President's Report

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President’s Report

April 2017 / Vol. 18 No. 2 THE PRESIDENT’S REPORT April 2017 Vol. 18 No. 2

CINEMACON 2017 3

CINEMA BUYING GROUP 5

GLOBAL FEDERATION 6

GOVERNMENT RELATIONS—FEDERAL 7

GOVERNMENT RELATIONS—STATE 8

INDEPENDENT THEATER OWNERS 9

INDUSTRY DATA 10

MEMBERSHIP & MEMBERSHIP SERVICES 12

MOVIE THEFT 13

NATO ELECTIONS 16

NATO FALL SUMMIT 17

RATINGS 17

SECURITY 18

STRATEGIC PLANNING 19

TECHNOLOGY 20

THEATRICAL RELEASE WINDOWS 21

STAFF CONTACT INFORMATION 22

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CinemaCon 2017

CinemaCon is pleased to report another successful convention in the books this past March in Las Vegas. Attendance soared to over 3,250 fully-registered del- egates. As well, CinemaCon welcomed an additional 350+ Cinemark general managers to the show. The trade show and demonstration suites were busting at the seams including an exciting new VR demonstration from Universal Pictures and IMAX. Seminars had the highest ever attendance; including the NAC panel on “Adult Beverages at the Mov- ies”, the ICTA program on the landscape of Virtual Reality and a NATO led program on the DOJ’s ruling on captioning & audio description technology.

NATO Chairman John D. Loeks (l), CEO, Celebration! Cinema, and NATO In 2017, CinemaCon featured a re- International Committee Chairman Jan Bernhardsson (r), CEO, Nordic Cinema Group, welcome attendees to CinemaCon 2017. cord-setting TEN studio events, including Colosseum presentations & screenings from Sony Pictures Entertainment, STX- films, Paramount Pictures, Walt Disney Studios, Universal Pictures, Warner Bros. Pictures, 20th Century Fox and Lions- gate. Amazon Studios returned to the final day luncheon, and for the first time at CinemaCon, Focus Features celebrated their 15 year anniversary with a luncheon of their own. Attendees were also treated to early screenings of Universal’s The Fate of the Furious, Walt Disney’s Pirates of the Caribbean: Dead Men Tell No Tales, and Lionsgate’s The Hitman’s Bodyguard.

CinemaCon wishes everyone an excel- lent summer at the box office and looks forward to welcoming everyone back to Byron Berkley (l), President & CEO, Foothills Entertainment Co., and recipient of NATO’s 2017 Marquee Award, receives congratulations from Chris Aronson (r), Las Vegas next year for CinemaCon 2018 President, Domestic Distribution, 20th Century Fox. (23-26 April). Mark your calendars now!

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Amy Schumer, Hugh Jackman, and Goldie Hawn CinemaCon 2017 saw more celebrities and filmmakers than ever, including appearances from: Ben Affleck Anthony Hopkins Michael Bay Charlie Hunnam Luc Besson Hugh Jackman Jack Black Patty Jenkins Sofia Boutella Dwayne Johnson Matt Damon and George Clooney promote the upcoming crime comedy Suburbicon Steve Carell Jake Johnson Jerrod Carmichael Nick Jonas Henry Cavill Mila Kunis John Cena Queen Latifah Jessica Chastain David Leitch Priyanka Chopra Jared Leto George Clooney Ludacris Sofia Coppola Chris Meledandri Alexandria Daddario Ezra Miller Matt Damon Jason Momoa Rosario Dawson Isabela Moner Cara Delevingne Julianne Moore Eugenio Derbez Kumail Nanjiani Vin Diesel Christopher Nolan Kirsten Dunst Gary Oldman Zac Efron David Oyelowo Ray Fisher, Ezra Miller, Director Zack Snyder, Henry Cavill, Ben Affleck, and Jason Ansel Elgort Alexander Payne Momoa represent Warner Bros.’s Justice League Colin Farrell Chris Pine Ray Fisher Kurt Russell Dave Franco Amy Schumer Tyrese Gibson Jada Pinkett Smith Karen Gillan Zack Snyder Emily Gordon Aaron Sorkin Al Gore Charlize Theron Ryan Gosling Justin Theroux F. Gary Gray Brenton Thwaites Jon Hamm Colin Trevorrow Goldie Hawn Denis Villeneuve Salma Hayek Mark Wahlberg Katherine Heigl Naomi Watts Ed Helms Edgar Wright Bottom line, CinemaCon 2017 featured more CinemaCon award winners Isabela Moner (Transformers: The Last Knight), Salma Hayek product and talent on display than (How to Be a Latin Lover), Brenton Thwaites (Pirates of the Caribbean: Dead Men Tell No ever before! Tales), Eugenio Derbez (How to Be a Latin Lover), and Sophia Boutella (The Mummy)

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Cinema Buying Group

Early 2017 has been full of great program-related activity! The vendor community is showing heightened interest in the Cinema Buying Group in various forms and across varied service and product categories. New member programs and strengthened focus on promoting and marketing programs to our independent theater community is showing great results in this New Year. Member participation is up, vendor interest is high, and we had a very productive members-only meeting at CinemaCon last month. The future looks bright for the CBG community of independent operators!

The most successful member program in 2016, the Philips Xenon Lamp Program, showed another quarter-over-quarter increase in the first quarter of this year. The Sign-on Purchase Incentive and a generous Customer Loyalty Program (free lamp rewards) make this program very popular with members. The Royal Corporation Janitorial & Sanitation Products Program proved to be a great cost-saving option for members with its best quarter of performance since introduction last April. We are in process with program improvements in both of these well-performing programs, exciting details coming soon.

Created specifically to support the independent theater community through the Cinema Buying Group, the Indie Marketing Coalition (IMC) provides participating members expansive, studio-approved digital assets as well as selective hard assets (bus shelters, three-sheets, promotional packs, t-shirts, mini-posters, etc.) for use in promoting films and encouraging attendance. Other FREE member benefits include free show- time distribution through csXpress as well as inclusion in Movie Goer Network.

The DCDC (Digital Cinema Distribution Coalition), which provides satellite delivery access for feature films and alternative content, continues to garner consistent interest within the membership through FREE equipment, installation and service, at a pre-negotiated exhibitor delivery cost. This partnership shows immediate cost benefit to our community with savings of ~50% on the majority of titles.

In addition to our offering of standard Candy Rebate Programs from Nestle, Mars, Hershey and Promotion in Motion, we look to promote expansion in the concession arena this year. Our first Disney concession promotion launched this past month, with a Cars 3 Collectible Combo Pack. With special member pricing and free shipping to the U.S. and Canada, we anticipate increased concession per-caps, high purchase inci-

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dence, and a lot of smiling faces for this upcoming release. We look forward to a calendar full of these very targeted promotions for the balance of the year.

Potential programs in the queue for 2017 could address the following areas of need: Equipment Financing Program (from reseating a single auditorium to a complete theater FF&E package), Promotional Programs (studio licensed drink cups, popcorn bags/tubs), Independent-branded Con- cession Container Program (popcorn bags/tubs, drink cups).

The theoretical model of starting with base programs and key vendor relationships, effectively promoting the offerings to our community, showing continuous sales growth, then strategically enhancing and/or expanding offerings within the proven programs, has shown actual and measurable impact over the past year. The program model is working! The road to more meaningful program improvement in 2017 is Learn more about the CBG programs at vendor/manufacturer support with better and more programs www.cbgpurchasing.com. based on proven, measurable member support in existing and future programs. 2017 focus will be on improved individual For membership information please contact member outreach, expansion of current key programs, con- David Binet at [email protected], or for more tinued increases in member participation, and the strategic information on our programs you may contact introduction of a select combination of sponsorship and Brad Wardlow at [email protected]. program opportunities.

Global Federation

Representatives from ten leading global ex- At the group’s meeting, the representatives recommended hibitors, along with NATO and the Euro- supporting a global federation of exhibitors, which would pean association, UNIC, met at Cinema- include both existing trade associations and individual Con to discuss forming a global exhibitor exhibition companies. The global federation of exhibitors alliance. Members of the group discussed would serve two purposes: to (1) educate exhibitors globally key issues for a global group and what with greater information collection and sharing, and (2) to model would best achieve these priorities. advocate on behalf of exhibitors globally, consistent with all For each issue, the group also evaluated whether education, applicable laws. NATO’s Executive Board voted in support of advocacy or a combination of both would be most useful. Key exploring this option. issues included: (1) movie theft, (2) theatrical exclusivity, (3) music rights, (4) accessibility and related regulations, (5) work The group is currently evaluating membership and gover- with studios and the creative community, (6) technology and nance structures, and plans to announce further details fol- standards and (7) international trade and foreign investment. lowing its second meeting, which should be held at CineEu- rope in June.

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Government Relations dors presented their products: Dolby, QSC, Sennheiser, and Federal Sony all described their personal captioning devices, ranging from cupholder-based mounts to glasses to mobile app solu- Health Care Repeal Effort Falls Short: Congressional tions, as well as their audio description systems. Randy Smith, Republicans’ attempt to pass legislation partially repealing CAO and Counsel of the Regal Entertainment Group, and and reforming the Affordable Care Act failed when they were Joe Masher, COO of Bow Tie Cinemas, offered insights for not able to muster a majority vote in favor of the legislation. exhibitors to consider when complying with the staff training NATO members should be aware that this legislation would aspects of the rule. not have fully repealed the employer mandate; it would have only repealed the tax penalties for non-compliance. The failure Beyond the Red Carpet Event Makes a Splash on of this legislation to move forward was a major political blow Capitol Hill: NATO participated once again in Beyond the to President Donald Trump and House Republican leadership, Red Carpet, a special entertainment industry event held on who had thrown their support behind this bill. President Capitol Hill. Along with the Congressional Creative Rights Trump promised that reforming the Affordable Care Act is one Caucus, the MPAA, major Hollywood studios, and enter- of his major priorities, but the next steps are unclear. NATO tainment unions, NATO hosted a booth at this unique trade continues to support the restoration of 40 hours per week as show designed to showcase the many facets of production, the definition of full-time employment and will continue to distribution and exhibition. NATO partnered with TimePlay press for this amendment to the Affordable Care Act. to demonstrate how movie theater screens can become exciting interactive multi-player experiences during the preshow. Visi- Drive-By Legislation Makes Progress: Legislation tors to NATO’s booth left energized about finding TimePlay at creating a notice-and-cure period for alleged ADA violations their local theaters and impressed with the innovations made continues to pick up steam in the House of Representatives, by cinema technology partners. where it now has 14 cosponsors, evenly divided between Dem- ocrats and Republicans. H.R. 620, the ADA Education and Reform Act, would help exhibitors who get hit with demand letters or lawsuits on minor ADA violations. These demand letters and lawsuits can result in significant costs for exhibitors. A notice-and-cure period would require an aggrieved party to give a public entity notice of an alleged ADA violation or bar- NATOPAC Continues To Grow rier to access. The business would then have a certain amount NATOPAC ended the first quarter of 2017 on a high note of time to resolve the issue; if the business does not address the with over $54,800 cash on hand. NATOPAC made its first issue within the time period, the aggrieved party could move contribution this cycle to Senator Dianne Feinstein (D-CA), forward with civil action. NATO supports this legislation and who now serves as the Ranking Member of the Senate continues to lobby for the bill’s progress in the House. Judiciary Committee. NATO Hosts Panel on DOJ Rule at CinemaCon: Esther Baruh (left), Director, Government Relations at NATO moderated a successful panel at CinemaCon on the Department of Justice’s final rule on movie captioning and audio description. Four equipment ven-

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Government Relations lawmakers realized this double tax on a State particular form of the entertainment business would be both unjust and burdensome. NATO Surplus to Assist Regionals: NATO’s Executive Board recently approved a State Sugary Beverage Taxes: States plan to utilize NATO’s surplus to assist regional continue to look at beverage taxes as a way associations facing extraordinary expenses and to help their budget shortfalls. Arizona, precedent-setting legislation. Some of the funds Connecticut, Hawaii, Illinois, Massachusetts, will be used for enhanced legislative tracking New Mexico, New York, Rhode Island, and monitoring, as well as hiring an intern Vermont, Washington, West Virginia all have to support the government relations staff at legislation proposing taxes on sugary beverages. NATO. The remainder will be evenly divided Most have not moved out of committee. between a general fund for supporting the regular However, West Virginia remains a concern as government relations efforts of select regional the Governor vetoed the legislature’s budget and associations and a strike fund that may be used he is a proponent of a beverage tax. to address any high-priority issues that arise Local Sugary Beverage Taxes: Seattle’s throughout the country. To be eligible for this mayor wants a two-cents-an-ounce tax only supplementary assistance for either its regular on sugary beverages. The Seattle City Council activities or in the event of major legislation will possibly vote on the issue in mid-June. specifically impacting exhibition, a regional Advocates in Multnomah County, Oregon association must apply by submitting a legislative are trying to get a soda tax of 1.5 cents on the action plan explaining its legislative monitoring, November ballot and Santa Fe is having a vote grassroots advocacy, and lobbying strategy. A on a beverage tax on 2 May. The Philadelphia task force of Government Relations Committee 1.5 cents per ounce beverage tax went into members comprised of Mike Cavalier of effect 1 January 2017. However, efforts to get Cinemark, Bo Chambliss of Georgia Theatre the tax repealed are still ongoing. NATO of Advocates in Company, Mark Gramz of Marcus Theatres, Multnomah County, Pennsylvania is actively working with coalition Oregon are trying and Randy Smith of Regal Entertainment to get a soda tax members to try to get this tax reversed. of 1.5 cents on the Group will review these applications and make November ballot recommendations. NATO plans for the system Open Captioning to go into effect this year. Open captioning bills continue to crop up on state agendas. This session there are bills in Taxes Connecticut, Hawaii, Nebraska and Rhode Film Rental Tax: Senate bill 409 in West Island. All are in different stages of the legisla- Virginia proposed an elimination of the sales tive process. and use tax exemption for film rentals. This tax measure would impose a discriminatory double CT SB 958 CATO and local members testified tax on movie theaters as exhibitors already pay in opposition. This bill would mandate two admissions taxes in West Virginia. open captioned screenings per week for each movie shown in the complex. NATO of West Virginia, our partners at Status: The bill has not moved out of the MPAA and local exhibitors weighed in committee. to oppose this bill. Through this outreach,

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HI HB 475 Hawaii’s legislation proposes to or more screens at one location within the state repeal the sunset date of 2018 for the current shall provide open movie captioning during at open caption mandate of two shows per week least two (2) showings per week of each motion of every movie that comes with captioning. picture that is produced and offered with open Amendments are keeping the bill see sawing movie captioning. back and forth between repealing the sunset to make the current provisions permanent or It would also require that, upon request, a extending the sunset date and studying the motion picture theater in the state shall be financial and operational impact of the current required to obtain the master file from the mandate. movie distributors to include both closed and open captioning capabilities for each movie as Status: In House. House disagrees with Senate part of the standard file. This would empower amendment. the movie theater to decide to choose open or closed captioning for their theaters at any time, NE LB 269 North Central States NATO and even on short notice. local exhibitors gave testimony to oppose this Status: TONE and local exhibitors gave op- bill. Legislators suggested that representatives position testimony at the House hearing. The of North Central States and Nebraska’s Com- Senate has not yet scheduled a hearing. mission for the Deaf and Hard of Hearing work together to resolve the issue rather than go Metal Detectors through legislation. SC HB 3006- The bill would require all motion Status: Communications between the two picture theaters in South Carolina to install groups are ongoing. walk-through metal detectors. Status: Bill is in Judiciary Committee and has RI HB 5667 and SB 645 Rhode Island’s bill not had a hearing. is different in that it would mandate that a motion picture theater that consists of eight (8)

Independent Theater Owners RESOLUTION

NATO Executive Board Adopts PVOD Resolution Regarding Early PVOD Windows At a meeting on 27 March 2017, the elected independent WHEREAS third party integrators and certain studios and distributors are urging the industry to agree to early theater owner representatives on the NATO Executive Board PVOD windows and proposed a resolution which was adopted. The full text of the WHEREAS we believe early release windows may resolution appears at right. have a detrimental effect on all NATO members of NATO’s Chairman and President will share this resolution all sizes, therefore with the major studios. Any discussions or negotiations BE IT RESOLVED NATO hereby urges the studios to regarding specific potential business models will and must include all exhibitors regardless of size in the discussions and negotiations that each of the studios may have be conducted between individual distributors and individual individually with each of the exhibitors. exhibitors.

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Industry Data 2017 2016 Q1 domestic box office Q1 domestic box office Q1 2017 Sets a Record at the Domestic Box Office; Billion Dollar March $2.915 billion $2.790 billion Domestic box office continued to set records as the new year unfolded. Q1 box office hit $2.915 billion for the first time, powered by strong holdovers from Q4, Oscar-nominated +4.5% films such as La La Land and Hidden Figures QUARTER/QUARTER still in theaters, and blockbuster dating that continues to find success regardless of time of year. The strong results were up 4.5% over Q1 2016—itself up 12.7% over the previous year.

source: comScore Admissions data is pending the results of the Q1 average ticket price survey.

The quarter continued the evolving pattern of equalization between the quarters, with no particular time period wildly outperforming or underperforming.

Quarter Gross in billions Q1 2016 $2.79 Disney’s Beauty and the Beast had a powerful Q2 2016 $2.80 March, grossing nearly Q3 2016 $2.97 $400 million during the period. Q4 2016 $2.80 Q1 2017 $2.91

These strong results were driven in part by a record-setting March, which topped $1 billion for the first time. A mix of overperforming blockbusters—Beau- ty and the Beast, Logan, Kong: Skull Island—and complete surprises—Get Out (which opened the last weekend of February, but grossed most of its $164 million in March) carried the weight, with Beauty and the Beast alone grossing $441 million through mid-April.

March is not the entire story, though. Q1 box office outperformed 2016 in nine out of 13 weeks. The strong box office continued into April, with Q2 box office through 16 April up 4.59% and YTD up 4.51% at $3.42 billion.

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Average Ticket Price for 2016 is $8.65; According to comScore, Brazil delivered an Q1 Average Ticket Price Pending Survey impressive 31.2% increase in Q1 2017 when Results measured in U.S. dollars. In Japan, where nine The full year 2016 average ticket price was of the top 10 films of Q1 2017 were Hollywood $8.65. The average ticket price titles, the market saw a 27.9% increase. South for the fourth quarter of 2016 1976 Korea rose 12.4% with only three Hollywood ti- was $8.79, up 9 cents from Q4 $2.13 tles—Beauty and the Beast, Moana, and Logan— $2016 2015 and up by 28 cents from Q3 1976 cracking the top 10 during Q1. Australia posted 2016’s $8.51. Q2 2016’s average $9.08 a solid 5.1% jump in Q1. Spain and Mexico 2016 was $8.73. were basically flat. $8.65 The average ticket price in 1976 Not all markets had a great Q1. China contin- was $2.13. Adjusted for inflation, ues to struggle after growth slowed substantially that ticket would cost $9.08 in 2016. in 2016. Q1 2017 brought a decrease as high Quarterly fluctuations in the ticket price are as 7%, according to some estimates. A decline largely a function of the type of movies in the in Q1 is a very troubling sign for the Chinese marketplace. Blockbusters with high percentages market because the Chinese New Year holiday of ticket sales in 3D and Premium Large For- is the most active time for moviegoing. China mat screens in the winter holiday and summer now looks to The Fate of the Furious to provide periods tend to move the average up, while a a much-needed boost. The popularity of Uni- preponderance of family titles attracting children versal’s franchise is clear: Furious 7 is still the #1 and matinee audiences see a downward shift. Hollywood title released in China with around $390 million in box office. As of this writing, The average ticket price for 2015 was $8.43. The Fate of the Furious is already breaking records in Q1 2017 average is pending the results of the the world’s #2 market. ticket price survey. Elsewhere, Italy fell 24.4% as local titles failed to Q1 2017 International Box Office: have a substantial impact. Germany dipped 7.9% Key Territories Show Promising in Q1 while coming off a weak 2016 that saw a Growth, China Underwhelms 12% year/year decline. When content produced by Hollywood excites moviegoers, that excitement is felt around the Currency fluctuations continue to impact the world. North America’s Q1 2017 total posted global total. For instance, the U.K. was up 15% a 4.5% increase over Q1 2016, and strong in Q1 in local currency, but flat when measured titles such as Beauty and the Beast, Logan in dollars. and Fifty Shades Darker also played incredi- Looking ahead to the rest of the year, there’s no bly well overseas. Beauty is the first film to lack of optimism thanks to a slate that boasts hit $1 billion globally in 2017, and Dis- plenty of globally-viable properties. The markets ney has now released the five most recent that are up should have no problem staying up, additions to this exclusive club. In total, 29 and the markets that dipped in Q1 have plenty films have now hit $1 billion globally. of time to rebound.

Fate of the Furious raced to a $190 million opening weekend in China—a new record for Hollywood.

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Membership and Young Members Committee Update: Membership Services CinemaCon 2017 Meeting, New Goals Eight members of the Young Members Com- NEW NATO MEMBERS mittee Leadership board—along with a handful Company Name Main Contact Location of general members from other companies— January 2017 were able to get together at CinemaCon to Lafayette Theatre Ari Benmosche Suffern, NY discuss future initiatives. As a quick recap: the February 2017 YMC has already hosted one webinar on dine- 4 Mile Cinemas Steve Nothdurft Canon City, CO in theatres/luxury seating and also successfully Inspired Motion Picture Branden Joynt Newport, TN Group, Inc. executed a survey of millennial moviegoers. Optimist Town Theatre Mark Kosinski Chillicothe, OH Looking forward, the committee wants to pur- March 2017 sue the following: Central Coast Cinemas Bob Ey Paso Robles, CA (Park Cinemas) • More in-person meetings at regional events Lemoore Cinemas John Roush Lemoore, CA and a bigger presence during the week at MudBrick Studios Craig Hall Mobile, AL CinemaCon 2018 April 2017 • Increased marketing efforts to sign up even Milaca Theatre Jessica Wright Milaca, MN more employees of NATO member compa- Reel Cinemas, Inc. Greg Wax Narberth, PA nies Smárabíó Cinema/ Tino Mikaelsson Reykjavik, Iceland Háskólabíó Cinema South Hill Cinemas Marcus Meredith South Hill, VA • An online directory of YMC members • More webinars on “evergreen” topics in the NATO welcomed eleven (11) new exhibition industry companies since the last President’s Report. These • An expansion of our millennial research companies operate in nine (9) different states and that will dive deeper into key topics related one (1) territory worldwide. Above is a timeline to technology, the moviegoing experience, of when these companies joined NATO. brand awareness, ticketing, etc. The chart below displays the most recent screen The YMC leadership board will meet via con- count for NATO member companies, including ference call again in late April to begin work on the total number of companies that comprise these items. NATO:

Number of Number of Numbers of Representing more than 65,000 screens in 92 countries (as of 14 April 2017) Screens Companies Territories

NATO Domestic (US) Members 33,227 579 1 NATO Canadian Members 2,307 20 1 NATO North American Members 35,534 599 2 NATO US Territory Members 330 3 4 NATO International Members (Non-US, Non-Canadian) 29,280 46 86 NATO Worldwide Members 65,144 648 92

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NATO Continues to Expand Data Offer- Training Materials ings in the Encyclopedia of Exhibition The NATO Training Modules are complete, and With the global nature of our industry in mind, beta testing has begun! We invite you to preview NATO continues to add more data points from the interface at www.theatreowners.org and to sign around the world to our Encyclopedia of Exhi- up for updates at www.training.natoonline.org. bition (EofE). With the help of partners such as NATO Member Benefit - 2017 Loews comScore, UNIC, Artisan Gateway, Box Office Hollywood Hotel Discount India, and others, we are able to provide valu- The Loews Hollywood Hotel has once again able data points— lists of top exhibition chains, offered a discounted rate for NATO members top-performing films, etc.—for important mar- through the end of 2017. The benefit may kets. The updated data is currently here (you be used for any upcoming studio meetings or must be logged in to view) and any members general trips to Los Angeles. Please click here who need access should e-mail Phil Contrino for details. ([email protected]). Also, in the coming weeks we will be sending out a PDF version of the EofE to members. Non-members will be able to subscribe to the PDF version for an annual fee of $150.

Movie Theft

Movie Theft Task Force Meeting Report fully below); brainstorming how to collaborate Members of the Movie Theft Task Force met at with the MPAA going forward, including the CinemaCon to discuss recent challenges in the possibility of a new employee rewards program; field. MPAA representatives attended to provide an overview of arrests and litigation in 2016; context to recent restructuring that has central- and highlights from UNIC’s CEO Phil Clapp ized operations and resulted in fewer investiga- on European strategies to combat piracy. Con- tors in the field. MPAA representatives stressed tact Jackie Brenneman ([email protected]) for that piracy continues to be a top priority and more details on any of these topics. they urged exhibitors to continue to reach out Domestic Sources via their hotline (1-800-371-9884) if they have any incidents. As a note, members Camcord incidents in the United States more present at the meeting described some than doubled from 2015 to 2016 (from 33 in difficulties accessing an operator us- 2015 to 72 in 2016), though the numbers are ing the MPAA hotline. If you have still down from 2013 (116 incidents). Although any issues with the number, please the incidents have increased, most of this reach out to Jackie Brenneman increase comes from a small handful of very ([email protected]) and she will notify organized professional cammers that are proving the MPAA. challenging to stop. The MPAA is working in close collaboration with affected exhibitors and Other issues discussed included: a summary of local law enforcement to interdict these profes- the camcord incidents in 2016 (described more sionals.

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TOTAL UNITED STATES CAMCORD SOURCES U.S. CAMCORD INCIDENTS 120 100 80 60 40

20 63 63 116 89 33 72 0 2011 2012 2013 2014 2015 2016 NORTH AMERICAN CAMCORD SOURCES BY STATE Highlighted numbers denote “hotspots” = about 10% of total sources 2011 2012 2013 2014 2015 2016 TOTAL Alabama 2 3 5 Alberta 3 3 Arizona 5 5 British Colombia 2 2 California 13 14 13 17 57 Connecticut 7 2 2 2 13 Florida 10 1 9 9 20 49 Georgia 4 4 4 12 Illinois 2 2 1 5 Iowa 1 1 Indiana 1 1 Louisiana 2 11 8 2 23 Maryland 1 10 31 4 2 48 Massachusetts 2 1 1 4 Michigan 2 5 1 2 10 Mississippi 2 3 1 6 Missouri 5 3 8 Unknown North America 1 4 1 6 Nevada 10 5 15 New Mexico 4 2 6 New York 13 4 1 18 North Carolina 1 1 Ohio 6 3 2 3 14 Oklahoma 1 1 1 9 12 Ontario 10 4 2 16 Oregon 1 1 Pennsylvania 1 1 2 Puerto Rico 4 13 17 Quebec 2 2 South Carolina 2 6 4 12 Tennessee 4 8 8 20 Texas 9 7 5 5 25 51 Virginia 5 1 1 2 4 1 14 TOTAL 75 67 121 91 33 72 459

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Worldwide Camcord Sources Though the United States remains a top territory for piracy, movie theft continues to migrate to territories without strong local enforcement mechanisms. This is bolstered by the proliferation of digital piracy distribution and the ability to sync audio tracks from multiple languages onto a single digital copy of a film. As a result, sophisticated camcord operations operate globally. Current key markets for theft overseas include: Mexico, Russia, Peru, Ecuador, China, India, Brazil and Italy. Top audio theft lo- NOTE: In the chart below, countries with no blue or cations include: The United States, India, Thailand, Germany, Brazil, Russia, Spain, Italy and Hungary. gold bar indicates zero instances in that year 2008 GLOBAL CAMCORD INCIDENTS 2016 Australia

Chile

Ecuador

Thailand

Guatemala

Panama

Spain

Venezuela

United Kingdom

France

Canada

Mexico

Philippines

China

Brazil

Ukraine

Peru

Italy

Germany

India

Russia

Colombia

0 10 20 30 40 50 60 70 80 90 100 110 120

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NATO Elections

EXECUTIVE BOARD SEATS AND In addition to these eight automatic seats, the OFFICER SPOTS UP FOR ELECTION Executive Board has nine elected seats – four that IN 2017 represent regional/mid-sized circuits (75 or more Term Limits Will Change the Face of screens, but not “top eight”), four that represent NATO’s Governing Body independent cinemas (fewer than 75 screens), and NATO’s governing body, the Executive Board, one that represents NATO’s 25 certified regional is comprised of 17 representatives of the ex- associations. The two-year terms of the elected hibition industry in the U.S. seats are staggered, and this summer, the following and Canada – eight seats are terms will expire and NATO will hold elections to automatically assigned to fill these five seats for the 2017-2019 term: the “top eight” companies based on screen count, and Two regional/mid-sized circuit seats currently nine seats are elected to represent held by: Nora Dashwood*, Pacific Theatres/ their segment of NATO’s membership. ArcLight Cinemas; Joe Masher, Bow Tie This summer, when NATO holds elections Cinemas for five of the 17 Executive Board seats, four of Two independent seats currently held by: the five incumbents will not be eligible to seek Byron Berkley*, Foothills Entertainment Co., re-election. Gina DiSanto*, Schuylkill Mall Theatres

When the membership roll is taken on 1 July One regional association seat currently 2017, the automatic seats for the upcoming held by: Belinda Judson*, Heartland NATO fiscal year (1 July 2017 to 30 June 2018) will be filled by representatives of the “top eight” *These four incumbents are currently serving companies ranked by screen count in the U.S. their fourth consecutive term on NATO’s and Canada, as reported in NATO’s latest En- Executive Board which means that, in accordance cyclopedia of Exhibition survey. If the current with NATO’s Bylaws, they have reached the rankings remain unchanged, the automatic seats maximum number of consecutive terms and will be filled by: are not eligible to run for reelection in 2017. Nora Dashwood, Byron Berkley, Gina DiSanto 1. AMC Entertainment Inc. and Belinda Judson have been long-serving and 2. Regal Entertainment Group outstanding contributors to the Board, and NATO thanks them for their leadership and 3. Cinemark USA service. At the same time, we look forward to welcoming new people to the Board. 4. Cineplex Entertainment LP NATO encourages all eligible Advisory Board 5. Marcus Theatres Corp. members to consider running for election to 6. Harkins Theatres the Executive Board this summer. The time commitment for Executive Board service is 7. Southern Theatres, LLC two in-person meetings annually – one held in conjunction with CinemaCon in the spring, 8. B&B Theatres

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and the other held in conjunction with the The first face-to-face meeting of the newly General Membership Meeting in the fall—and constituted Executive Board will be held on occasional, as needed, conference calls. Only Wednesday, 27 September, 2017, in Marina members of NATO’s Advisory Board are eligible del Rey, CA. The terms of service for NATO’s to run for the elected seats, and only members current Officers—Chairman John D. Loeks; of the Advisory Board who are the main contact Vice Chairwoman Amy Miles; Treasurer Byron at their NATO-member company are eligible Berkley, and Secretary Jeff Logan—will expire to vote in their category. If you have questions at that meeting. At the end of the agenda that about Executive Board service and/or the afternoon, the new Board will elect NATO’s election process, please contact Kathy Conroy at Officers for the 2017-2019 term from within (202) 962-0054 or [email protected]. its ranks.

NATO Fall Summit Ratings: Forsyth Litigation Settlement Early last year plaintiff Timothy Forsyth sued Once again, NATO is combining its annual Fall NATO, the MPAA and its six studio members Meetings with the NATO Fall Summit. Please demanding that the Classification and Ratings mark your calendars and plan to attend NATO’s Administration (“CARA”) assign an “R” rating combined 2017 General Membership, Board to movies that portray the use of tobacco prod- Meeting and Fall Summit, which will be held ucts. Along with the MPAA, NATO vigorously again at the Marina del Rey Marriott (left), Tues- defended the voluntary movie rating system and day-Thursday, 26-28 September 2017. Stay tuned fought Forsyth’s claims. In November of 2016 soon for more information on programming, the judge issued an order granting NATO and registration, and hotel reservations. the MPAA’s motions to strike and dismissing all of Plaintiff’s claims. In his opinion, the judge Ratings clearly articulated the First Amendment rights that protect our rating system. Annual Ratings Appeals Board Meeting The Classifications and Ratings Administration Despite the strong wording of the opinion, the (CARA) Appeals Board annual meeting was plaintiff filed for an appeal. Counsel for NATO held 24 February at the MPAA’s offices in Los immediately filed a motion for attorney’s fees Angeles. Members comprised of representatives based on our initial victory. Shortly thereafter from NATO members, the six MPAA members, Plaintiff chose to settle the case in exchange for MPAA, NATO, and other industry groups dis- reduced attorney’s fees to NATO. We accepted cussed ratings issues and appeals over the last year. plaintiff’s offer, as we believed the lower court victory was significant enough to discourage There were only three appeals held since the future would-be plaintiffs from filing similar last meeting; Max Steel—rated PG-13 for some lawsuits, and settling would save NATO the sci-fi action violence, The Lost City of —ratedZ considerable resources necessary for an appeal. R for brief violence, and So B. It—rated PG-13 for some thematic elements. All three were up- This was a great result and continues to high- held. Appeals of PG-13 rated titles are unusual, light the importance of our voluntary ratings Lost City of Z as PG-13 is a non-restrictive rating. system.

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Security

FBI Debuts “Redemption” Training Senate Advances Cybersecurity Program Legislation At CinemaCon, NATO hosted a private, mem- Earlier this month the U.S. Senate Commerce bers-only event introducing an opportunity for Committee approved legislation to provide a movie theaters to serve as hosts for a new train- consistent set of resources for small businesses ing program developed by the Federal Bureau of to best protect their digital assets from cyber- Investigation. Anthony Farinacci, Supervisory security threats. The MAIN STREET Cyber- Special Agent in the Office of Private Sector, security Act (S. 770) would help small and and Tracy Miller, Supervisory Intelligence medium-sized businesses access and adopt the Analyst in the Office of Public Engagement, National Institute of Standards and Technol- presented the FBI’s new program designed to ogy’s Cybersecurity Framework— a voluntary train community leaders in identifying home- guide for organizations and businesses to better grown violent extremism. The event included a manage and reduce cybersecurity risks. The screening of “Redemption,” a short film devel- bill will now head to the Senate floor for full oped by the FBI to use in conjunction with a consideration. workshop on understanding radicalization and the pathway to violence. Messrs. Farinacci and Miller described how theaters can serve as ven- ues for this training workshop. Local FBI field offices would work in coordination with theaters on when the trainings take place and who For more information and resources would attend. Note: This training program to help your company implement a does not address movie theater safety; the FBI cybersecurity plan, visit: simply wishes to host the program at theaters NIST Cybersecurity Framework because of the “Redemption” film component Small Business Administration Resources of the training. If your company is interested in participating as a host for this training program, Better Business Bureau 5-Step please contact Esther Baruh at [email protected] Approach (based on the NIST Framework)

or Kathy Conroy at [email protected]. Better Business Bureau Cybersecurity Resource Index NATO Addresses Cybersecurity at CinemaCon During CinemaCon, Members of the NATO Cybersecurity Task Force met with exhibitors leading the way on addressing cybersecurity risks facing the industry. With insights and information gleaned from these important meetings, the Task Force is currently developing informational resources and programs to address the evolving arena of cybersecurity.

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Crisis Management Handbook NATO distributed its Crisis Management Handbook to mem- to respond and anticipate the obstacles and opportunities to bers in March. This handbook is designed to provide guidance return your business to its normal functions after such events. for those preparing for and managing crises. Because every company is different, how you and your company decide to NATO intends to update the Handbook frequently to keep prepare should be guided by your company’s policies and the information as timely as possible. Member feedback is practices. welcome and encouraged.

The range of crises that can confront your company is wide The Handbook is available in the Members Only section of and can affect your business operations in varied and some- the NATO website. Click here (you must be logged in times unpredictable ways. Since crises are by their nature un- to view). You can also contact Patrick Corcoran at predictable, considering the risks and opportunities associated [email protected] for a copy. with them in advance may enable you to be better positioned

Strategic Planning

In April 2015 NATO’s Executive Board approved a Strategic Plan for the association that was produced from member surveys, recommendations from a member task force, and discussions of NATO’s Advisory Board. According to the 2015 Strategic Plan, the members’ top priorities for NATO included: (1) theatrical release windows; (2) government relations; (3) cinema technology; (4) industry promotion; (5) security; (6) movie theft; and (7) JOHN LOEKS ROLANDO RODRIGUEZ ratings. At its most recent meeting on 27 CELEBRATION! CINEMA MARCUS THEATRES March 2017, the Executive Board decided to re-engage the strategic planning process during 2017-2018.

Task force members will include: Chairman John Loeks of Celebration! Cinema; Rolando Rodriguez of Marcus Theatres; Treasurer Byron Berkley of Foothills Entertainment; and Mark Zoradi of Cinemark. Any NATO members with ideas or suggestions regarding the association’s strategic plan could contact any of those task force members, and/or John Fithian ([email protected]) or Todd BYRON BERKLEY MARK ZORADI Halstead ([email protected]). FOOTHILLS ENTERTAINMENT CINEMARK

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Technology

SMPTE-DCP there are many applications outside of the cinema (sports bars, signage, etc.) we expect quantities to The transition to SMPTE-DCP deliverables is increase and the price to come down. moving ahead at a faster pace. Both Disney and Fox feel confident that they can reliably release Many issues remain to be solved—How to make in the updated format. Others are watching care- the sound work without speakers behind the fully and seem to be poised to shift soon. There screen, reliability of individual pixels, cost and are a known number of systems that cannot play consistency in real applications - but these panels SMPTE-DCP, but these are well understood at are a game changer for image quality. Many studio reps were this time and those sites will continue to receive Interop-DCP very impressed with the presentations. - much like some sites continued to receive 35mm film prints. Many are holding to 2018 as the date for full distribution in • Immersive Sound SMPTE-DCP. The standardization of a common bitstream for immersive sound appears to be making good progress and companies are CinemaCon 2017 moving forward to support the standard. Dolby introduced The following are the observations of NATO Technology a new media block that included Atmos decoding as well as a Consultant Jerry Pierce about the technologies demonstrated multi-channel amplifier solution. This architecture may help at CinemaCon. CinemaCon provided a venue for new tech- drive the costs down for future immersive sound installations nologies this year. A number of manufacturers were showing from both Dolby and other providers. new solutions and opportunities for theaters. CinemaCon is becoming the venue for introducing new technology for the • Virtual Reality (VR) cinema! A few demonstrations of lobby-based VR entertainment were presented at CinemaCon. The general impression is these are • LED Panels—Direct View or Active Cinema Screens still short experiences - mostly around 3 minutes, up to 20 Sony and Samsung both demonstrated LED screens during minutes - suitable for lobby entertainment. the show. These screens have made huge strides in providing images that can equal—and exceed—the best digital projector. • Smart Phone Use In Theater The brightness was demonstrated 100 times brighter than the There are new entries with new applications of smart phones highest deployed projection system and the contrast is spec- during the movie. New audio tracks (alternate language, HI, tacular (well black is truly black—no light is emitted and the VI and even some talk of director’s commentary) and closed screen is black—not a white screen—NO front projector can captions on smart phones are being described. There are still match this contrast.) many issues to be resolved such as piracy and distraction to other patrons. The use of augmented reality (AR) glasses These LED screens are made up of three-color LED’s of about will be on the rise and needs to be considered for the future. 1/2 mm square on a grid pattern of about 2.5mm. From all Have you heard of “micro-boredom?” Seems that’s why we all viewing distances it appears as a solid sheet of light. We all stare at cell phones when we don’t need to. were looking for junctions, but they were all but impossible to see. Very impressive! [But these are prototypes.]

What does this mean? We expect to see prototypes deployed this year or early next year. The price has not been mentioned (probably very high compared to normal projectors), but since

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Theatrical Release Windows

NATO released its bi-annual Theatrical Win- Discussions Between Distributors and dows Report the week before CinemaCon 2017 Exhibitors Continue (it is also released just prior to NATO’s annual According to various reports in the press, Board and Membership meeting in the fall). individual studios and individual exhibitors have held discussions regarding the future of For major studio releases, the Electronic Sell release window models. Most of the stories Through (EST) window shrank by two days have focused on one issue – the possibility that to 3 months 3 days. The DVD release window movies might be released in an early window at shortened by a week to 3 months 16 days. This a high price point as so-called “Premium Video reverses a trend over the past few years on Demand” (“PVOD”). A few of the stories that saw EST windows shrink indicate, however, that a broad range of issues at a faster rate than DVD has been on the table, including: important windows. parameters on the later, less expensive release windows for Electronic Sell-Through (“EST”) EST windows have and DVDs; compensation for exhibitors from had a profound any early PVOD release revenue stream; and effect on the num- a term of years during which the parameters ber of films with of these windows models would not change a release window without the support of both distributors and under 90 days. exhibitors. Discussions that include this broader In 2012, the first range of issues would better protect exhibitors year that the major and potentially “grow the pie” for both distrib- studios embraced utors and exhibitors, than would discussions on EST in earnest, 15% PVOD alone. of movies had release windows under 90 days; As stated previously, it is important to remem- in 2016, 53% of movies did. ber that any discussions or negotiations regard- In 2012, 39% of major studio titles ing specific potential release models will and had windows longer than 120 days; in 2016, must be conducted between individual distribu- 11% of movies did. tors and individual exhibitors.

The report, and an analysis of the results, was emailed to NATO members in March. The report is also available on the NATO website at http://www.natoonline.org/data/windows/. You can request the analysis by emailing Patrick Corcoran at [email protected] or Jackie Brenneman at [email protected].

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NATO STAFF CONTACT INFORMATION NATO DC NATO LA 1705 N Street, NW 4605 Lankershim Boulevard Suite 180 Washington, DC 20036 USA North Hollywood, CA 91602 USA

John Fithian President & CEO [email protected]

Kathy Conroy Vice President & Chief Operating Officer [email protected]

Vice President & Patrick Corcoran Chief Communications Officer [email protected]

David Binet Director of Membership [email protected]

Esther Baruh Director, Government Relations [email protected]

Jackie Brenneman Counsel & Director of Industry Relations [email protected]

Phil Contrino Data and Research Manager [email protected]

Cheryl Dickson Executive Assistant & Office Manager [email protected]

Enid Palazzolo Bookkeeper [email protected] NATO CONSULTANT CONTACT INFORMATION

Todd Halstead Program Consultant [email protected]

Belinda Judson State Government & Regional Liaison [email protected]

Jerry Pierce Technology Consultant [email protected]

Chris Rauch Controller [email protected]

Brad Wardlow Purchasing Director, Cinema Buying Group [email protected]

CINEMACON STAFF CONTACT INFORMATION 60 Cuttermill Road, Suite 413 Great Neck, NY 11021 USA

Mitch Neuhauser Managing Director [email protected]

Matt Pollock Associate Managing Director [email protected]

Matt Shapiro Operations Director [email protected]

Cynthia Schuler Finance Manager [email protected]

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