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Las Vegas, NV -- March 14, 2006

Motion Picture Association of America (MPAA) Chairman and CEO
Dan Glickman addresses the Convention

One of my favorite movie lines is from an unforgettable character, Ferris Bueller, who says, quite philosophically, "Life moves pretty fast; if you don't stop and look around every once in awhile, you could miss it."

I love that line, because it is about keeping things in perspective. Sometimes it is difficult for all of us to see the forest for the trees. It can be especially difficult in the entertainment industry, which right now seems to be evolving at lightning speed. There is so much change -- both internal and external. And I think one thing that's nice about this gathering each year is it gives everyone a chance to stop, come together and look around.

I think that's particularly important after a year like 2005.

In 2005, total domestic box office was down, but remained near $9 billion, a barrier broken for the first time only three years ago.

Global box office is down, but remains 46 percent higher than it was in 2000. The cost of making movies has flattened, and declined from the $100-million-PLUS-perpicture price tag from a few years ago.

Eight movies grossed more than $200 million last year - a new all time high for mega-blockbusters in a single year.

People still love going to the movies.

And despite an ever-widening array of consumer choice - both in terms of how they watch movies and what they do instead of watching movies -- Americans bought more than 1.4 billion movie tickets last year. And over 80 percent of moviegoers say the overall movie-going experience is time and money well spent.

But our numbers could and should be better. Average theater attendance per person is down -- for the third year in a row. To state the obvious: this is a trend that needs to be reversed.

We have some significant challenges ahead. Change is afoot. There is no question the evolution of the on-demand world and the new and enhanced power of consumer choice is impacting the habits and preferences of the audiences we serve -- not to mention the internal dynamics of new production techniques, marketing methods, financing of film and distribution strategies, including the current discussion of window lengths.

Yes, we live in interesting times.

It has been the tradition for the Chairman of the MPAA to present last year's box office totals during this appearance and review the year that was. But in the spirit of the winds of change in our industry and beyond, I wanted to try something different. Because I think everyone knows how to sum up box office in 2005. It was down. Attendance was down. This is not breaking news. What is important in 2006 is how we respond to the changing marketplace.

When I consider the state of the industry, it is clear: we're in a state of change. At the same time I will also tell you: I am bullish about the future of the moviegoing experience.

Granted, I'm someone who waxes nostalgic about my hometown theater every chance I get. I'm someone who believes that the only way to really see a movie is in a big theater, on a big screen, with a big bag of popcorn.

I believe that no technology exists, or will ever exist, that replaces the experience of watching towering images in the dark with a crowd of people who laugh, cry and feel terrified at the same moment you do.

The question is, are people like me a dying breed?

Research released last week by the MPAA suggests, certainly not yet. Almost 70 percent of consumers say going to the theater is the ultimate way to see a movie. But it's just a matter of time until the competitive marketplace makes high-tech home entertainment more affordable and accessible to everyone.

Not to mention the expanding competition for our customers' time and entertainment dollar - from video games to pay-per-view sporting events, to the Internet.

All the modern technology in the world notwithstanding, Americans will come to the movies if they think they have value. But if they don't, they will stay home.

So the question we must answer is what are we going to do to make sure our customers are getting a valuable experience and that they appreciate the value of the experience?

If there is a silver bullet answer it is, very simply, that everyone must perform their respective roles and perform them well.

I'd suggest first - and quite obviously - that movie-makers must continue to turn out quality movies with compelling and entertaining stories that audiences want to see. That's fundamental. It doesn't matter how smart or market-savvy you are as a theater owner. Moviemakers have to do their jobs. The power of the story always has been and will continue to be the key to our success.

But the critical role you play as exhibitors in giving the audience a place to come and connect with that story should not be underestimated. It is your job to ask, why should they come to my theater rather than staying at home? Why should they sit in my seats and eat my popcorn rather than on their sofa with the microwave variety? If you can't give them good answers to these questions, they won't come.

I was home in Wichita recently and was visiting with a theater owner who said to me something very obvious that I think is important. He said, "We've all got to be thinking creatively about providing a good value. People have to think, it's worth my time to go there."

This type of thinking is working in Wichita. I've been to his theaters. They are friendly, customer-oriented places, and people are willing to drive halfway across town to go there for the same movie that's playing at a different theater much closer to their house. And I know he is not alone.

There are some basic things that people want when they go to the movies - things that are important to maintaining and building audiences. Safety, comfort, convenience, cleanliness, friendly employees and ample parking - those are the basics.

There are other things that exhibitors are experimenting with to provide their customers added value.

For example, offering concierge services that actually make dinner and babysitting arrangements for their patrons.

I've seen a theater with a really clever way to buy tickets on your cell phone. You dial in your ticket order and the system sends a bar code back to your phone that you can scan in when you get to the theater. No paper tickets, no lines, no hassles.

We should be looking at other industries who have aggressively courted loyalty. I think of the airline industry and its frequent flier program that rewards repeat business. In short -- are we giving customers the most bang for their buck? And I'm not talking about the number of explosions onscreen.

Now, I'm not here to deliver a lecture or tell you what to do. I am not in your shoes and I don't pretend to be. I am here as a committed partner who believes that we are all in this together. We fail or succeed together.

We at the MPAA have a role to play ourselves and we are doing some strategizing to bolster our own effectiveness. For starters, I believe it is important to better understand consumer attitudes about our industry.

We need to know exactly what movie consumers want from the theatrical experience. We need to know what motivates people to go to the movies -- and, equally important, what causes them to stay at home. We must understand their perceptions about the value of a movie and whether they recognize the ramifications of piracy. In a competitive environment as unforgiving as today's marketplace, we simply can't afford to rely on guesswork -- no matter how smart we think we are.

I've directed the staff of the MPAA to conduct research into these and other important questions -- the first time we as an association have undertaken such a project. That research is ongoing as I speak. I have no doubt that some of the answers we're going to get will be obvious.

But I'm equally certain that we will learn things we don't know that generate ideas. Maybe we'll find out that customers value the ability to buy other things like posters, DVDs and other ancillary items at theaters. I've seen that happening in some theaters, by the way. Maybe they want more choices at the concession counter. Maybe they think movies are too long or too short. Maybe moviegoers feel even more strongly about pre-trailer advertisements than we can even surmise from anecdotal evidence. Maybe they think there are too many movies to choose from - or maybe they think there are not enough options. Maybe we'll find people would consider seeing a short film or old cartoon before the feature as adding value to the experience.

We will be working closely with our friends at NATO on this project and will share results with you so your members can also benefit.

The goal of this research is not to suggest to theater owners how you should do business. We want to be armed with data that will inform our efforts to accomplish two things:

  1. to foster an environment in which our companies and all producers and distributors of movies can continue to thrive.
  2. to better communicate the value and rewards of the movie-going experience.
We as an industry collectively spend hundreds of millions of dollars promoting individual movies, but very little promoting the value of the movie-going experience or the movies in general. Why not?

When I was at the Department of Agriculture, industries like pork, beef and milk spent a lot of money promoting generically the value of these products. Not any specific brand name, but the foods themselves. Not to suggest that the movies are like pork chops. But those campaigns were done because market sales and volumes of individual consumer brands were falling, and this reversed the trend. And I simply suggest that we as an industry should consider whether such an effort might be useful.

I'm pleased that some industry leaders are moving forward on an idea somewhat along those lines and I am pleased to tell you the MPAA will be a part of it.

With the support of both film studios and theater owners, my good friend Jean Firstenberg of the American Film Institute has launched an effort to establish a "National Movie Week" next year. The idea behind National Movie Week is to generate enthusiasm, excitement and better understanding of movies. As part of this effort, the MPAA will be working to get Congress to pass a resolution recognizing a week in March as "National Movie Week". I look forward to working with Jean and others in the coming year on that project.

Speaking of national image and branding, I'd wager that if you ask someone on the street what the MPAA does, he or she will likely say: "They're the ones who rate the movies." Yes we are. And we're proud of the job we do.

After 40 years of operation, the Classification and Ratings Administration works to preserve the creative freedom that filmmakers need and deserve. It works as a system that gives consumers -- most importantly parents -- a reliable source of information about film content.

Administering CARA has been an historic and successful partnership between NATO and the MPAA and continues to be one of our most important endeavors. We all have a stake in making sure the system is as effective and transparent as it can be, and we will continue our close partnership with you to make sure we are asking consumer oriented questions about CARA's service as well.

Finally, after talking so much about change, let me assure you there are some things that won't change at the MPAA. For example, it wouldn't be an MPAA speech if I didn't talk about piracy.

There is a reason I am a broken record on this subject. Copyrighted works like movies are unique cultural and economic assets that deserve protection. And making sure consumers actually pay for the movie experience continues to be at the core of our mission. On this front we have launched a multi-pronged approach -- one that includes enforcement, litigation, legislation, education and innovation. And we are making progress on a global scale.

We are advocating legislation at the federal and state levels to fight movie piracy. From enacting anti-camcording laws that punish people who go into your theaters with the sole purpose of stealing movies, to promoting digital anti-piracy laws designed to stop people from stealing movies from the comfort of their homes, we are aggressively moving forward to protect the value of the movies we all love.

We have a plan to go to Universities and High schools and spread the word that illegally downloading our movies is both morally and legally wrong, and such activity does have consequences.

This is important, because if we don't teach the children to respect copyrights, we will lose the next generation of customers.

And this last year we had a pivotal achievement by winning the Supreme Court Grokster case. A fight you stood with us in and we thank you for that support because I think re-affirming the value of creative property will benefit everyone in this room. We have many capable partners in these endeavors, and are building on these relationships and establishing new ones.

In that spirit of partnership, I am pleased to tell you we are launching a new effort with NATO this year -- a web-based training program that provides both information and incentives for theater employees, individuals who are on the front lines in the daily battle against camcording pirates.

Starting this week, theater owners can point employees to this site to ensure they have both the knowledge and the motivation to stop camcording in theaters -- which is responsible for 90 percent of the pirated new releases that wind up on the street and on the web. The site is www.fightfilmtheft.org

I encourage you to look at the site, use it, encourage your employees to use it. And I also encourage you to visit our booth and our presentation this week at ShoWest University to learn more about how you can continue to help.

Even on the piracy front, we are doing our best to think in new ways. We must be leaders, not victims, learning from the past but not dwelling in it.

And that is really my challenge to you today: take charge of your own future. Ask yourself if you are thinking creatively about providing a good value.

As Charles Darwin once observed, "It is not the strongest or the most intelligent of species that survive, but the ones most responsive to change."

There is another old adage that - the more things change, the more they stay the same. I think the truth for the movie industry is somewhere in between.

Yes home entertainment is growing and will continue to do so. Yes consumers' eyes and wallets are being pulled in many different directions. Yes we must be pro-active in maintaining and building audiences.

But I believe ultimately we will be successful because there are some fundamental truths about the movies.

One of those immutables is that Hollywood has the ability to tell superb stories unlike any other medium can -- stories that appeal to all kinds of audiences. Blockbusters like Star Wars or War of the Worlds and blockbuster family films like Harry Potter, The Incredibles or the Chronicles of Narnia bring worlds to life that must otherwise only exist in our minds and imaginations.

Comedies aimed at adult audiences like Wedding Crashers or the 40-Year-Old Virgin drew big laughs and big box office.

And smaller productions like Crash and Brokeback Mountain, Capote and Good Night and Good Luck attracted enthusiastic audiences.

Why? Because they offered us brilliantly told stories of love, life, fantasy, humor and history -- the kinds of stories that people want to see today and will want to see tomorrow.

The other established, permanent fact is that movies matter to people and, as a result, there will always be a demand for them. For nearly a century, we have made sense of our lives, populated our fantasies, and defined our dreams with words and images we got from going to the movies.

From Rhett Butler's refusal to give a damn to Dirty Harry's invitation to make his day -- from Dorothy's uneasy realization she was not in Kansas anymore -- a feeling I know only too well - to the Godfather's suggestion that you make your enemy an offer he can't refuse -- the movies have provided people around the world with a common reference point and a common language.

These two constants -- the unique story-telling art of film and the public's love affair with the movies - give us the oundation that will enable us to meet any and every challenge to our industry.

As Bill Murray's character Carl Spackler would say in Caddyshack, "We've got that going for us, which is nice."

I look forward to working with you during what I am confident will be a very successful 2006.

National Association of Theatre Owners (NATO) President and CEO
John Fithian addresses the Convention.

Thank you, Dan Glickman, for being with us today. In words and deeds you continue to demonstrate your commitment to the cinema industry, and your respect for the partnership our two associations share. I am also grateful for so many other partners with us here today, particularly the leaders of two important sister organizations: Larry Etter of the National Association of Concessionaires; and Dwight Lindsey of the International Theatre Equipment Association. I also want to thank the sponsors of last night's Independent Showcase by acknowledging Robert Mayson of Kodak Digital Cinema and Jack Brady of the Newspaper Association of America.

I also need to express my deep appreciation for the NATO members and our two top volunteer leaders--Chairman Phil Harris of Signature Theatres and Vice Chairman Lee Roy Mitchell of Cinemark.

ShoWest 2006 comes at an important juncture in our industry's history. Over the past year since we last gathered here in Las Vegas, significant and energetic discussions have taken place across a spectrum of fundamental issues. I view the debates as healthy and necessary, and I emerge from the year excited about our business and confident in our future.

After a final year of hard work on specifications, equipment development, and business modeling, we stand now at the dawn of the biggest technological revolution since the advent of sound. Digital cinema starts right now, in the year 2006, and it couldn't come at a more important time.

Digital cinema will enhance the movie-going experience by providing our patrons with consistent, high-quality images that won't degrade over time. Digital cinema will also give exhibitors greater programming flexibility to meet diverse consumer demand. Equally important, digital cinema will ensure that the theatrical experience cannot be replicated in the home.

In November 2004, NATO's board of directors adopted a unanimous resolution describing our fundamental objectives. Now that nearly all of those objectives have been achieved, or are on the road to fruition, the revolution is beginning.

In the resolution, NATO members called for uniform technical standards to promote interoperability and compatibility, and to foster competition. NATO worked with our partners at the studios to support the efforts of their Digital Cinema Initiatives, and we are pleased with the final specifications that DCI released in 2005. Two weeks ago, NATO's Technology Committee released some supplementary requirements that complement DCI's work. Those requirements are available on our web site. NATO will also continue to participate in the essential work of the Society of Motion Picture and Television Engineers as that body adopts formal standards.

The resolution also declared exhibitors' interest in high-quality equipment to enhance the theatrical experience. With the projector and server technology currently on the market, we believe that digital cinema quality exceeds that of film and anything available in home entertainment systems. I encourage all our members to spend some time this week on the trade floor, in the demonstration suites, and at the screenings examining the latest technologies.

Regarding the business models, the NATO resolution called for a financing plan where the studios pay for the costs of the transition. Today, various third party integrators have proposed financing and installation plans to North American exhibitors that are backed by agreements with the studios. Under these plans, the third parties raise the capital to buy and install equipment in cinemas. Over time, the studios will then pay "virtual print fees" to the third parties for the use of the equipment. Several exhibitors have already announced that they have reached agreements with the various third parties under these models.

The resolution also urged that financing plans be open to participation by all exhibitors regardless of size or geographic location. All of the third parties currently offering plans have stated their commitment to this principle. I am concerned, nonetheless, that smaller exhibition companies should seek mechanisms to aggregate their power to obtain economies of scale for use in negotiating digital cinema equipment and service deals. One such mechanism is the Cinema Buying Group LLC , currently operating under the leadership of managing director J. Wayne Anderson.

Regarding a roll-out sequence, the NATO resolution embraced the need for testing of complete digital cinema systems, based on specifications and standards, in a beta market for a reasonable time. Today, at least two of the third-party financing and installation organizations have announced plans for beta markets with exhibitor partners. We strongly support this essential beta testing to ensure that equipment systems do not fail and that the specifications and standards can be met.

NATO will continue to advocate the goals of the resolution as the transition goes forward. To a significant degree, though, the work of the U.S. exhibition industry through its association is coming to a successful end. It is now incumbent on our individual members to negotiate their particular plans for digital cinema, as they deem appropriate.

The past year has also produced a spirited debate on the issue of release windows. Aware of the potential irony of this statement, I am grateful for Mark Cuban, Steven Soderbergh, and the few other individuals who promoted simultaneous release of movies in cinemas, on DVDs, and directly to the home all at the same time. These radical, though misguided, experiments have served a very salutary purpose.

By teeing up the debate, and generating tremendous media attention to the issue, proponents of simultaneous release have encouraged important discussions between exhibitors and studios. Though the dialogue continues, I am very pleased to report that the overwhelming majority of studio and cinema leaders agree that the tiered release of movies, first to cinemas and later to ancillary markets, maximizes returns for everyone. Thoughtful industry leaders like Howard Stringer of Sony, Sumner Redstone of Viacom, Ron Meyer of Universal, and Jim Gianopulos of Fox have all articulated publicly their support for the theatrical release window because they know the tiered release model best serves their companies and their consumers.

The creative community has also begun to voice their understanding of the role the cinema release window plays in the experience of their art form. Leading talent like M. Night Shyamalan, Jonathan Demme and Tim Burton have described why theatrical release windows are important to them and their work.

The NATO staff has collected the many comments supporting the theatrical window, and those statements will be available in the press room throughout the week. The comments suggest four reasons why the theatrical window is here to stay.

First, the window enables the viability of the cinema industry. As Sumner Redstone emphatically stated, "any exhibitor playing pictures under [simultaneous release] circumstances would be committing suicide."

Second, the theatrical window drives the economics of the movie industry as a whole. As Ron Meyer explains, "The window of time between theatrical-release dates and DVD-release dates has a purpose in delivering financial results to us and different experiences to the audience. There's a place for each of those windows."

Third, the theatrical window preserves the artistic medium. That's why Tim Burton calls the idea of simultaneous release "absurd." Burton believes that "everything should be done to treat the [cinema business] as an art form--it's a visceral medium."

Finally, and perhaps most importantly, the theatrical window gives consumers choices. Our patrons know that some movies are made for the cinema first, while other pictures are made for television or the straight-to-DVD market. Consumers have different expectations for each category. In a world of simultaneous release, entertainment product would be homogenized and consumer choice reduced. Howard Stringer put it best when he stated that "if you collapse a window or go day and date...you're doing movie of the week. And the sizzle...of the movie industry will be gone. You have to guard the value of the content."

We are pleased with the response, and confident that the theatrical release window is here to stay. Thankfully, our studio partners appear similarly confident. In fact, the average video release window dropped by only four days from 2004 to 2005-- from four months and 20 days to four months and 16 days. We'd naturally prefer to see it go the other direction--but in a year with often raucous debate about simultaneous release, it's comforting to see the window remain relatively stable.

The past year has also produced inordinate media attention and industry consternation on the issue of box office results and the decline of 2005. Box office receipts did decline by 5.8% in 2005 over 2004. But in what other industry would a decline of that size garner so much attention and doomsday predictions? In the short term, our business is cyclical. In the long term, however, we are growing. Movie theatres have sold more tickets on an average annual basis this decade than they did in the 1970s, 80s or 90s. Indeed, every decade has seen growth. In the 1970's we sold 985 million tickets a year. In the 1980's, that number grew to 1.1 billion. In the 1990's, we averaged 1.3 billion. And in the first six years of this decade, we have sold an average of 1.5 billion tickets. Steady growth over the years, despite the short term cycles.

Exhibitors know that good movies drive good box office receipts. No other factor looms as large. Variations in movie supply drive short term cycles. But our members also know that we must strive to improve the movie-going experience on a continual basis. That's what digital cinema is all about. That's why we are attacking rude patron behavior with public service messages and increased patron monitoring by theatre ushers.

That's why we're working with screen advertising companies to make the pre-show as entertaining as possible. These and many other innovations in the movie-going experience will be discussed further in panel discussion on Wednesday morning, when four top cinema company CEOs will join a renowned cinema studies professor in an important dialogue about enhancing the magic of the movie-going experience.

As a final comment, I want to salute the Academy of Motion Pictures Arts and Sciences. The 78th Annual Academy Awards last week proved to be, again, an entertaining and inspiring portrayal of the magic of movies. In fact, I can claim some special solidarity with the Academy this year--as I have watched some in the pundit class declare the imminent death of the Oscars, the obsolescence of this great institution, and the surrender of its grandeur to largely unspecified, but nevertheless somehow "inevitable," revolutions in public consumption habits. Yes, sounds familiar, doesn't it? We in the movie theatre business read our obituaries in 2005 with equal amusement. As with Mark Twain's famous cable from London, as with movie theatres, and so with the Academy, the reports of our death have been greatly exaggerated.

I want to issue a special thanks to Academy president, Sid Ganis, for devoting a few moments of his very scarce and precious time at the Oscars podium to a celebration of movie theatres, and the vital--and unique--role that movie theatres play in enhancing and perpetuating the value of movies. He could have spent that time delivering any number of messages. His decision to tell an international audience that movie theatres are indispensable to our collective industry certainly earns President Ganis our deep gratitude.

My father, who was a history professor and a politician, once told me this. When someone else makes your point for you, and states it better than you ever could, quote them, sit down, and shut up. I conclude my remarks today with those words from Academy President Sid Ganis, who said, "I bet you that none of the artists nominated tonight have ever finished a shot in a movie, stood back and said 'that's going to look great on DVD.' Because there is nothing like the experience of watching a movie in a darkened theatre, looking at images on an eye enveloping screen, sound coming at you from all directions, and sharing the experience with total strangers who have been brought together by the story they are seeing." Thank you.

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