posted 08-28-2009 11:26 PM                    

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latimes.com
COMPANY TOWN
Technicolor dreams of a bright future in digital cinema
While much of Hollywood is scaling back, the film processor has invested more than $200 million in its production facilities. 'We are pushing harder than anybody else in the industry,' the CEO says.

By Richard Verrier

August 24, 2009
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Technicolor has been a fixture since the early days of Hollywood.

The company brought color to the big screen in such classics as "Gone With the Wind" and "The Wizard of Oz." When its pioneering "three-strip" color process fell out of favor, Technicolor reinvented itself as a successful film processor. The company later became a leading duplicator of VHS tapes and DVDs.

Now, after 94 years of serving Hollywood, Technicolor Inc. has planted itself in the heart of Tinseltown, leaving its nondescript headquarters in an industrial neighborhood near Burbank Airport. Its new digs -- a modern, six-story structure at the corner of Sunset Boulevard and Gower Street -- are a symbol of the company's latest transformation.

Technicolor is now refashioning itself to keep pace with the digital revolution that has reshaped the entertainment industry.

It has invested more than $200 million in digital post production and visual effects facilities, including in Bangalore, India, London and the company's new Hollywood headquarters, as well as in a sound editing facility that is slated to open next year on the Paramount Pictures lot on Melrose Avenue.

"People say Technicolor, it's just fighting to stay in the old business and they will never make it in the digital business," said Frederic Rose, chief executive of Thomson, the French media technology company that owns Technicolor. "In reality, we are pushing harder than anybody else in the industry to go digital."

The global expansion comes at a time when many other companies that service Hollywood are scaling back in the face of a severe production slowdown. Not that Technicolor has much alternative: The bulk of the company's business derives from replicating DVDs and processing film prints for theaters, both challenged segments. DVD sales are slowing and more movies and TV shows are being shot digitally.

Technicolor is the largest manufacturer of DVDs and remains one of the largest processors of film -- it processed 1.8 billion feet of film during the first half of this year.

But the company also has emerged as a market leader in the processing and distribution of digital cinema. Its new headquarters includes nine digital scanners, which cost more than $1 million apiece. They are part of a "digital intermediate" process that Technicolor developed several years ago that allows film to be color-corrected and edited on digital equipment as opposed to in a film laboratory using chemicals. The process is less expensive and faster.

As part of a strategy to expand into creative services, Technicolor in March hired Tim Sarnoff away from Imageworks, Sony Pictures' visual effects and computer animation unit, to lead its new Digital Productions division, which creates visual effects for movies, television shows, commercials and video games.

"They could have put their head in the sand and said, 'This is what we do.' But they didn't," said Randi Altman, editor in chief of trade publication Post Magazine. "They've adapted and evolved with the industry."

Technicolor's outlook brightened recently when its parent company reached a deal with creditors to slash 45% of its $4.1 billion in debt. Thomson, a provider of digital set-top boxes and other telecommunications equipment, amassed the huge debt after a string of costly acquisitions.

As part of a restructuring plan, Thomson is focusing more resources and marketing on Technicolor, which generates $3billion in yearly revenue and accounts for about 45% of Thomson's revenue.

Rose, who keeps offices in Hollywood and Paris, wants to position Technicolor as the French company's cornerstone brand. That's a departure from his predecessor Frank Dangeard, who struggled to transform Thomson into a "one-stop shop" of digital equipment and services for movie studios, TV channels and cable and telecommunications companies.

Dangeard resigned last year as Thomson's losses mounted. The board tapped Rose, a former top executive with French telecommunications firm Alcatel-Lucent, to turn things around.

To highlight the Technicolor brand, Rose insisted that all references to "Thomson" be removed from Technicolor signs and employee e-mails. He's also marshaling Thomson's researchers, who helped develop the technology for the MP3player, to create and patent new technologies for Technicolor's customers, such as finding ways to deliver 3-D entertainment in the home.

Technicolor also is shedding businesses that don't directly involve its key customers -- studios and filmmakers. That includes Premier Retail Networks, a company that manages video networks for retailers including Wal-Mart; and Screenvision, a joint venture with British broadcaster Carlton Communications that provides advertising for movie theaters. Thomson also plans to unload its Grass Valley unit, which supplies digital cameras, routers and switchers to the broadcast industry.

"The company had stopped focusing on its customer and instead focused on diversions," Rose said. "The new Technicolor is focused exclusively around content creators. What do these people want and what do they need to grow?"

Some aspects of Technicolor's digital strategy haven't worked. The company last year pulled the plug on a planned rollout of digital equipment in theaters, concluding that it wasn't economical and that it veered too far from its core business.

Instead, Technicolor recently devised a system that can show 3-D movies using conventional film projectors, potentially saving exhibitors from spending $75,000 on a digital projector. The rollout of 3-D screens has been significantly delayed because exhibitors have had difficulty funding the conversion, raising concerns among studio executives who are releasing dozens of 3-D films in the next two years. Technicolor's system will be tested this fall at an undisclosed theater in Los Angeles.

Industry insiders say reaction among studio executives and exhibitors has been mixed. But at least one studio executive who has seen a demonstration of the system is impressed.

"The solution they are working on today could potentially be very helpful to the deployment of the new 3-D platform in theaters across the globe," said DreamWorks Animation SKG chief Jeffrey Katzenberg, who is an outspoken proponent of 3-D.

Technicolor has 13,450 employees, including about 2,000 who work in various offices throughout Los Angeles. Its chief rival is Deluxe Entertainment Services Group Inc., the post production house owned by Ronald Perelman's holding company, MacAndrews & Forbes Holdings Inc. As the world's largest film processing company, Deluxe has faced similar challenges as Technicolor, and also has moved heavily into digital services.

Like other service companies, Technicolor's business was buffeted by last year's labor unrest in Hollywood and the effects of the recession, which slowed film production and further damped DVD sales.

The company cut 1,200 jobs at its North American facilities in 2007, largely because of the slowdown in DVD sales. The mastering and replication of DVDs generates about 40% of the company's revenue. Technicolor saw a 22% drop in DVD replications in the first half of this year.

Yet the company's earnings (before taxes, depreciation and amortization) rose 13% to $77 million in the first half of 2009, according to a company filing.

One reason has been growth in Technicolor's digital asset management business, which involves encoding movies and TV shows so they can be distributed in various formats, including video on demand and over the Internet.

Another small but growing area for the company is visual effects and computer animation. In late 2004, Technicolor bought the Moving Picture Co., a leading London visual effects house known for its work on Super Bowl commercials as well as films including the "Harry Potter" movies and "Lara Croft: Tomb Raider."

Moving Picture Co. has offices in London, Vancouver, Canada, and Santa Monica. It also works with an effects and animation house in Bangalore, India, called Paprikaas, which is partly owned by Thomson. Technicolor in 2007 partnered with DreamWorks to build and staff the facility, which has become another production outlet for DreamWorks, animating DVDs, the successful "The Penguins of Madagascar" cable TV series for Nickelodeon and, eventually, feature films.

To be sure, Technicolor is entering an arena dominated by larger, more established players such as Sony Pictures Imageworks and Industrial Light & Magic. A number of visual effects firms have struggled with the high cost of producing effects and overseas competition, and some, notably the Orphanage in San Francisco, have gone out of business.

Sarnoff, who is working to integrate the various facilities, says Technicolor can compete by offering high-quality effects at a lower cost than rivals.

"Technicolor has a distinct advantage in that it is truly a global company," he said. "It has facilities in places where they already have tax incentives and strong talent pools."

richard.verrier@latimes.com

Copyright © 2009, The Los Angeles Times

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Instead, Technicolor recently devised a system that can show 3-D movies using conventional film projectors, potentially saving exhibitors from spending $75,000 on a digital projector. The rollout of 3-D screens has been significantly delayed because exhibitors have had difficulty funding the conversion, raising concerns among studio executives who are releasing dozens of 3-D films in the next two years. Technicolor's system will be tested this fall at an undisclosed theater in Los Angeles.

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posted 09-01-2009 01:49 PM                   

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Has 3-D already failed?
Years ago, James Cameron announced that his upcoming film, Avatar, would only be released to theaters capable of showing it in 3-D. Since then, he has proselytized fervently at trade shows and fan cons, hoping that Avatar would be such a blockbuster that exhibitors would finally decide to make that expensive leap and invest to convert their auditoriums to add 3-D.

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Avatar will need about 4,000 screens for a 3-D-only release, estimates Doug Darrow, manager of DLP brand and marketing at Texas Instruments, which makes the chips that power theatrical 3-D projectors. Of course, once the Avatar-inspired infrastructure is in place, other 3-D-only releases will follow.

The problems with conversion are manifest. Number one is the expense. 3-D systems are digital, so first the theater owner must convert from 35mm projectors to digital. 3-D is an add-on system that entails additional expenditure. A digital conversion alone costs over $100,000, about five times the cost of a 35mm platter projector. Right now most “D” theaters have 2K projection, but 4K is gradually being introduced for both shooting and showing. (Che and District 9 were shot mostly on 4K.) What theater owner wants to buy an expensive projector that will be obsolete within a few years? And what was supposed to be the breakthrough year for 3-D sees us at what may be the bottom of a huge financial crisis. It has slowed down an already laggardly process.

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I’ll admit that the signs that 3-D is finally going to become a routine and frequent method for making and exhibiting films are clearer than ever this year. More theater chains are announcing conversion to digital projection after years of resistance. More films in 3-D, and good films, are appearing, like Coraline and Up. And I have to admit that I enjoyed Monsters vs. Aliens more than its tepid reviews had suggested I might.

But there are negative signs as well. Perhaps most notably, the major proponents of 3-D, after years of berating the exhibition wing of the industry for its slow adoption of digital and 3-D technology, are still berating it. Jeffrey Katzenberg, who had announced that all Dreamworks Animation features would henceforth be made in 3-D, is one such complainer. Cameron is another. As of now, roughly 320 of the U.K.’s 3600 screen are digital—which doesn’t entail that all have 3-D capacity. In the U.S. it’s 2500 out of 38,000.

These days, a major blockbuster may open on 4000 screens or more. Given Avatar’s massive budget, rumored at $237 million (not counting prints and advertising), Twentieth Century Fox couldn’t settle for showing only in 3-D, even if every properly equipped screen in the country showed it.

The recent theatrical free previews of scenes from Avatar in 3-D have renewed the claims that this approach is the future. Yet some commentators are cautious about that claim. The Guardian quotes Louise Tutt, deputy editor of Screen International: “It seems a little overambitious,” she says. “A little over-enthusiastic. I mean, take a film like 4 Months, 3 Weeks and 2 Days – who needs to see that in 3-D? So no, I don’t believe it will happen.” She sighs. “But then who am I to contradict James Cameron?”

Cameron is a mighty force for change, no doubt. The Abyss and Terminator 2 introduced the sort of morphing technology that made digital effects a reality. But oddly, there aren’t a lot of other directors quite that gung-ho about 3-D. They’re willing to praise it and suggest that they may make films in 3-D, but they don’t go around to trade shows pressuring exhibitors to convert their theaters.

Peter Jackson, for example, keeps hinting at such a possibility. Apparently his team is testing the new Red camera’s 3-D model with an eye to using it in the remake of The Dambusters. That’s slated to be produced by Jackson and directed by Christian Rivers. But if Jackson were as enthusiastic about the process as Cameron, wouldn’t The Lovely Bones be in 3-D? Steven Spielberg hasn’t been pushing 3-D, although there are rumors about the Tintin films being 3-D. But rumors and expressed interest don’t influence exhibitors reluctant to invest in upgrading theaters on the basis of the still-limited 3-D product that’s out there so far. Where’s Ridley Scott in this debate? Well, to be fair, he called the Avatar footage “phenomenal,” but I don’t see him making 3-D movies and demanding that they play only in properly equipped theaters. Where’s Tim Burton? Even George Lucas, Mr. Digital Technology, who keeps saying that Star Wars will be converted to 3-D, doesn’t have Cameron’s zeal.

Retro-fitting movies is hugely expensive, by the way. One of the few retro-fitted titles, Tim Burton’s The Nightmare before Christmas, has taken to returning annually, as if to remind us of that fact.

Even Pixar, which has said it will henceforth make all its films in 3-D, has been strangely low-key about its current project of re-doing the first two Toy Story films in 3-D and re-releasing them as a lead-up to the premiere of the third film, planned in 3D from the start. (This year the first two will be shown at the Venice film festival, which has added a 3-D prize.) Presumably they are content to provide both 3-D and 2-D prints.

We’re also not seeing a lot of directors in other countries clamoring for the option of making their movies in 3-D. Hollywood may dominate world cinema in terms of screen time occupied and tickets sold, but there are still thousands of movies made elsewhere each year.

There are still few enough theaters in the U.S. capable of showing 3-D movies that films end up with truncated runs. Coraline perhaps suffered most from being taken off screens while it still had commercial potential and before word of mouth had time to help it gain the audiences it deserved. The release of the partially 3-D Imax version of Harry Potter and the Half-Blood Prince was delayed by the fact that Transformers 2 was still occupying Imax theaters. I can’t help but wonder if there are some studio executives who look at this situation and, without announcing it to the world, decide that the films they’re about to greenlight will be made in 2-D. Plenty of those theaters to go around. (Well, not for all the independent films jostling each other in the market, but that’s another blog topic.)

Cameron has bowed to the inevitable and is allowing Avatar to play in both 3-D and 2-D theaters. It seems obvious that it will still take years before a film can go out into the world without 2-D 35mm prints being included in its distribution.

During those years, there’s the potential that 3-D will lose its luster for audiences. One of the main arguments always rolled out in favor of conversion is that theaters can charge more for 3-D screenings. Proportionately, theaters that show a film in 3-D will take in more at the box-office because they charge in the range of $3 more per ticket than do theaters offering the same title in a flat version.

But what happens when, say, half the films playing at any given time in a city are in 3-D? Will moviegoers decide that the $3 isn’t really worth it? Even now, would they pay $3 extra to see The Proposal or Julie & Julia in 3-D? The kinds of films that seem as if they call out for 3-D are far from being the only kinds people want to see. Films like these already make money on their own, unassisted by fancy technology.

Then there’s the fact that the extra $3 is not simply profit. There has to be an employee handing out the glasses, though sometimes the ticketseller does that. And those glasses in themselves cost money. Some will get damaged. When David and I saw Monsters vs. Aliens, there was a woman with a child, perhaps four years old, in front of us in the concession line. She handed both pairs of glasses to the kid while she dealt with paying for the refreshments. He had his fingers all over the lenses, of course.

If a theater is using the RealD 3-D system, it’s no big deal if kids with sticky fingers get hold of the glasses. They are so cheap as to be disposable, if the theater doesn’t want to bother collecting and re-using them. Problem is, the theater has to buy or rent a special silver screen to project on. The Dolby 3D system doesn’t require a special screen, but its glasses cost a whopping $50 apiece as of 2007. In Dolby theaters, you’ll find tense ushers waiting outside, making absolutely sure everyone returns theirs for washing and re-use.

No doubt 3-D enthusiasts would object that someday the system will be so routine that we’ll all have our own glasses and bring them along. That would cut the expenses to the theater, to be sure. But remember, different 3-D systems require different kinds of glasses. Are audiences willing to collect one of each and keep track of which they need to take along when they head for the theater—especially those $50 ones? (“Check the theaters listings, honey. Is it RealD or Dolby tonight?”) And there are more competitors entering the market, with their own glasses.

Is current audience enthusiasm permanent?

As usual, the studios take box-office figures to equal enthusiasm on the part of fans. In public, at least, they don’t speculate as to whether 3-D might again be, as it was in the 1950s, a mere fad or a specialized taste. But because spectators are willing to pay extra now because 3-D is still a novelty, does that mean they’ll maintain that attitude once 3-D is common?

Maybe not. And maybe even now not all filmgoers care. Some even dislike 3-D.

One vocal critic is Roger Ebert. His “D-Minus for 3-D” blog entry is an eloquent takedown of the technique on aesthetic grounds. He just doesn’t like watching movies in 3-D:

In my review of the 3-D “Journey to the Center of the Earth,” I wrote that I wished I had seen it in 2-D: “Since there’s that part of me with a certain weakness for movies like this, it’s possible I would have liked it more. It would have looked brighter and clearer, and the photography wouldn’t have been cluttered up with all the leaping and gnashing of teeth.” “Journey” will be released on 2-D on DVD, and I am actually planning to watch it that way, to see the movie inside the distracting technique. I expect to feel considerably more affection for it.

Ask yourself this question: Have you ever watched a 2-D movie and wished it were in 3-D? Remember that boulder rolling behind Indiana Jones in “Raiders of the Lost Ark?” Better in 3-D? No, it would have been worse. Would have been a tragedy.

He refutes the widespread argument in favor of realism:

There is a mistaken belief that 3-D is “realistic.” Not at all. In real life we perceive in three dimensions, yes, but we do not perceive parts of our vision dislodging themselves from the rest and leaping at us. Nor do such things, such as arrows, cannonballs or fists, move so slowly that we can perceive them actually in motion. If a cannonball approached that slowly, it would be rolling on the ground.

It’s true that the “coming at you!” effects in 3-D movies are disruptive. I remember the 3-D in Bwana Beowulf, excuse me, Beowulf primarily for those weapons thrusting out of the screen or the gratuitous overhead tracks past beams looking down toward the distant floor. More interesting, though, is that fact that although I saw Coraline and Up in 3-D, I remember them in 2-D. Those films didn’t throw spears at the spectator or otherwise seek to pierce that fourth wall with their props. Of course as I was watching, I noticed that the mise-en-scene had layers of depth and the figures a rounded look, but apparently my life-long movie habits filtered those aspects out as the films entered my memory. I look forward to seeing both films again on DVD, and given the fact that home-theater 3-D is still in its very early stages, I’ll probably see them flat. Fine with me.

Yes, Coraline was carefully designed with 3-D effects in mind, playing with skewed perspective to characterize the two worlds the heroine moves between. But as David showed by reproducing a frame here on our merely 2-D blog, the same motifs worked without the glasses. They’re quite similar, in fact, to the forced or distorted perspective used in German films of the 1920s.

We saw District 9 this week. No 3-D, and I for one am glad about that.

On August 26, TheOneRing.net, the premiere Tolkien site on the internet (for both novels and films), pointed to the current results of its ongoing poll. They asked, “Should the Hobbit films be in 3-D?” Many of the fans who frequent TORN do so because of the films. They have heard rumors over the years, mainly hints dropped by Peter Jackson, that The Hobbit might be made in 3-D. So what is their reaction as reflected by the poll? As of August 26, 55% say no, 13% say emphatically no (“Ugh … 3-D?”), 13% are sitting on the fence, and 13% say yes.

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TORN subsequently checked with director Guillermo del Toro, who reassured them, “I can safely say that, as of this moment, there are absolutely NO conversations about doing the HOBBIT films in 3D.”

Of course, my title, “Has 3-D already failed?” was meant to be provocative. Its answer depends on how one defines success. If you’re Jeffrey Katzenberg and want every theater in the world now showing 35mm films to convert to digital 3-D, then the answer is probably yes. That goal is unlikely to be met within the next few decades, by which time the equipment now being installed will almost certainly have been replaced by something else.

Right now, the big proliferation is in tiny personal screens, iPod Touches, cell phones, portable gaming devices. Will teenagers allow themselves to look dorky by sitting with 3-D glasses staring at their phones? 3-D has the effect of making films that won’t play well on the very devices that studio heads would love to see playing their movies. So far, it is a remarkably inadaptable technology to try and force on people whose movie-playing gadgets change every few years. The big break-through, home-video 3-D, is aimed at a machine that people are supposedly abandoning in favor of other screens. 3-D movies on your computer? So much for inviting pals over for a sociable evening of popcorn and a movie in your impressive home theater.

Maybe Hollywood will forge ahead, despite all the obstacles I’ve mentioned. But it also seems possible that the powers that be will decide that 3-D has reached a saturation point, or nearly so. 3-D films are now a regular but very minority product in Hollywood. They justify their existence by bringing in more at the box-office than do 2-D versions of the same films. Maybe the films that wouldn’t really benefit from 3-D, like Julie & Julia, will continue to be made in 2-D. 3-D is an add-on to a digital projector, so theaters can remove it to show 2-D films. Or a multiplex might reserve two or three of its theaters for 3-D and use the rest for traditional screenings.

If that more modest goal is the one many Hollywood studios are aiming at, then no, 3-D hasn’t failed. But as for 3-D being the one technology that will “save” the movies from competition from games, iTunes, and TV, I remain skeptical. Given the banner year that Hollywood is having, I echo Daffy Duck in The Scarlet Pumpernickel when after his lover picks him up and, crying “Save me,” races from her forced marriage, he says,“So what’s to save?”

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posted 09-04-2009 06:47 PM                    

quote: Mark Gulbrandsen

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It's moneys wasted IMHO. Ever since 3-D film based systems went single strip 35mm the 3-D has sucked big time and is so inconsistant as to be a joke.

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It's also still going to cost theaters about 10 grand or more to get another special lens and the silver screen. Many will also need to install larger lamphouses as well. All in all this is money that would be better spent in the long run on digital!!

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