DIGITAL CINEMA: MOSH PIT OR BLACK HOLE

I have been dealing one way or another with Digital Cinema for over 10 years and I see no reason to be anymore enthusiastic about it now than I was a decade ago and, in fact – the way things have evolved – I’m coming to the conclusion that D-Cinema could lead to the ultimate demise of the cinema industry. Similar to what has occurred to the music business, once movies vacate their analog format chances are the studios will lose distribution control and the industry (as it now exists) will begin its decline.

At best, I can categorize D-Cinema as a mosh pit – semi-controlled chaos with the potential for inflicting lot of damage. At worst, we’re witnessing what could be a black hole – sucking in the entire cinema industry. What would remain? DVDs and variations of alternative content. My concern would be eminent but D-Cinema continues to fall short of its expectation and is not the transformational acquisition it has been dubbed.

ADMISSION TO THE MOSH PIT

What is the cost of Digital Cinema? I get this question a lot. “About $100,000 to $120,000”, I say, “and then there’s the ongoing operating and maintenance costs, and oh yeah, the 3D option if you want that”. It’s not a very good answer but then again it is in keeping with the nebulousness of the whole D-Cinema saga. However, least I be accused of perpetuating the notion of D-Cinema as the industry’s ‘black hole’ I’ll quantify this mosh pit.

Big-D requires a cadre of basic components; as well as, ancillary items and services. The detail below depicts average pricing from component manufacturers less 20%. All amounts are stated in incredible shrinking U.S. dollars.

COMPONENTS

- Show Player – for image decoding and data feed to D-projector, also provides digital audio output to sound system

- Show Storer – stores digital movie (received from studios in DCP packages) for playback through Show Player

- Show Manager (System Software) Player, Storer and Manager: $20,000

- Digital Media Adapter – interfaces Show Player to existing cinema sound system: $2,500

- Network Automation Interfacer – interfaces Digital System to existing cinema automation system: $2,500

- Digital Cinema Projector w/Power Supply (2K Version) Lenses, Lamp, Pedestal: $80,000

-Alternative Content Formatter – for playback of alternative content through digital cinema projector: $6,000

- PC/Laptop w/work station: $3,000

- Installation - Equipment setup, interfacing, alignment, testing, & training, including all cabling, wiring, interconnections, etc.: $5,000

TOTAL: $119,000

3D OPTION

- 3D Filter Controller & Filter Wheel Assby.: $18,000
- 3D Glasses – Regular Type: $35 each
Calibration Type: $100 each
- Silver Theatre Screen - $3.75/sq. ft. – if required for 3D Option
Screen Installation: $1,000 – 2,500

OTHER COSTS

- Annual Service/Maintenance Fees: $1,500 – 3,000
- Build-out costs for any enhanced electrical power and/or exhaust & cooling requirements in Projection Room: Unknown

So, at the present time, the cost to convert one auditorium is approximately $120,000 – 140,000 with an undetermined useful life. Additionally, although not published, there are indications that the failure rate of the digital cinema components is higher than that of film projection. It is also worth noting that the various digital components making up the ’system’ are manufactured by various companies. In some cases, being “sold through” other manufacturers/vendors under contractual arrangement.

SURVIVING

Big D’s reason for being – with all of its inherent complexities and costs – is Hollywood’s attempt to retain control of movie distribution while increasing their share of pre-feature advertising revenues. Otherwise, films could be transmitted to theatres via the internet or sent on encrypted HD-DVDs.

Film is the glue that keeps the relationship between the studios and the exhibitors from falling apart and provides the studio’s distribution control. As is happening with other media that has experienced digital conversion once the bits are out it is impossible to get them back. Currently, piracy is a problem but the copies are inferior and it is not an industry killer. Digital piracy could be.

Late last year I forecast the U.S. box office would reach $10 billion in 2007. As it now stands it should come in between $9.8 – 10b, a 6 – 7% increase over ’06, but bolstered by a stellar summer box office (which was anticipated), and a good holiday finale (also in the cards). Internationally, there is higher growth but as compared to other (competing) forms of entertainment particularly internet and video gaming, the cinema’s growth is modest. Toying with the cinema’s fragile business model could prove disastrous – best to leave it alone.