI equipped Distance projectorscreen Screen width Screen height Nova Brussels 1 0 18.55m 8.40m 3.90m Zed Leuven 1 0 13.50m 8.00m 3.40m Central Ninove 2 0 S1 12.00m 7.00m 3.00m S2 11.50m 4.50m 2.20m KASK Cinema Ghent 1 0 13.00m 6.58m 2.80m Styx Brussels 2 0 S1 tbc tbc tbc S2 tbc tbc tbc Zuid Antwerp 2 0 S1 12.00m 10.00m 4.25m S2 15.00m 10.00m 4.25m Cinema De Keizer Lichtervelde 1 0 27.50m 7.80m 4.40m Flagey Brussels 2 0 S1 27.00m 16.00m 7.00m S2 17.00m 7.50m 4.50m Buda Kortrijk 3 0 S1 15.90m 7.65m 3.20m S2 15.40m 6.93m 3.20m S3 7.53m 5.75m 2.55m Lumière Bruges 3 0 S1 9.95m 6.20m 2.63m S2 13.00m 5.90m 2.45m S3 22.60m 9.85m 5.85m Cartoon's Antwerp 3 0 S1 9.50m 6.00m 2.50m S2 10.50m 4.50m 1.90m S3 10.00m 4.20m 1.80m Sphinx Ghent 5 0 S1 12.00 to 13.00m 10.00m 4.30m S2 16.00m 6.80m 2.90m S3 16.00m 6.80m 2.90m S4 10.00 to 11.00m 4.00m 1.80m S5 10.00 to 11.00m 4.20m 1.80m 8 At the time of publishing, DICIF did not yet have complete technical information for Styx. We will send this information to interested applicants as soon as possible. 11

Venue Town Number of screens non equipped Number of screens DCI equipped Distance projectorscreen Screen width Screen height Vendôme Brussels 5 0 S1 23.30m 9.00m 3.70m S2 21.68m 8.23m 3.39m S3 20.77m 9.00m 4.66m S4 12.76m 6.85m 2.90m S5 11.24m 5.70m 3.00m Actor's Studio Brussels 2 1 S1 12.00m 5.00m 2.20m S2 12.00m 5.00m 2.20m S3 8.00m 5.00m 2.00m Cinema Koksijde Koksijde 2 4 S1 24.00m 11.35m 4.95m S2 28.00m 12.73m 5.70m S3 33.00m 15.57m 6.90m S4 33.00m 15.57m 6.90m S5 28.00m 12.73m 5.70m S6 24.00m 11.35m 4.95m Roxy Koersel 1 2 S1 20.00m 8.10m 2.85m S2 14.00m 4.70m 2.00m S3 16.00m 7.80m 2.75m 12