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» Film-Tech Forum   » Operations   » Digital Cinema Forum   » Digital Cinema Looks Like A Hit, But Theaters Fight Release Date (Page 1)

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Author Topic: Digital Cinema Looks Like A Hit, But Theaters Fight Release Date
Bevan Wright
Expert Film Handler

Posts: 176
From: Fountain Valley, CA, USA
Registered: Sep 2003

 - posted 02-07-2004 10:40 AM      Profile for Bevan Wright   Author's Homepage   Email Bevan Wright   Send New Private Message       Edit/Delete Post 
Digital Cinema Looks Like A Hit, But Theaters Fight Release Date


Digital cinema could be the biggest thing in the film industry since the 1920s,
when talkies replaced silents.

Sure, digital cinema improves picture quality, but perhaps more important it may
save movie studios billions and boost theaters' ad revenue.

The technology exists to replace 35 mm film projectors. Instead of film, movies
are stored on disk drives, and a digital projector sends the images to a screen.

But after years of discussion, the big Hollywood studios and the corporations that
own theater chains have yet to agree on a business model.

"The politics involved with getting major studios and exhibitors comfortable with
the business model is tricky," said John Fithian, president of the National
Organization of Theatre Owners, also known as NATO.

Work on digital cinema technology has been ongoing for 10 years. Manufacturers
hoped the rollout would be under way by now. But it might be a few years more
before that happens, exhibitors believe.

The sooner a business plan is developed, the sooner theaters will replace 35 mm
film projectors with the new technology, including the servers and computerized
projectors. Movies could be sent to theaters via satellite instead of shipped in
film canisters by truck.

That would save movie studios hundreds of millions each year in distribution
costs, said NATO.

Exhibitors could boost revenue by using the projectors for alternate programming.
For instance, they could broadcast live events or special advertising content.

But the rollout will cost billions.

Fithian has been talking about business models for years without getting the ears
of Hollywood honchos. He decided to turn up the volume in December when he fired
off a blunt letter to the major Hollywood studios.

It was addressed to Charles Goldwater, chief executive of Digital Cinema
Initiatives. It's a joint venture that represents 20th Century Fox, Universal
Pictures, Disney, (DIS) Paramount Pictures, Sony Pictures, (SNE) MGM and Warner
Bros. He also sent the letter to the Society of Motion Picture Engineers.

Fithian made clear that hundreds of firms that own theater chains would end their
support for digital cinema if studio heads failed to address their concerns.

"Cinema operators around the world demand the development of fair business models
as a necessary antecedent to the large-scale transition from film to digital
cinema," his letter read. It was co-signed by the president of Europe's largest
theater-chain association.

Too Many Formats

Next month, Hollywood studios are slated to present a position paper on digital
cinema at an industry trade show. Fithian and the theater owners may learn whether
their warning will be heeded.

The Digital Cinema Initiative was formed two years ago to resolve myriad technical
and business issues.

At the time, there were four competing formats for digital projection systems.
Theater owners wanted to avoid repeating mistakes made during the digital sound
rollout of the 1980s. Theaters bought extra equipment to accommodate four formats.

Even if the format question is resolved, other concerns remain. Studios and
theaters want to protect themselves against piracy, which could cost them

Theater owners say DCI's work on technical specifications should stop "until
studios and cinema operators can answer fundamental business questions that must
precede the adoption of any standards," said Fithian in his letter.

With digital cinema, theaters would no longer have a physical copy of a film in
their possession. So the process of sending digitized encrypted data via satellite
introduces a new question: Who will control the keys to decrypting the movies?

The current proposal put forth by DCI gives the studios far too much control, NATO
says. In a worse-case scenario, theater owners say, studios could dictate in which
auditorium a theater shows a movie, and at what time.

The DCI has noted those concerns. "The studios recognize that more work needs to
be done, and should be done," Goldwater said. "We're committed to seeking workable
solutions. All parties involved have given these questions a tremendous amount of
attention, and it's bringing us closer to wide-scale rollout."

Privately, some exhibitors say a rollout is several years out. That doesn't seem
to bother them.

"Right now, there is little passion among exhibitors to rush into digital cinema,"
said Fithian. "They believe it's going to happen and that it's the right thing to
do, but they want to be sure it happens in the right way."

There are 35,000 movie screens in the U.S. and 130,000 worldwide. Only about 150
of them have digital cinema projectors, many of them provided free to the
exhibitors on a trial basis.

Regal Entertainment Group, (RGC) the largest U.S. theater chain, has installed
four of the units. AMC Entertainment, (AEN) the second largest chain, has 11.
Neither plans to add more, preferring to wait for the business questions to be

"The biggest issue has to do with the relationship with exhibitors and
distributors, and those discussions haven't really started yet," said Kurt Hall,
co-chief executive of Regal.

Said Rick King, a spokesman for AMC: "We've been a leading participant in the
field-testing of digital projection systems. We accomplished our objective; we're
familiar with the equipment and the audience response. It doesn't make sense to
further expand the program pending the outcome of business discussions."

There's another reason why exhibitors aren't in a hurry. While waiting for digital
cinema to arrive, they are pursuing another avenue.

Regal is investing $75 million to equip almost all of its theaters with standard
digital projection systems. These cost $10,000 each, one-tenth that of a digital
cinema projector. With other gear, such as satellite dishes and servers, Regal is
spending $13,000 to $15,000 per screen.

This equipment delivers lower picture quality than digital cinema projectors, and
it is not designed to play full-length digital films. But it's just right for pre-
show advertising and the display of other entertainment programming, such as live
or prerecorded concerts. With the revenue boost from such programming, Regal
expects to recover its investment within three years.

"It has provided a new high-margin revenue source," said Hall.

Regal expects to have 5,300 screens equipped with the new projectors by the end of
this year. AMC has installed 1,250 units and plans to double that by summer for an
80% penetration rate of its theaters.

AMC and Regal are testing the concert concept in theaters around the country. For
instance, on Tuesday Regal plans to show a Gloria Estefan concert in some

The chains have also created original content with advertisers. Regal has worked
in partnership with NBC, TBS and Vivendi Universal Entertainment (V) to create
original content. AMC is making similar moves.

"We think audience expectations are high for this kind of pre-show programming,"
said AMC's King.

Regal's Hall said off-peak business may grow as a result of new
programming. "We're trying to create content that will put more people into seats
Monday through Thursday," said Hall.

Michael Karagosian, an analyst at Karagosian MacCalla Partners, said exhibitors
are motivated to pursue this route rather than wait for Hollywood studios.

"The discussion is taking up time and resources that exhibitors don't view as
productive," he said. "I've received calls from the largest exhibitors saying they
would be happy to see digital cinema shelved for a few years if they can't make

Theater owners say movie studios should foot the bill, or at least most of it,
because digital technology would save them the most money. Fithian said studios
would save $800 million a year in distribution costs.

Goldwater said he doesn't know whether studios are willing to pay. "We haven't
reached that point in our business discussions with the exhibitors. There are
other issues to deal with first."

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Darryl Spicer
Film God

Posts: 3250
From: Lexington, KY, USA
Registered: Dec 2000

 - posted 02-07-2004 12:32 PM      Profile for Darryl Spicer     Send New Private Message       Edit/Delete Post 
I am all for shelving it until everything and I mean everything is set in stone. This is too expensive of a change that only really benafits the studios. I also think that a roll out should not be major but on a level of one or two in each location gradually increasing over a period of time. This is not something the should be done on a rapid uncontroled pace. As long as we keep doing film right why spend the money to replace something that has worked for a century. If it ain't broke don't fix it, at least not right away until every bug is worked out.

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Mike Blakesley
Film God

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From: Forsyth, Montana
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 - posted 02-07-2004 01:02 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I hate it when the headline of the article "blames" the theatre industry for the non-rollout. A better headline would have been, "Digital Cinema Looks Like a Hit, If Studios Pay Their Share."

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Bevan Wright
Expert Film Handler

Posts: 176
From: Fountain Valley, CA, USA
Registered: Sep 2003

 - posted 02-07-2004 01:03 PM      Profile for Bevan Wright   Author's Homepage   Email Bevan Wright   Send New Private Message       Edit/Delete Post 
Do you do a roll-out D-cinema like digital audio where the larger houses in each complex (typically) were done first then eventually all houses get upgraded and all new complexes are 100% equipped? Means going back to most complexes a few times... pulling cable and doing electrical and building modifications. What about new complexes that would be built during this transition period - 100% digital or a mix or dual film/digital systems? Which theatres get done first? Which countries? Would all movies instantly be available in digital format? Assuming you could do 5,000 screens per year (a tremendous pace for suppliers and installers) it would still take 7 years just to do the US market, studios would have to do dual inventory for all those years - slowing the ROI on the investment. [Not to mention the technology issues, with the first units that would be put in would likely be obsolete and easier/cheaper to replace than to fix by the end of the deployment period - further compounding the ROI period.] Lots of logistics questions let alone the business and control issues mentioned in the article.

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Aaron Mehocic
Jedi Master Film Handler

Posts: 804
From: New Castle, PA, USA
Registered: Jun 99

 - posted 02-07-2004 02:14 PM      Profile for Aaron Mehocic   Email Aaron Mehocic   Send New Private Message       Edit/Delete Post 
Not to mention the technology issues, with the first units that would be put in would likely be obsolete and easier/cheaper to replace than to fix by the end of the deployment period - further compounding the ROI period.
Yeah I have the same observations about that myself. Personally my view on this entire digital projection debate is that we finally have achieved a point in our technological development in which we can have something "better", but it is just not cost effective at any time in the future to make it truely valuable to us.

If digital projectors are ever installed in mass amounts both here in America, as well as around the world, it should be solely funded by a consortium of studios who as we all know will be saving the most money in the long run. There should be no question about that - PERIOD. If John Fithian's 800 million dollar claim in distribution costs is accurate, one does not have to be a harvard trained economist to figure out who is the beneficiary to savings.

Digital projection was and probably will be dead-on-arrival. Perhaps 30 or 40 years from now somebody will simplify it, standardize it, and syncronize it, but I doubt it. There is too much money at stake. The owners of my company have stated time and again that they will not transition to D-cinema until required to by the studios. They figure that will never happen in their business careers. I agree.

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Michael Brown
Phenomenal Film Handler

Posts: 1522
From: Bradford, England
Registered: May 2001

 - posted 02-07-2004 03:26 PM      Profile for Michael Brown   Email Michael Brown   Send New Private Message       Edit/Delete Post 
Sure, digital cinema improves picture quality
Say what now?

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Bobby Henderson
"Ask me about Trajan."

Posts: 10973
From: Lawton, OK, USA
Registered: Apr 2001

 - posted 02-07-2004 03:31 PM      Profile for Bobby Henderson   Email Bobby Henderson   Send New Private Message       Edit/Delete Post 
The article from Investors Business Daily is yet another inaccurate piece in the very long line of inaccurate articles on the subject.

The fundamental thing all of them can never get correct is the myth of digital projection having better quality than film. Shit. It doesn't even have HDTV quality!

The whole thing is a bad business model. Three primary things have to be addressed before theaters can safely purhcase "upgrades" to D-Cinema:

1. The Quality Must Be Better Than Film
A 1280 X 1024 pixel DLP image does not equal film quality. The stored video image much have significantly higher resolution. A 35mm projector system costs much less than any D-Cinema system. So the D-Cinema systems have to prove themselves against the best that 35mm can offer, not just "film done wrong."

2. D-Cinema Must Be Far Better Than Home Theater
It is dangerous for any D-Cinema system to be of lesser quality or merely equal to 1080 HDTV standards. The systems must be substantially better so they don't get stung in the digital marketing numbers game. Movie theaters have to offer movie viewing technology that is exclusive to commercial system, not just something that is equal to a home HDTV system. Watching a movie in a theater is more than just being in a big room with a bunch of people.

3. Inexpensive, Easy Upgrades
A 35mm projector can last decades. These D-Cinema systems do not. They have a shelf life of only a few years. A properly designed D-Cinema system should have a modular design where certain core components can be upgraded at a lower cost than replacing an entire system. Home theater and computer technology sure isn't going to sit still. Even now, I can buy a Viewsonic VP2290b monitor for around $6000 that shows a 3840 X 2400 pixel image, an image far higher in resolution than the current HDTV standard and well above the 2K de-facto standard for film-related CGI. I would expect standards like QUXGA-W to improve further and proliferate. Movie theaters must have some way to react to that through their own D-Cinema installations.

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Daryl C. W. O'Shea
Film God

Posts: 3977
From: Midland Ontario Canada (where Panavision & IMAX lenses come from)
Registered: Jun 2002

 - posted 02-07-2004 04:53 PM      Profile for Daryl C. W. O'Shea   Author's Homepage   Email Daryl C. W. O'Shea   Send New Private Message       Edit/Delete Post 
Link to Article

A better headline would have been, "Digital Cinema Looks Like a Hit, If Studios Pay Their Share."
A better headline would have been, "Digital Cinema Looks Like Shit, and Nobody Really Cares."

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R. Andrew Diercks
Expert Film Handler

Posts: 232
From: Marion, Iowa (In the middle of everywhere)
Registered: May 2003

 - posted 02-07-2004 05:21 PM      Profile for R. Andrew Diercks   Email R. Andrew Diercks   Send New Private Message       Edit/Delete Post 
This topic has appeared many times on this site in one form or another. Fact is this IMO: Nobody will ever convince me that electronic information can translate to image as well as light traveling through an acutal photograph. This is strictly a money game and theatres already get [sex] by the studios. Why would we want to open the door for more dictation of our business. We have less freedom as a business than any other I can think of not contracted by the government.

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Greg Mueller
Phenomenal Film Handler

Posts: 1687
From: Port Gamble, WA
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 - posted 02-07-2004 05:47 PM      Profile for Greg Mueller   Author's Homepage   Email Greg Mueller   Send New Private Message       Edit/Delete Post 
Ya know Andrew, when I first saw this post and started reading it. I had to check the date of the first post. I was sure this was an old thread by the same guy. Seems like this is exactly the same article we saw a couple of years ago.
Deja Vue all over again....

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Bevan Wright
Expert Film Handler

Posts: 176
From: Fountain Valley, CA, USA
Registered: Sep 2003

 - posted 02-07-2004 06:11 PM      Profile for Bevan Wright   Author's Homepage   Email Bevan Wright   Send New Private Message       Edit/Delete Post 
I thought the same thing - change a few words and it is the same story.

Standards committees are moving so slowly that the technology changes before the standards can be set in place. Compression, interfaces, storage and other technology aspects are on very rapid cycles. I agree with the NATO position that there is no point in developing the technical standards if the business issues are not yet set.

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Jack Ondracek
Film God

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From: Port Orchard, WA, USA
Registered: Oct 2002

 - posted 02-07-2004 11:15 PM      Profile for Jack Ondracek   Author's Homepage   Email Jack Ondracek   Send New Private Message       Edit/Delete Post 
A $130,000-ish digital installation that lasts maybe 3 years before it becomes obsolete...

For a seasonal drive-in that gets around 900 show hours a year, that's about $48 per hour for the projector... maybe a little under $100 per performance, or $600 per night for my triplex. That doesn't count power, lamps, maintenance, repairs or tech charges.

Sign me up! [Big Grin] [Razz]

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Matthew Stevens
Film Handler

Posts: 37
From: Colorado Springs, Co
Registered: Jan 2004

 - posted 02-08-2004 01:58 AM      Profile for Matthew Stevens   Author's Homepage   Email Matthew Stevens   Send New Private Message       Edit/Delete Post 
I have seen one of these digital projectors up in Denver at the 16th mall, and it was only 12 fps, the motion was all messed up. The picture looked horrible.

They said it would help in shipping costs, but only for the studios. They said it would generate revenue for the studios and the theaters, but the theaters are the ones still paying for the projectors. Who's winning in this sitution?

"it's the biggest thing since the talkie." there is a reason why most none-animation (exclude pixar movies), computer generated movies has failed at the box office, like Star Wars (new ones, NOT OLD)

Since we're all getting digital projectors, why not get rid of the concessions counter too and just put up vending machines, and replace the ticket sales counter and put up a box office kiosk. The new tickets will have bar codes, and the customers will just scan the tickets to get in the theater. And to clean up the theater, a giant fan to blow away any trash (popcorn, cups, customers left behind). Sound heartless enough.

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Mark Gulbrandsen
Resident Trollmaster

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From: Music City
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 - posted 02-08-2004 12:37 PM      Profile for Mark Gulbrandsen   Email Mark Gulbrandsen   Send New Private Message       Edit/Delete Post 
"They said it would help in shipping costs, but only for the studios."

According to industry insiders I've talked with the studios and distributers will have the same or even higher costs for distribution. You alsoahve to take inflation into account for the long time period it will take to develope and standardize something(if they ever do or can) Satellites transmission time doesn't come cheap ya know, and if they didn't go the sat route they'd still have to distribute disks with the high costs, or do land line transmissions still at high costs. No matter how they distribute the digital media it will be very expensive for them to do so.

Mark @ CLACO

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R. Andrew Diercks
Expert Film Handler

Posts: 232
From: Marion, Iowa (In the middle of everywhere)
Registered: May 2003

 - posted 02-08-2004 12:51 PM      Profile for R. Andrew Diercks   Email R. Andrew Diercks   Send New Private Message       Edit/Delete Post 
Not to mention the cost of new encryption and other anti-piracy measures that will need to update almost weekly. Then who pays for the software to unlock this stuff...theatres would be my guess.

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