CineBUZZ REPORT - 1 September 2012

HIGHLIGHTS OF THIS REPORT

- New York May Nix Sales Tax on Digital Flix
- Dine-In Theatres - Have They Gone Too Far ?
- Coming To Your Wrist - Movie Viewing
- 3D Glasses Cleaning Made Easy
- Minimum Wage Increase - Good or Bad ?
- Potter's Magic No Match For Hunger

NO SALES TAX ON DIGITAL MOVIES

The New York State Division Tax Appeals Court recently ruled and determined that the delivery of digital movies on hard drives would not cause the transaction to be taxable under the New York Sales Tax law primarily because the hard drives were not necessary for the display of the movies. New York State imposes its sales tax on retail sales of tangible personal property, thus in order for sales tax to apply, there must be a transfer of title or possession or both of the property.

Traditionally, movies have been viewed as constituting tangible personal property because the 35mm film they were recorded on was "corporeal" and therefore licenses to exhibit movies on the film have been subject to New York sales tax.  However, digital movies delivered electronically are intangible property, and receipts from licenses of them are thus not subject to NY Sales Tax.

The ruling found the, "hard drives, unlike traditional film, were not necessary to each (or even any) instance of displaying the content, and that the hard drive was not itself the desired object of the transaction."  The ruling further found that exhibitors, "did not take title to the hard drives, but rather immediately returned them to the distributor after uploading the movies."

The New York State Department of Taxation & Finance has 30 days from the Appeals Court determination date to file an exception (appeal) to the ruling.

This is great news for New York exhibs and the ruling should hold up against appeal, if filed.

UPDATE: It was learned yesterday that the NYS Department of  Taxation would not be filing for an appeal of the sales tax ruling.

DINE-IN THEATRES - HAVE THEY GONE TOO FAR?

CMG has preached on the benefits of expanding/embellishing cinemas' concession offerings for many years.  We now can test this theory in the extreme as AMC Entertainment (the U.S. movie chain now owned by Chinese media company Dalian Wanda) opened its seventh Dine-In Theatre - a 13 screen venture located within the confines of AMC's Easton Town 30plex in Columbus, Ohio.

The new 13 Dine-In auditoriums are converted/remodeled regular auditoriums, and demonstrate AMC's commitment to the Dine-In strategy as the loss, of each converted auditorium's seating capacity averaged 50%.  To further delineate their commitment,  AMC has two separate types of Dine-Ins. Nine of the 13 converted auditoriums are termed "Fork & Screen" auds. - which are family-friendly and allow children under 18 admittance if accompanied by an adult.  The other four auds. are termed, "Cinema Suites" and are only for the 21 and above crowd.

The Dine-Ins serve up burgers, sandwiches, salads, pizza, and quesadillas, in addition to regular concession fare.  The food is touted as being top quality with pricing, for most menu items, in the $10-15 range.

Good strategy or has AMC gone too far?  The Dine-In concept is not new (see CMG post of September 2011 on Platinum Cinema Suites in Singapore) but devoting 13 auditoriums to the idea may be overkill - do that many moviegoers want to dine and watch a movie?  We'll keep you informed as to their market success.


MOVIE VIEWING ON YOUR WRIST - it's just a matter of time.


Wristwatches that just tell time are fast disappearing.  SmartWatches will be the future, not only of time-telling but a mode of getting a lot of information.  Companies like Apple, Sony, Nike and loads of others hope that you will be strapping a 'device' on your wrist very soon.

The new devices won't replace SmartPhones but rather connect to them, but they will provide far more information than the most advanced watch or chronometer.  For example, the Sony SmartWatch (pictured above) can display emails, Twitter posts, other text and images  all 'pulled' from an Android phone.  "The wrist becomes a remote screen where you now have the ability to control your phone with a number of different applications," states Stephen Sneeden, Sony's Product Marketing Manager. " By virtue of the intelligence of the smartphone, it's going to help redefine what goes on your wrist." 

Big issue: the new SmartWatches must strike a balance between technology and fashion in order to entice a broader audience, particularly those under 21, who have given up on the wristwatch. The wrist is used for fashion and expression not just funcion - the two will have to be merged for the SmartWatches to really catch on.

My take: Consumers do not buy multiple SmartPhones, but multiple wrist devices - well that may be a different story and one the manufactuers, I'm sure, are drooling over.


3D GLASSES CLEANING MADE EASY

Esther Hormatz of the Dietrich Theatre, in Tuckhannock, PA recently informed me that they clean their Dolby 3D glasses using a normal dish washer, and "it works great."

"We weren't sure if the glasses would get tossed about, but they don't. The unit has a heat boost cycle, and a shorter wash cycle." says Esther. " We use the dishwasher packets with bleach, and spot free rinse. We don't let them dry inside the washer. After the wash, the kids immediately take them out and lay them on the counter to dry".  The glasses are given a quick wipe with a microfiber cloth which the staff performs between shows.

"We are very satisfied with the regular dishwasher" states Esther, "and it cost a lot less than the washers made specifically for washing glasses and the required special holding racks, which still require the simple dry wiping with a cloth".

Thanks Esther for the great information and excellent advice.  I'll be using this info. as a selling point, as the Dolby 3D System provides, by far, the best on-screen 3D image.


INCREASING THE MINIMUM WAGE: GOOD/BAD FOR EXHIBS.

The federal minimum wage stands at $7.25/hour.  Usually, efforts to raise the minimum wage has drawn fierce opposition from small business, but the U.S. income equality issue will make opposing the raising of the rate very difficult this time around.

The current proposed legislation would boost the federal rate in three 85 cent increments, to $9.80 an hour, over three years, then adjust it annually to keep pace with the cost of living.  Those favoring the increase argue that employees who are paid more work harder and stay on the job longer.  But the timing for increasing labor costs couldn't be worse, particularly for movie exhibitors - which are dealing with digital conversion and most of which can't raise prices to offset higher wages .Currently  18 states have minimum wage rates that are higher than the federal rate (New York is at the $7.25 federal rate) five states have no minimim.

My take:  The minimum federal rate increase will be enacted after the Presidential election but not to the extend as proposed, but at a lesser amount.

'HUNGER GAMES' BEATS 'HARRY POTTER'

Amazon reported that on-line sales of the three novels that make up The Hunger Games triology surpassed the seven books that made up the 'Harry Potter' series. This makes the Suzanne Collins saga the best selling book series (cum movie franchise) of all time on Amazon - both ebook and print sales. It is estimated that there have been more than 50 million copies of the three books sold - print or digital versions.

Hopefully these record sales will translate to record box office admissions as the second film in the tri-movie franchise is released.


Best and Happy Movie Going!
Jim Lavorato

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