The Future of Digital

Of the many stories to come out of ShoWest this past week, one of the least covered but potentially most important is the announcement of Technicolor’s promise to put 1,000 digital projection systems into theatres… at no initial cost to theatre owners.

Shortly after the EU competition authorities approved the pending sale to French- based Thomson Multimedia, Technicolor teamed with Qualcomm to announce their plan at the Las Vegas based convention of distributors and exhibitors. In exchange for the digital projection system, each theatre would agree to pay Technicolor 12.5 cents for every ticket sold for films playing in those enhanced screens. With the retail cost of digital projection systems running up to $150,000 per screen, a theatre would need to sell 1.2 million tickets for their payout to Technicolor to equal the retail cost.

How does Technicolor justify committing $150M worth of equipment to theatre ownersr Technicolor Digital Cinema President Dave Elliot explained during his ShoWest keynote speech:

“Digital cinema projectors are very expensive, which has limited the development of the industry from the start. By putting digital cinema in theaters nationwide, we are demonstrating that this is indeed a superior product whose time has come and that the benefits are numerous for the various segments of the motion picture industry and the moviegoing public. The challenge of bringing the industry to digital from analog has been finding a business plan. Technicolor Digital Cinema, by providing the first 1,000 systems, will incur the risk that this transition will be successful.”

Elliot explained the 12.5 cents per ticket figure was derived from the same per person expense a theater incurs to install an analog projection system. Technicolor and the studios it services would also saves hundreds of millions of dollars per year from the reduction of prints being struck and shipped to theatres, as movies would either be pressed onto a DVD-ROM and shipped to the theatre or beamed to the theatre’s computer via satellite. In addition to scratch-free and splice-free movies, backers of the new digital systems say theater owners could “re-purpose underused theaters into pay-per-view venues for events, concerts or high-definition, digital broadcast of the Super Bowl”, for example. Additionally, on-screen advertising could be “customized for individual markets for additional revenues and to promote theatre programming, concessions and merchandising, according to the company”.

So what’s to hate about the planr

John Fithian, president of the National Association of Theater Owners, cautioned member companies to probe how much it will cost them, where the 1,000 systems will end up and who will control the content in theaters. “I encourage theater owners not to overemphasize the importance of the proposal,” Fithian said, “But what’s the relative cost burdenr My guess is it works out to exhibitors paying over half.

Technicolor. who has already installed 31 of the digital projection units worldwide, expects the first of the new units in theatres sometime in the fall.