Digital cinema still a work in progress

Executives ask ShowEast attendees to have patience

ORLANDO -- Execs seem almost embarrassed about the prospect of promising too much too soon regarding digital cinema.

Too late.

A decade into a planned industrywide conversion to digital projection, the effort remains a work in progress, with the protracted credit crunch reducing the rollout of d-cinema hardware to a snail's pace for the past year. That's also hampered the related introduction of 3D projection.

But with the financial community finally beginning to rebound, d-cinema proponents here Tuesday politely asked exhibitors attending ShowEast to keep the faith.

"The reason you do this is to add to your business," Bud Mayo, CEO of d-cinema integrator Cinedigm, said during a panel discussion. "It's not just to have cool technology up on your screens. We've seen the incremental increase in revenue that 3D allows."

JPMorgan managing director Andy Sriubas said bankers helping integrators and studios to underwrite installation costs also want to see that "exhibition has some skin in the game." In an earlier round of digital installations, studios footed the bill almost 100%.

Exhibitors seem OK with shouldering a modest portion of installation costs. In fact, some self-financed digital conversions as integrators waited out the credit crunch.

"We didn't want to wait," said Henry McCalmont, who converted half of the six screens in his Mountain Home, Ark., multiplex to digital and added 3D capability to some.

Art Gordon of AG Theatres also jumped quickly into digital and 3D for his two theaters in Guam. "I'm a believer," he said with a shrug.

Even bigger exhibs have continued to convert a select number of screens. But the U.S. big three -- Regal, AMC and Cinemark -- have had to wait for Wall Street support before proceeding with more ambitious rollouts.

"We're really ready to get going," said Travis Reid, CEO of big-three integrator Digital Cinema Implementation Partners.

DCIP and JPMorgan recently went to market with a $525 million loan syndication to fund the rollout of 15,000 screen installations during the next several years.

The bigger circuits already had marked considerable progress before the economic troubles set in. But digital screen counts can be confusing, as estimates by any three industryites are likely to yield at least four numbers.

Consensus estimates put movie-quality installations at roughly 13,000-14,000 screens globally, with 6,500-7,000 auditoriums boasting 3D capability.

In the meantime, with the industry's conversion to digital and 3D projection going so slowly, Technicolor recently came forward with a stopgap proposal: The film lab is pushing a newly developed format for film-based 3D projection.



The film-processing giant today will demo the technology for exhibs here amid broad skepticism. Technicolor is positioning the system as a lower-cost alternative to digital 3D, but Cinemark International president Valmir Fernandes summed up sentiment among skeptics.

"We don't like it," he told THR. "We think it's a step backward."

A handful of studios have lent endorsements, but they are much more bullish on digital 3D, which eventually will do away with distribs' print costs.

For exhibs, every theater operator who opts to go with the Technicolor system would be one less participant in so-called VPF plans, the virtual-print-fee agreements that studios have signed to fund the rollout of digital systems. The way such pacts are written, VPF terms are more generous to exhibs if more theaters participate in the conversions.

Technicolor has yet to begin signing up theaters to its plan, so its ShowEast promos could prove key if its technology is to gain traction. But some industryites question even the notion of significant cost savings from film-based 3D.

Certain kinds of 3D glasses will only work with polarized screens of the sort installed in digital auditoriums. So to avoid that $10,000-per-screen conversion cost -- and after all, low cost is the whole appeal of film-based 3D -- exhibs might have to absorb greater upfront costs to buy nondisposable 3D glasses of the kind required with nonpolarized screens.

To overcome such concerns, Technicolor today will announce an initiative by three film-oriented companies to cover screen-conversion costs for the first 500 auditoriums outfitted with film 3D systems. Kodak, Fuji and Deluxe will contribute to the Silver Screen Fund, which will be managed by Technicolor.

"Technicolor is committed to delivering high-quality, affordable 3D solutions, and the creation of the Silver Screen Fund accelerates our promise to our exhibition partners by helping them defer upfront costs associated with the purchase and installation of silver screens," Technicolor topper Lanny Raimondo said.

ShowEast continues through Thursday at the Marriott Orlando World Center.
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