Fox reaches digital cinema upgrade deal -sources

By Sue Zeidler

LOS ANGELES, July 24 (Reuters) - News Corp's (NWSa.N: Quote, Profile, Research, Stock Buzz) Twentieth Century Fox has reach a deal with a group of theater chains paving the way for a long-delayed $1.1 billion digital cinema upgrade that Hollywood hopes will boost attendance and cut costs, sources familiar with the deal said on Thursday.

Fox is the first of six studios engaged in year-long talks with the Digital Cinema Implementation Partners (DCIP) -- formed by Regal Entertainment Group (RGC.N: Quote, Profile, Research, Stock Buzz), Cinemark Holdings Inc (CNK.N: Quote, Profile, Research, Stock Buzz) and AMC Entertainment Inc, who operate 14,000 screens -- to reach a deal to help finance the theater upgrades.

Walt Disney Co (DIS.N: Quote, Profile, Research, Stock Buzz) and Viacom Inc (VIAb.N: Quote, Profile, Research, Stock Buzz), which owns Paramount, are expected to soon reach a DCIP deal, sources said. Officials from the studios were either unavailable or declined comment on the negotiations.

Travis Reid, chief executive of DCIP, confirmed a studio had reached a deal but declined to disclose which one.

"A party has signed a deal and we think it won't be long until we have multiple studios," he said.

DCIP was formed over a year ago and first hoped to reach a deal by the fourth quarter of 2007. Discussions also involve General Electric Co's (GE.N: Quote, Profile, Research, Stock Buzz) Universal Pictures, Time Warner Inc's (TWX.N: Quote, Profile, Research, Stock Buzz) Warner Bros, Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) and third party financiers.

Negotiations had been slowed by disputes over terms requiring studios, exhibitors and content providers to pay usage and other fees to help pay off loans provided by financial institutions such as JP Morgan (JPM.N: Quote, Profile, Research, Stock Buzz) to buy and install new digital equipment.

Market volatility and issues involving standards, equipment procurement and performance criteria also delayed the talks.  Continued...