Finally, after years of wrangling and rumor, it looks like the digital cinema age is about to arrive.
So is it time for an old-fashioned gold rush, as companies flock to cash in on the wide-open d-cinema space? Not exactly.
While there are deals yet to be made, the d-cinema market is far from wide open. Two companies, Technicolor Digital Cinema and Christie/AIX, are already well on their way to controlling the business.
For dealmaking purposes, d-cinema has three parts: Distribs ink a digital “lab” that creates digital “prints”; either the distrib or the exhib pacts to have digital prints delivered to theaters by wire or by satellite; and exhibs strike deals to finance and install digital projection systems.
The first link in the chain is close to being locked in.
All the majors except Paramount have inked non-exclusive deals with either Technicolor Digital Cinema (Warner, New Line, the Weinstein Co.), Christie/AIX (Disney) or both (DreamWorks, Sony, U, Fox).
Par has lagged because its former regime — former distribution prexy Wayne Lewellen, in particular — was in no hurry to board the d train.
Now, however, the stars seem to be aligning for Paramount to sign a d-cinema deal soon. The studio’s new acquisition, DreamWorks, pacted with both Technicolor and Christie, and DreamWorks’ Jim Tharp has replaced Lewellen.
While Technicolor is a familiar name, Christie/AIX — a joint venture between projector maker Christie and AccessIT — is a new player. Film-processing stalwart Deluxe, meanwhile, has said it, too, will get into d-cinema, but hasn’t announced any deals yet.
The middle link of the d-cinema chain, delivering the digital content, involves moving large data files around very, very securely. There’s been little action on this front so far. And these are likely to be the last pacts signed in the whole conversion process, since they’re irrelevant until theaters have their digital projectors in place.
It’s also unclear if delivery will be a stand-alone biz. “It may just be an additional service that’s offered at a competitive price to encourage use of the other services,” says Charles Swartz, CEO of USC’s Entertainment Technology Center. So the players in this area could well be Technicolor and Christie.
The great digital logjam developed around the last link, getting digital projectors into theaters. Here, too, Technicolor and Christie are big players.
Exhibs complain that they’re being asked to spend a lot of money for something that benefits distribs more than theaters. Distribs answer that digital projectors open a lot of new revenue streams for theaters. Each says the other should shoulder the burden.
Christie and Technicolor aren’t waiting for their clients at either end of the pipleine to budge. They’re offering to serve as intermediaries, financing the cost of the projection hardware and collecting a “digital print fee” from the theaters, a fee that is supposed to shrink and eventually disappear as the equipment is paid for.
The duo hope that smoothes the way for a wide rollout. Technicolor aims to have 15,000 digital screens within a decade, while Christie plans to hit 10,000 by 2010.
Each boasts one pact with a midsized exhib. Christie pacted with Carmike Cinemas to take every one of its 2,300 U.S. screens digital. Technicolor landed its first exhib deal in January when it inked Century Cinemas, with some 1,000 screens.
But in this arena, Technicolor and Christie have some serious rivals.
The three biggest theater chains, Regal, AMC and Cinemark, have banded together to form National CineMedia (NCM). Together, they have more than 11,000 screens. NCM will create a d-cinema plan for the chains and in the meantime, those three chains aren’t pacting with either Technicolor or Christie.
NCM could emerge as a rival to Technicolor and Christie for intermediary services; that would allow the chains to get part of those print fees back.
Kodak Digital Cinema is a dark horse in this race. The company has already become an important supplier of digital pre-show systems and is introducing hardware suitable for features.
There is a fourth area for d-cinema deals, but no one’s sure yet whether it will be more bang or bust: 3-D. Every new digital projection system will be able to play 3-D, but they need some add-ons — including special glasses for viewers, and in some cases, a special silver screen.
There are at least two rival 3-D systems, and the Digital Cinema Initiative spec hasn’t yet harmonized them.
But last year, a ShoWest panel of top helmers, including James Cameron and Robert Zemeckis, backed digital 3-D. Zemeckis’ “The Polar Express” fared very well in its Imax 3-D release and Disney’s 3-D version of “Chicken Little” also did strong business.
If auds embrace 3-D, exhibs will likely rush to cut deals with 3-D vendors. If not, it’ll remain a niche product.