August 31, 2004 4:00 AM PDT

Digitizing the multiplex

For two days in mid-August, film projectors in more than 50 theaters around the United States shut down, and a live version of jam band Phish's farewell performance in Vermont took over the big screen.

This unconventional movie-hall moment was made possible by Regal Entertainment Group's state-of-the-art digital network, which is at the forefront of a move to replace the whirring, old 35mm film projectors with high-tech digital projection systems.

News.context

What's new:
Recent breakthroughs in technology standards have brought the "digital cinema" transformation within shouting distance.

Bottom line:
Getting the the new digital system into theaters could be a cliff-hanger. And the new technology standard could leave at least one major digital media player on the sidelines: Microsoft.

More stories on this topic

Regal doesn't show full movies in digital format yet, a move deeply desired by big movie studios that believe phasing out film will save them millions in distribution costs. Now recent breakthroughs in technology standards have brought this transformation within shouting distance, and some Hollywood optimists say the digital transition could get under way in earnest as soon as early next year.

"There are clearly a lot of varying agendas in this business that are trying to push the process and deployment (of digital systems) faster than they probably should be going at this point," said Kurt Hall, co-chief executive officer of Regal. "We've learned that you never know how everything will work until you get out and start doing it."

The "digital cinema" transformation refers specifically to the distribution and projection of films in theaters, not to the digital filmmaking of directors such as George Lucas, or the computer-aided production that creates monsters and special effects in "Spiderman" and "Lord of the Rings." Technology for digital projection has been available for years, but incompatible formats and expensive hardware has kept it out of all but a few theaters.

A technology consortium called the Digital Cinemas Initiatives (DCI), created by the major Hollywood studios in early 2002, is finally nearing completion on a set of technical recommendations that is intended to rally the industry around a single technological standard. A few details remain to be completed, largely dealing with securing the files against unauthorized copying while in the theater. But the fundamental technology specifications, based on the JPEG 2000 video format, have now been chosen.

The DCI's work is expected to be endorsed relatively rapidly by official film standards-setting bodies. Equipment makers such as Texas Instruments and Sony are already scrambling to make projectors and network equipment that complies with the group's early specifications.

Studios see this as a multimillion-dollar boost to their bottom line. Today they create a film print for every screen that shows one of their movies--about 36,000 theaters in the United States and 150,000 worldwide--at an estimated cost of about $1,000 per print. Indeed, by some industry estimates, the film industry spends close to $800 million every year on printing and distributing film alone.

Under the proposed new digital system, studios could instead create a single digital master file and send that to theaters over a high-speed network. The file--which would have to be locked down with industrial-grade copy-protection in order to satisfy studio's piracy fears--would be stored on servers in the theater, sent over a local area network, and then shown on screens using digital projectors.

Aside from cost-savings, boosters of this technology note that digital projection systems will enhance the quality of the movie itself, creating a clearer picture and eliminating the scratches and other damage that degrade a film print that has been copied too many times.

Industry observers say the fact that studios have been able to agree on a new technology is a tribute to how desperately they want the shift.

"The major studios are competitors in every way, for audience, scripts and stars, and are part of larger corporations who each have own strategic agenda," said Charles Swartz, executive director of the Entertainment Technology Center at the University of Southern California. "The fact that they were able to get together and see that agreeing on this would be to the benefit of the entire world is remarkable in itself."

The new technology standard could leave at least one major digital media player on the sidelines: Microsoft.

The company has worked hard to make its Windows Media 9 video technology useful for in-theater applications, and it's already been adopted in some limited-use applications, including by the Landmark Theater chain to show independent films. DCI Chief Executive Officer Chuck Goldwater said his group had talked with Microsoft, but that the JPEG standard proved more attractive for several reasons.

"We've had conversations with Microsoft, as we have with many vendors and manufacturers," Goldwater said. "Microsoft has a proprietary operating system, and one of our guiding principles and goals was to create technical specs based on an open architecture."

Who pays?
Throughout the process, it has been theater owners who have been the most vocal skeptics. They like the potential benefits, they say--but they don't want to get stuck paying for something that helps studios' bottom line and not their own.

"Originally everyone thought we'd go out and buy (the digital systems) and put them in," said John Fithian, president of the National Association of Theater Owners. "We didn't, because it does not make sense as a mathematical proposition for theaters."

The Digital Cinema Initiatives is working on that problem too. The group is not allowed to negotiate on behalf of the studios, but it has been quietly suggesting some basic models for funding the digital investments.

One possibility would have third-party investors--possibly banks or venture capitalists--finance the purchase of the equipment. The investment would then be repaid out of a pool that included money from everyone who benefited from the new technology.

"What I've been saying is that (payments) should be relatively proportional to the benefits expected to be derived from digital cinema," Goldwater said.

Studio executives declined to talk on the record for this story.

For their part, theater owners believe that the studios will likely bear at least part of the costs of installing digital projectors. In Fithian's words, the studios' fund would pay theater owners for a "Chevy" of a digital system. If an owner wanted a "Jaguar," that money would have to come from the owner's own pockets.

Theater owners have longer-range worries, however. They're used to maintaining low-tech film projector systems that last for decades. They want equipment that won't substantially increase their maintenance expenditures and be simple enough to be operated by minimum-wage high-school projectionists. Most of all, they want to ensure that they don't buy an expensive upgrade that--like many other products marketed by the high-tech industry--will be rendered obsolete in just a few years.

"We have got to be very careful," Regal Entertainment's Hall said. "It's like if someone gave you a million-dollar house on the beach and then you lived there for a year, got a tax bill, and found out you couldn't afford to live there after all."

The only way to suss out these real-world issues is to do slow market tests, probably one market at a time, Hall said.

The Digital Cinemas Initiative that has quietly shepherded the technology standardization is scheduled to close Sept. 30, although some expect its mandate to be extended to take care of the final security pieces and help guide the business model. Goldwater said he is pleased with the work his quiet organization has accomplished.

"One thing I can say is that the pieces of the puzzle are just about all in place," Goldwater said. "Technical specs, products and services that meet them, and the foundation of the thinking about business issues (are all in place). The rest is up to the individual participants."

14 comments

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Digital Cinema
The article fails to mention that consumers (ie. the viewing public) will ultimately determine a cinema's success or failure. Advertising that your cinema has taken the technology leap for the betterment of your theatre and ultimately, the enjoyment of the patrons will give your theatre a commercial edge. This revenue will easily pay for the cost of equipment upgrade.
Posted by vc73 (6 comments )
Reply Link Flag
Digital Cinema
The article fails to mention that consumers (ie. the viewing public) will ultimately determine a cinema's success or failure. Advertising that your cinema has taken the technology leap for the betterment of your theatre and ultimately, the enjoyment of the patrons will give your theatre a commercial edge. This revenue will easily pay for the cost of equipment upgrade.
Posted by vc73 (6 comments )
Reply Link Flag
Yeah, but will it reduce ticket costs?
The only way it will benefit the consumer is if it reduces ticket costs. If it saves the studios $800 million a year, they better lower prices. Chances are, the greedy studios are accustomed to the money generated from the current ticket prices and won't come down. They'll tell us the quality of the picture is much better.
Posted by CD_ Rome (9 comments )
Reply Link Flag
Or...
Or they will raise it because of the quality of the picture and sound are better and because they have to come up with some way to pay for all of this equipment they are going be handing out.

Frankly I don't go to the show all that much any more. In fact once I can get a good reasonably priced 60" flat screen for home I will just wait for video releases.

Robert
Posted by (336 comments )
Link Flag
Yeah, but will it reduce ticket costs?
The only way it will benefit the consumer is if it reduces ticket costs. If it saves the studios $800 million a year, they better lower prices. Chances are, the greedy studios are accustomed to the money generated from the current ticket prices and won't come down. They'll tell us the quality of the picture is much better.
Posted by CD_ Rome (9 comments )
Reply Link Flag
Or...
Or they will raise it because of the quality of the picture and sound are better and because they have to come up with some way to pay for all of this equipment they are going be handing out.

Frankly I don't go to the show all that much any more. In fact once I can get a good reasonably priced 60" flat screen for home I will just wait for video releases.

Robert
Posted by (336 comments )
Link Flag
Piracy is the biggest issue...
It seems that no matter how high-tech the technology is,
someone always finds a way to break into it. I was in Peru
watching the original Spiderman movie with spanish subtitles
one month before it was released in United States theaters.

So is it cheaper to buy film prints or make digital copies? I
guess it depends as to how secure the digital copies are...

Also, it is a proven fact that any multimedia technology becomes
outdated rapidly. For some reason, the motion picture film
standard (a film print can play in any 35mm projector in the
world) has worked. It will be interesting to see how theater
owners finance new technology that will need to be won't
become obsolete in a few years. Look at all the video formats
that are now obsolete. VHS, S-VHS, Video-8, Hi-8, 3/4", Beta,
Beta SP, D1, D2, Laserdisk, DiviX, etc...

As technology exponentially improves, video standards and
formats rapidly change. New video technologies tend to be very
expensive when they are new, then you practially have to give it
away to update.

It will be interesting to see what unfolds in the future with this.

Adam Berman
Cinematographer
www.bermanfilms.com
Posted by (2 comments )
Reply Link Flag
Piracy is the biggest issue...
It seems that no matter how high-tech the technology is,
someone always finds a way to break into it. I was in Peru
watching the original Spiderman movie with spanish subtitles
one month before it was released in United States theaters.

So is it cheaper to buy film prints or make digital copies? I
guess it depends as to how secure the digital copies are...

Also, it is a proven fact that any multimedia technology becomes
outdated rapidly. For some reason, the motion picture film
standard (a film print can play in any 35mm projector in the
world) has worked. It will be interesting to see how theater
owners finance new technology that will need to be won't
become obsolete in a few years. Look at all the video formats
that are now obsolete. VHS, S-VHS, Video-8, Hi-8, 3/4", Beta,
Beta SP, D1, D2, Laserdisk, DiviX, etc...

As technology exponentially improves, video standards and
formats rapidly change. New video technologies tend to be very
expensive when they are new, then you practially have to give it
away to update.

It will be interesting to see what unfolds in the future with this.

Adam Berman
Cinematographer
www.bermanfilms.com
Posted by (2 comments )
Reply Link Flag
digital cinema transition
Movies move from first run theaters to 2nd run, 3rd run, foreign theatres, on down the chain. It is wrong to say that studios save $1000 per print until the whole world goes digital. Until then, studios have to create BOTH the digital file and the film print. So going digital costs more, and gives the 2nd and 3rd run theatres less reason to go digital, because they are getting better prints!
Posted by Benjamin_23 (4 comments )
Reply Link Flag
It will take more than digital to make a good picture
All of this digital technology is great for the theater entertainment experience such as clearer sound, high definition screens, no scratches ect but the main issue is this: the movie's plot and story realy have to be of significant worth.

To the audience point of view they don't want to sit though 20 minutes just to see commercial filler before the previews and the main feature they just want to see the previews and the main feature. We get too much of that at home on tv, newspapers, magazines, Internet and you name it.

A movie's got to have good entertainment value to justify the $8.50 price and a good picture with good sound is not enough to justify the price unless they delete all the stupid commericials and reduce the price for concessions.

Lets face it the consumers bottom line realy dictates how well a movie does at the box office which is entertainment value in terms of fun, laughter, cheap food, good acting, good plot. If a movie lacks all of these important items and the service is poor or lacking at the consession stand and all we get is a bunch of comercials to sit through before the main feature then they don't deserve my $8.50 just to see it.

As a rule of thumb I bypass the commericials by arriving at the theater 20 minutes after posted showtime to get my snaks and in that way no commericials for me to sit through. After all isn't this the reason why we go to the theater to get away from the commericials that we are constantly subjected to at home on tv everyday?
Posted by msims (66 comments )
Link Flag
digital cinema transition
Movies move from first run theaters to 2nd run, 3rd run, foreign theatres, on down the chain. It is wrong to say that studios save $1000 per print until the whole world goes digital. Until then, studios have to create BOTH the digital file and the film print. So going digital costs more, and gives the 2nd and 3rd run theatres less reason to go digital, because they are getting better prints!
Posted by Benjamin_23 (4 comments )
Reply Link Flag
It will take more than digital to make a good picture
All of this digital technology is great for the theater entertainment experience such as clearer sound, high definition screens, no scratches ect but the main issue is this: the movie's plot and story realy have to be of significant worth.

To the audience point of view they don't want to sit though 20 minutes just to see commercial filler before the previews and the main feature they just want to see the previews and the main feature. We get too much of that at home on tv, newspapers, magazines, Internet and you name it.

A movie's got to have good entertainment value to justify the $8.50 price and a good picture with good sound is not enough to justify the price unless they delete all the stupid commericials and reduce the price for concessions.

Lets face it the consumers bottom line realy dictates how well a movie does at the box office which is entertainment value in terms of fun, laughter, cheap food, good acting, good plot. If a movie lacks all of these important items and the service is poor or lacking at the consession stand and all we get is a bunch of comercials to sit through before the main feature then they don't deserve my $8.50 just to see it.

As a rule of thumb I bypass the commericials by arriving at the theater 20 minutes after posted showtime to get my snaks and in that way no commericials for me to sit through. After all isn't this the reason why we go to the theater to get away from the commericials that we are constantly subjected to at home on tv everyday?
Posted by msims (66 comments )
Link Flag
Bandwidth will be a big problem
If the theatres are in anything but cluster urban which many are not there is no fibre anywhere near ????
then they get to pay qworst etc $20k per month for LEC transport hmmmm.
this sounds like it was made for the RBOC's the screw more folks instead of deploying fibre.....

Ben West
Posted by Flushls (18 comments )
Reply Link Flag
Bandwidth will be a big problem
If the theatres are in anything but cluster urban which many are not there is no fibre anywhere near ????
then they get to pay qworst etc $20k per month for LEC transport hmmmm.
this sounds like it was made for the RBOC's the screw more folks instead of deploying fibre.....

Ben West
Posted by Flushls (18 comments )
Reply Link Flag
 

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