Techies pitching ‘digital-for-a-dime’

Exhibs would make monetary contributions, distribs would cut costs

LAS VEGAS — Despite exhib skepticism so palpable you could stick a fork in it, two major technology vendors served up a proposal Wednesday to cover costs of digital theater conversions by diverting a few cents of each box office dollar to cover those costs.

Lab giant Technicolor and fiber optics networker Qualcomm, who together hope to electronically distribute pics to theaters, announced their financing proposal to the press after a luncheon on electronic cinema at the ShoWest exhib trade show here.

The Technicolor-Qualcomm joint venture, Technicolor Digital Cinema, proposes to finance and execute the conversion of a selected 1,000 theaters nationwide to digital projection. Under the plan, participating exhibs would make a monetary contribution of 12.5¢ per patron, and distribs would help by cutting the costs of circuits’ acquisitions.

Though the scheme would still be a money-losing one for Technicolor Digital, joint venture prexy Dave Elliott said he hopes the plan will “kick-start” enthusiasm for electronic cinema and ultimately prove profitable for the partners.

Execs said the National Assn. of Theater Owners likely will assist in selecting 1,000 exhibs willing to participate in the plan. Though details of qualifying for participation have yet to be worked out entirely, execs suggested exhibs of all size could potentially participate.

The plan, which would begin to make the first digital installations in September, offers competitive bidding procedures to various digital projector vendors, execs said. Unspecified studio reps and filmmakers have been consulting with Technicolor Digital to review various systems for quality control, officials added.

Competing plan

Another digital-distrib wannabe, Boeing Digital Cinema, in low-key meetings with circuit execs has also been floating some ideas about how exhibs can pay for converting theaters to digital projection. Boeing Digital, a unit of the giant airplane maker, wants to use its satellites to beam movies into theaters and suggests circuits can cover costs of acquiring digital projectors through leasing plans offered by Boeing Capital.

Boeing Digital co-director David Baker stressed its satellite-delivery scheme is “standard agnostic” and could work with any digital projection system.

Digital choices

There are also competing proposals for digital projection.

To date, projection systems using a high-powered Texas Instruments chip have gotten the highest marks. Those include projectors marketed by Barco, Christie and Imax unit DPI.

There are 31 prototype T.I. systems in place worldwide, and 14 in the United States. The prototypes use DVDs to deliver digital images to projectors, but it’s widely expected fiber-optic and satellite delivery eventually will supplant disk-based arrangements to allow for greater cost efficiencies.

Sony, using a chip from JVC, is the standard-bearer for a rival digital projection system that’s clearly not out of the running just yet. Kodak, which has been interested in electronic cinema for some time, may throw in with the JVC chip crowd as well.

In fact, the film giant announced at ShoWest that it’s testing a new prototype system at the Kodak Imaging Technology Center in Los Angeles, where demonstrations will begin in the next several weeks, officials said.

Electronic ennui

Meanwhile, there’s muted interest in digital cinema at best among exhibs, who are going through an industrywide financial crunch of historic proportions. Further, exhibs see the studios as the main beneficiaries of electronic film distribution.

And studios, who would save considerable money in film print costs by going to electronic distribution, so far have resisted a Disney-led proposal to kick in some collective cash for theater conversions.

Still, there’s a sense among all parties that digital cinema will become a reality. So any specific scheme for dealing with conversion costs –estimated at $100,000-$150,000 per screen — could prove notable.

As a commitment of capital, the Technicolor Digital proposal represents a total expenditure of up to $150 million to convert only those first 1,000 screens. But digital proponents reason that though upfront costs for converting theaters to digital are high, exhibs will also save in the long run, largely because projectionists aren’t needed to run electronic systems.

Boeing Digital’s Baker estimates that exhibs’ per-screen cost to show pics drops to about $500 per run with digital from the usual $2,000-$3,000.

Imax co-CEO Richard Gelfond says he senses an incremental increase in exhib interest in digital this year, their money woes notwithstanding.

“I think there was a seed planted previously, and this year’s show will sprinkle some water on it,” Gelfond said. “Of course, it may take some time before a forest sprouts.”

Indeed, John Fithian, president of NATO, knocked the notion that broad conversion to digital exhibition could happen anytime soon.

“Anyone who thinks exhibs can pay for these systems in their current state is not doing the math,” he said.

Fithian also cautioned against viewing the Technicolor plan or any other specific financing plan as a catalyst for the digital rollout. He said other obstacles remain, including exhib sentiment that buying into digital projection systems too soon could mean getting saddled with equipment that quickly becomes obsolete when refinements are made in the young technology.

Concerns also abound about security issues, with studios seeking absolute assurance that digital distribution won’t heighten the threat of pic piracy. Electronic cinema proponents hope such concerns will be offset by the allure of big savings on print costs, which Technicolor Digital estimates at $14 million a year per major studio for the distribution of movies and trailers to theaters.

“Digital is going to happen eventually,” observed Pat Knieff, who runs a small theater chain in Mt. Pleasant, Texas. “But for now, there are just too many things to work out.”

There’s also a creative piece to the electronic cinema puzzle. In addition to movies that would be converted to digital for electronic distribution, some filmmakers, including George Lucas, have begun shooting directly in digital video.

Madstone Films, a Gotham-based production house, aims to release modestly budgeted specialty pics shot in digital. Then, if it can acquire some theaters –the company has a bid on the ailing Silver circuit at present — Madstone wants to show the films on screens converted to digital projection.

Such a business model, known as a “private cinema network” arrangement, is also being pushed by aspiring digital circuit InTheater Entertainment.

Essentially, Madstone and InTheater would complete the digital paradigm by first converting a bunch of screens and then programming them with proprietary content. Both companies envision supplementing movie fare with videos of live sporting events and concerts, and business-oriented video conferencing.

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