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Exhibs drill into digital cinema’s prospects

Efforts aim to combat rise of home-based entertainment

TIP SHEET
What: ShoWest
When: March 13-16
Where: Bally’s Las Vegas, Paris Las Vegas, Las Vegas, Nev.

Amid a flood of consumer entertainment options, theater owners are looking to digital cinema and related opportunities to shore up their own competitiveness.

“We have more competition for the entertainment time of American consumers, because consumers now have so many more options than they did 20 or 30 years ago,” says John Fithian, president of the National Assn. of Theater Owners.

For all the talk of tighter DVD windows and the popularity of the shiny disc, Fithian puts equal importance on the spread of videogames and Internet-based entertainment. All these rivals for consumers’ time and money are home-based.

“Cinema operators need to continue to differentiate the entertainment experience they offer from that of the home experience,” Fithian says.

“I believe long-term that digital cinema will be the biggest innovation.”

Digital cinema offers exhibs the opportunity to integrate new kinds of programming, such as sports and concerts. It also bodes well for the spread of 3-D movies, which the NATO chief suggests can be a rich new area of revenue for exhibition. Theaters that offered recent Disney tooner “Chicken Little” in 3-D rang up three times more than conventional venues.

“There is incremental opportunity there, but it’s just that,” says R. Glen Reid, an exhibition analyst at Bear Stearns. “I don’t think 3-D changes the dynamics or positioning of the entrenched players. But to the extent 3-D improves the experience offered by theaters … it could help.”

But 3-D carries costs for exhibs. First comes the digital projector, which then must be augmented to provide 3-D images. Special eyeglasses worn during such presentations are another expense. Disposable glasses are cheapest, with lower upfront expense, but they do require pricey screen alterations. With mechanical glasses, there are substantial acquisition and maintenance outlays, but no special screen adaptation is necessary.

“We’re never going to have 3-D capability in every auditorium in every theater in the country — it’s too expensive,” says Fithian. “You’re adding a cost factor of about 30%.”

But where available, 3-D will give consumers a “value-added” experience, he says, not unlike the luxury amenities some venues now offer, such as in-seat food and beverage service.

Recent marketplace challenges mean exhibs must deal with some not-so-pleasant aspects of contemporary movie-going. Ushers are returning to neglected posts in theaters, checking for active cell phones and encouraging patrons to report other moviegoers’ rude behavior. And though the spread of cinema advertising is likely to continue, exhibs are encouraging the pitchmen to integrate more interstitial entertainment into ad “preshows” and to diminish the prominence of staid commercials of the TV variety.

“We’re really trying to be cinema-centric and patron-centric,” says Kurt Hall, CEO of National CineMedia, which supplies the ad pre-shows for 14,000 Regal, AMC and Cinemark screens. “It’s very obvious that if we scare people out of their seats, we’re not helping the exhibition business and we’re not helping the advertising business.”

Can exhibs’ renewed efforts meet the challenge of home-based entertainment?

“No matter how advanced a home-theater system becomes, most consumers enjoy getting out of their house and making an event of a movie,” says Reid. “In-home entertainment cannot be a perfect substitute for an evening at the movies.”

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