Films/DVD Asylum

Posted by clarkjohnsen (R) on October 18, 2003 at 09:04:46

Digital Projection of Films Is Coming. Now, Who Pays?

NYT October 13, 2003

By ERIC TAUB

LOS ANGELES, Oct. 12 - Moviegoers who recently saw the
Johnny Depp film "Once Upon a Time in Mexico'' at the
Pacific Sherman Oaks Galleria 16 cinema here may have
noticed that something was different. Instead of the traces
of dust and scratches, and the slight shaking of the image
that is perceptible at many screenings, they were looking
at a picture that is pristine, sharp and steady.

That is because the film was projected digitally, the
images fed not from a five-foot-diameter reel of
35-millimeter film, but from a computer hard drive, and
beamed onto the screen using a projector without any moving
parts.

Filmgoers evidently like what they see. "Given a choice
between watching a 35-millimeter print or a digital file of
the film, customers prefer the digital version," said Jerry
Pokorski, executive vice president and head film buyer for
Pacific Theaters, which operates the 16-screen movie
complex in Sherman Oaks, in the San Fernando Valley. The
theater's newspaper ads note when a film is showing in the
digital format, and "our grosses are as much as 40 percent
higher when we screen a film digitally," Mr. Pokorski said.

One might think that a crowded theater and higher ticket
sales are all the evidence a multiplex owner would need to
be persuaded that digital projectors are worth adopting.
But economics and industry politics, as well as continued
disagreements over technical formats, have delayed the
long-predicted digital revolution in movie theaters. A big
sticking point is the standoff between theater owners and
Hollywood studios over who will pay to update the nation's
35,000 projection booths.

So far, the Galleria's digital system is one of only 39
that the supplier, Technicolor Digital Cinema, has
installed around the country as an experiment, at no charge
to the theater owners. In all, fewer than 80 cinemas in the
United States have movie-quality digital projectors - some
of the others having been installed experimentally by
another emerging competitor, Boeing Digital Systems, and
the rest by theater owners. Throughout the world, fewer
than 200 cinemas in some two dozen countries are using
digital projectors to show movies - with most of the
machines paid for by the manufacturers for test-marketing
purposes.

Aesthetics aside, the exhibitors say that the cost-benefit
analysis comes down too much in favor of the studios, which
could save a couple of million dollars on each movie they
release if they could send it to theaters as digital files
- whether by satellite, or high-speed network lines, or on
hard drives - rather than shipping film copies that can
cost $1,200 each. At that rate, a 2,000-print domestic
release, common for a typical feature film, costs about
$2.4 million in duplication costs, according to Screen
Digest, a British research firm, which estimated that the
movie studios spend a total of $1.36 billion a year to
produce and distribute prints worldwide.

The way the theater owners see it, the costs would not
offset any benefits. A typical 35-millimeter projector,
they say, costs $30,000 and lasts up to 30 years. But a
feature-film-grade digital projector is expected to cost as
much as $150,000, at least initially. And because it is a
new technology, its effective life is unknown. Beyond the
price of the projector would be the cost of the satellite
dishes or high-speed transmission lines needed to receive
the digital file, as well as an investment in the automated
theater management systems to connect and control the
entire operation.

"With the cost savings the studios would enjoy, they could
fund the U.S. transition to digital projection in seven
years," said John Fithian, president of the National
Association of Theater Owners, the exhibitors' trade group.
"But theater owners could not sell enough extra tickets or
raise prices high enough to cover those costs."

Theater owners do acknowledge that there might be economic
and operating benefits for themselves, as the Galleria 16
experiment seems to indicate. To prepare a standard
35-millimeter film for projection, several employees must
now physically splice the film to the preview trailers the
night before the first show. By contrast, to prepare a
movie for digital projection at the Digital Cinema test
site in the Galleria, an operator selects the film title
and the accompanying trailers from a list on a computer
screen, and adds them to the night's play list.

Mark Kahn, a Pacific Theaters engineer responsible for the
company's digital installations, said: "My policy is to
keep it simple, so I created a program that allows the
projectionist to just push a button and leave. The system
lowers the lights, plays the trailers, turns off the
lights, and starts the digital projector.''

To ensure that a technical problem does not interfere with
the show, a copy of the digital file runs simultaneously on
a second hard drive. If the first hard drive fails, an
operator can switch to the backup drive. And for good
measure, a 35-millimeter film copy of the movie is also
running, and that projector can start showing the film if
both hard drives crash.

But Mr. Pokorski of Pacific Theaters says he does not
believe that eliminating the film-preparation tasks will
necessarily translate into lower labor costs. "It still
takes from 4 to 10 hours to prepare and test the digital
print prior to its first screening," he said. "There is
really no overall financial benefit for us to go digital,
so we should not have to pay for the transition."

Before the digital transition can occur in earnest, various
technical and business issues also need to be resolved,
which is why many industry experts predict that the shift
may still take seven years to complete.

Hollywood studios, though, are eager to make the switch,
and not only because they will no longer have to make and
transport costly film prints. Using digital play lists,
like those that catalog music on personal computers, movies
and trailers will begin at the right time and in the right
order, simply by highlighting a title on a computer screen
and adding it to the list. And the film studios plan to use
various forms of scrambling software - encryption - to keep
the movies unviewable by anyone not possessing keys to the
digital code.

"By switching to an encrypted digital projection
technology, the motion picture industry will be able to
reduce the losses it now incurs due to piracy," said
Charles Swartz, executive director of the Entertainment
Technology Center, which, through its Digital Cinema
Laboratory, is testing various digital projection
technologies for the industry.

Thwarting piracy is only part of the laboratory's function.
"We need to create standards that are better than the
consumer can now get at home with an HDTV and a
surround-sound system," Mr. Swartz said.

The lab expects to complete its work by the end of the
year. In 2004, Digital Cinema Initiatives, an industry
group set up by the movie studios, plans to establish
specifications. Then, the Society of Motion Picture and
Television Engineers would be asked to adopt technical
standards for the industry.

The recent digital installation at the Sherman Oaks
Galleria used a digital projector made by Christie Digital
of Cypress, Calif. Technicolor also uses projectors made by
Barco, a Belgian company. A third manufacturer, Digital
Projection International of Manchester, England, has
supplied digital equipment to a number of Japanese movie
theaters. All three makers use the digital light
processing, or D.L.P., chip invented by Texas Instruments,
to project the image. Eastman Kodak has licensed a separate
projection technology, known as D-ILA, from the Japanese
electronics company JVC and expects to market
digital-feature-film grade projectors beginning in 2005,
according to Bill Doeren, general manager of the Digital
Cinema Group at Kodak.

Doug Darrow, the Texas Instruments business manager
overseeing the development of the D.L.P. chip, predicts
that the costs of digital projection systems will come
down.

"Once the standards are defined, companies that can develop
cheaper solutions will enter the marketplace," he said.
"We'll see a tiered approach, with smaller screens able to
use less expensive projectors."

But the exhibitors say they are skeptical. "With only
35,000 screens in the U.S., and an additional 115,000 in
the rest of the world," Mr. Fithian of the theater owners'
trade group said, "the economies of scale are not there to
create lower prices."

Talks between the theater owners and the studios to resolve
the transition issues began last March. Neither side will
comment on their status of the discussions. Several third
parties have stepped into the financial breach, proposing
to finance the hardware and software transition, and then
charge the studios a per-screen fee. The studios say they
have looked at the third-party approaches, but "we've not
yet begun examining them," said Chuck Goldwater, the
president of Digital Cinema Initiatives.

Rather than wait for all the issues to be resolved, one big
theater owner, the Regal Entertainment Group - which owns
the Edwards, Regal and United Artists theaters - has
installed a less-expensive type of digital projector in 306
of its 561 cinemas. The systems, which project an image
quality comparable to high-definition television, but not
fully equivalent to 35-millimeter film, are being used for
packages of advertisements before feature films or when
renting out the theaters for corporate videoconferences or
special remote transmissions of concerts and other live
entertainment.

"We're making money on our ad sales," said Kurt Hall,
president of the Regal CineMedia unit. "And we've built our
digital infrastructure. Once digital feature film standards
are set, we only have to upgrade our projectors to be
ready."

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