Digital Cinema

If you don't make the decision to get on the digital train soon, you will be making the decision to get out of the business....
John Fithian, theater owner group president

The motion picture industry is rapidly moving to digital video.

Nearly 900 digital screens are being added to theaters across the United States each month. This is making possible 3-D movies, live sporting and music events, and the presentation of sharper, scratch free images to audiences.

By mid-2011, nearly half of all 39,000 screens in the U.S. were digital, compared to just a few thousand in 2007.

The switch to digital is doable for theaters in the three largest chains: AMC Entertainment Inc., Regal Entertainment Group and Cinemark Holdings Inc. A consortium representing these theaters has invested close to a billion dollars to finance this change.

But for the smaller, nonaffiliated theaters there is a problem.

Digital hardware and software cost about $65,000 per screen. Add to that $4,000 to $8,000 for a special silver screen and approximately $10,000 to $20,000 more for 3-D equipment and you end up with an investment that small theaters can't afford -- especially with the downturn in the economy. Although financing is available in many cases, hundreds of small theaters in the U.S. and Canada are facing other realities.

For example, not only did box office revenue for these theaters drop more than 20% in 2010, but they are now competing with home video systems that deliver sharp, on-demand movies -- sometimes just 60 days after they appear in theaters. Several sources will stream these films into homes via the Internet.

Video production and presentation may soon move to the noticeably superior image quality of double frame rates (48 and 60 fps). Right now, audiences seem to prefer this to 3-D, especially when high resolution (4K) projectors are used. With film, doubling the frame rate is prohibitively expensive.

Meanwhile, the increase in theater prices have impacted box office ticket sales, especially in economically disadvantaged areas with small theaters. For these theater owners borrowing $100,00 or so with a questionable return may not be a wise investment.

And maybe most importantly there is this. "Film," as such, will be slowly phased out. Some theaters that can only screen film are already reportedly having problems getting film prints of movies when they want them. The distribution of digital motion pictures ends up being a fraction of the cost of distributing a digitized version on a hard disk.

It all comes down to simple economics.

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