Digital off runway

Boeing pilots effort to spur cinema transition

When it comes to pioneering digital cinema, an airplane manufacturer may not be the obvious choice to lead the charge.

But in December, Boeing will take one of the first steps to equip theater screens with the technology to receive and project pics digitally. Its efforts will substantially up the ante in the competition among such rivals as Technicolor, Qualcomm and Qwest to establish a beachhead in the race for digital delivery supremacy.

Boeing says that its satellite-based distribution system will be installed in 10 theaters nationwide in December, with hundreds to follow the next year and thousands sometime in year three. Deals with exhibition chains will be announced at ShoEast later this month.

At the same time, Boeing will open a network operation center in Hollywood to handle all aspects of digital film distribution.

The company estimates that digital projection will slash exhibs’ per-screen cost to show a pic, down to about $500 per run from the usual $2,000-$3,000. Also gone are print and shipping costs; print costs alone have been estimated at $14 million a year for each major studio.

Digital is also expected to offer revenue-making opportunities in the form of nontraditional programming, such as concerts, sporting events or even the broadcast of educational programming inside theaters.

Through Boeing’s “standard-agnostic” technology, films will be delivered overnight; the average two-hour pic will take up to seven hours to distribute to between one and 10,000 theaters simultaneously. Delivery times could eventually be reduced to two hours or less. Once delivered, films can be shown on any digital projection system.

DVD delivery

While its primary focus is on satellite delivery, Boeing is open to other distribution methods. It may be cheaper for some theaters to have pics delivered via DVD.

“But if a film is being distributed to greater than 1,000 screens, it makes more sense to broadcast it,” said Frank Stirling, executive director of digital cinema for El Segundo-based Boeing Satellite Systems, a division of the airplane manufacturing giant. “We’re using these first cinemas for testing purposes. We then want to work with the industry at large to see what makes sense going forward.”

Boeing has yet to determine how much it will charge to digitally distribute a film.

As for the question of copyright protection in a digital age, the answer comes from an unlikely source: Security will be handled using technology found inside U.S. military satellites that Boeing builds to deliver national security information.

Chicago-based Boeing is readying a high-flying 27-month rollout that is expected to generate enthusiasm among skeptical exhibitors. But it still faces some serious turbulence in its quest to establish a digital standard.

Other companies are jockeying to get competing digital delivery and projection systems in place.

Film lab Technicolor, through its relationship with digital wireless delivery company Qualcomm, is expected in November to finance the conversion of 1,000 theaters nationwide — estimated at $100,000-$150,000 per screen. Exhibition partnerships have yet to be signed.

Fiber-optic strategy

And mogul Philip Anschutz is showing signs that he may adopt land-based fiber-optic network operator Qwest to digitally deliver films to his exhibition holdings, which could reach 6,000 should his takeover of Regal Cinemas be successful. Anschutz is a majority shareholder in Qwest.

The technology used by the most players will become the industry standard. The first major exhibitor to pair up with either a Boeing or a Qualcomm-Technicolor will also be key to attracting other circuits to adopt digital cinema.

But the biggest roadblock remains the cost to convert theaters and maintain the technology. Add to that projection and compression standards issues and security concerns.

It’s still unclear who will bear the brunt of the conversion costs.

A consortium of studios, tentatively called Newco and led by a pro-digital Disney, has offered to pay for many of the theater conversions, in an effort to reap as much of the anticipated savings as it can from digital cinema.

Boeing Digital Cinema has pitched its Boeing Capital division to assist exhibs with financing through leases, while Technicolor and Qualcomm have floated a proposal to finance theater conversions by taking a few cents out of each B.O. dollar to cover costs.

Exhibs don’t want to be saddled with poor or short-lived equipment. Current 35mm film projectors are durable workhorses capable of being moved from theater to theater. Digital projectors, by contrast, have a lifespan of up to three years before becoming obsolete.

“Projectors last forever. Why buy a new projector if it won’t sell more tickets?” Larry Gleason, a technology consultant and former distrib chief with MGM, said at a recent panel on digital cinema in Beverly Hills. “No one knows how much they will cost or how long they will last.”

The largest airplane manufacturer in the world, Boeing is also the world’s leading manufacturer of communications satellites and a major provider of space systems, satellites and payloads for national defense, science and environmental applications.

In the last few years, Boeing has purchased a number of companies as part of a plan to diversify and rely less on the huge but cyclical market for commercial airplanes, which accounted for 60% of Boeing’s $51 billion in revenues in 2000.

But Boeing says it has no plans to become a Hollywood player through digital cinema. Instead, like several other technology outfits, the company considers the movie biz an important testing bed to improve its data-transmission technology in order to enter other arenas, including the medical industry and corporate storage, file transfer and data backup businesses.

“We’re using cinema because of the demand for high security and high image quality when distributing over satellite,” Stirling said. “We’ll use what we learn and incorporate that into our other businesses.”

Despite efforts by Boeing, Qualcomm and others, industrywide adoption of digital cinema is expected to take 10-20 years. But it is inevitable.

“The world is going digital,” Stirling said. “You can’t stop that. People talk about the chicken and the egg problem. The main dilemma is to get theaters equipped in order to receive films. It doesn’t matter if you have a projector or not if you can’t show anything on it.”

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