Designs on digital

Firms poised to make the most of transition

The arrival of digital cinema has the potential to reshuffle the deck in the exhibition and distribution businesses more than any innovation in years, perhaps in the entire history of the film business.

That has the industry’s big players diversifying to get into the digital game and hold onto their long-established relationships, while companies from the high-tech world look to leverage their skills into the entertainment business.

The biggest change will probably come in exhibition. Since there will be no prints to rent, per se, it will be much easier to assign extra screenings to a hit, and drop screenings of a flop. “This is new for everybody, but the players are pretty similar across the board,” says Scott Spector, digital cinema VP for projector maker Barco. He points to NEC, Christie, Sony and his own company as examples of established industry players moving into digital cinema projection.

Moreover, digital projection offers a paradigm shift for theater owners. A movie projector is pretty much built to do one thing: project movies. But a digital projection system is like a bigscreen projection TV; it can show the latest hit movie, but it can also show a teleconference, a business presentation, Olympic figure skating or the Rolling Stones live at the Rose Bowl — anything that can be transmitted digitally. Theaters gain access to a new revenue stream during the business day, and new revenue streams often lure new investors.

Various pieces of the digital cinema puzzle have been coming for years, but now, with the Digital Cinema Initiatives recommendations in place, the technology may be taking off.

“Any one application so far has not been overly compelling,” Spector says. “But the combination of all the elements, technology and cost-savings, are making digital cinema a reality.”

In digital distribution, executives around the industry expect the major studios will seek an end-to-end solution from a single provider when they move away from physical prints.

That threatens long-established labs Technicolor and Deluxe. They’ve had a duopoly in striking and shipping release prints, and they intend to leverage those studio relationships in the digital cinema realm.

Thomson Technicolor is already in the digital cinema business, and Deluxe is moving into that space.

“If a company sees itself as a film company, a photochemical company, that’s shortsighted,” says Charles Swartz, executive director and CEO of USC’s Entertainment Technology Center. “But if a company sees itself as an imaging company, as a company whose expertise is delivering images to the cinema, then they’re thinking strategically.”

But because digital cinema doesn’t necessarily demand large manufacturing facilities — there’s no need to strike thousands of prints — the barrier to entry is different. It’s still high, as the evolving world of digital distribution is going to require high-powered technology and a lot of expertise, but the big players have to acquire that technology and expertise, too. And some of the competition isn’t carrying the costs of those old print plants.

Deutsche Telekom’s T-Systems unit, for example, is bowing an end-to-end solution to connect Europe with the U.S. The service will hook up locations and sets in Europe to studios in L.A., then connect those studios back to European theaters for digital distribution.

Deutsche Telekom’s deep pockets and technological experience make it formidable competition, even without the relationships the labs have built, and its European base may give it a leg up in dealing with European locations and exhibitors.

Also, where now it’s not feasible for new players to get into the business of striking and distributing release prints, the process of preparing a digital cinema package for distribution to theaters is not unlike DVD authoring and mastering. Companies with experience in that field will find an opening to compete with the labs.

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