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Topic: Digital Cinema Looks Like A Hit, But Theaters Fight Release Date
Expert Film Handler
From: Fountain Valley, CA, USA
Registered: Sep 2003
posted 02-07-2004 10:40 AM
Digital Cinema Looks Like A Hit, But Theaters Fight Release Date
BY BRIAN DEAGON
INVESTOR'S BUSINESS DAILY
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
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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Jedi Master Film Handler
From: New Castle, PA, USA
Registered: Jun 99
posted 02-07-2004 02:14 PM
quote: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.
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.
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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From: Colorado Springs, Co
Registered: Jan 2004
posted 02-08-2004 01:58 AM
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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