A Turning Point

Every significant technology overhaul happens in fits and starts and the transition from film to digital in exhibition has been no exception. As with other global technological developments, there have been highlight moments along the way. It will take a few years to be certain but I believe several announcements that came to light at ShowEast 2009 in Orlando will come to be seen as major turning points in the ongoing worldwide adoption of digital cinema. Historically important events typically occur with little or no fanfare and the biggest news, in my mind, to come out of ShowEast 2009 is no exception. While it is still not widely known and there will be no formal announcement, it is not a secret: Christie has manufactured its last 35mm projector.

I learned this during an hour-long one-on-one conversation with Christie’s president Jack Kline. We talked about a wide range of industry topics and when – almost in passing – he mentioned the news about stopping the manufacture of 35mm projectors I confess I was at first shocked. Kline said he understood that the news sounds shocking at first, but said it was one of the easiest business decisions he’s ever had to make. The reason is that for a very long time no one has purchased a new 35mm projector from Christie. Kline said Christie would continue to support its existing film projector customers.

Upon reflection the news makes perfect sense. According to Texas Instruments, as of October 23rd there were more than 14,000 DLP Cinema projectors in the world. Obviously the majority of those replaced existing 35mm projectors, many of which are still in good working order and are available for sale in various places. There is simply no demand for new projectors.

There were three other significant developments discussed at the conference, all of which gain even more importance in the context of the fact that film projection is clearly trending downward:

- Digital Cinema Implementation Partners CEO Travis Reid spoke during a panel discussion on financing and confirmed that JP Morgan recently released the first $525 million of its loan to fund the rollout of 15,000 digital screens over the next few years in Regal, Cinemark and AMC theatres. The corner has been turned. "We're really ready to get going," Reid said.

- Two of the recently announced film-based 3D systems were represented at the show, were the subject of much debate and did not appear to gain any serious traction.

- Kodak Digital Cinema, for all intents and purposes, announced that it is out of the digital cinema business.

First Technicolor, which demonstrated its film-based over-under 3D system to ShowEast attendees. At the demonstration at a local Orlando movie theatre, Technicolor announced that it has aligned with other film companies including Deluxe Entertainment Services Group, Eastman Kodak Company, and Fujifilm to provide financial assistance to exhibitors seeking their 3D system. The Silver Screen Fund defers costs associated with the purchase and installation of silver screens by providing financial assistance to exhibitors who deploy the Technicolor 3D solution. Technicolor will manage the fund.

The Silver Screen Fund will finance up to 500 silver screens to be installed at theatres in the United States, Canada and the United Kingdom. Funding is available immediately for qualified exhibitors. When exhibitors complete the terms of the Silver Screen Fund agreement, they will own the silver screen, a necessary component for future digital 3D projection.

“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,” says Lanny Raimondo, head of Technicolor. “Thanks to overwhelming studio and industry support, we expect to sign up these first 500 screens in the coming weeks, keeping us on track to reach our target of more than 1,000 Technicolor 3D screens by mid-2010.”

According to Technicolor, DreamWorks Animation, Lionsgate, Paramount, Overture, Universal Pictures, Warner Bros., and The Weinstein Company have agreed to support its system and will supply content. But later that same day both Disney and 20th Century Fox said they would not support Technicolor or any of the other proposed film-based 3D systems. If that decision holds firm, the idea of film-based 3D is effectively dead.

Most exhibitors, especially from the more successful chains, do not like the film-based 3D systems – from Technicolor or anyone else. As Cinemark International president Valmir Fernandes told the Hollywood Reporter, "We don't like it. We think it's a step backward."

There may be some exhibitors who – for the sake of getting involved in 3D at a lower cost than digital – will embrace the Technicolor system or the other film-based 3D systems, such as Oculus that was also introduced (at least as a concept) at the show. But the supply of content will be limited and will get even smaller as time passes.

That is because digital cinema has moved from a possibility to inevitability. The DCIP announcement that the company’s rollout is seriously underway puts an exclamation point on this.

Ironically, the fact the digital cinema is now an inevitably is one of the main reasons that Kodak has decided to pull out of the market. Kodak Digital Cinema has limped along from its earliest days. That it no reflection on the people in that division; blame corporate executives in Kodak’s headquarters in Rochester, New York.

Kodak Digital Cinema’s corporate bosses gave them mixed signals from the start, providing financial support and backing one day and pulling it back the next. And, in their ongoing (and understandable) desire to prolong the life of 35mm film, the powers that be at Kodak did all they could behind the scenes to undermine the growth of digital cinema. Just one example: the company waited until Cinedigm (in those days called AccessIT) had begun to implement digital systems and then dropped the price of 35mm film prints.

Worse, from corporate Kodak’s perspective, competing in the new digital cinema world will require a significant financial commitment and, right or wrong, Kodak decided not to make that commitment. The result, Kodak Digital Cinema, which never got a fair shake from its corporate parents, is gone.

The only question that remains for Kodak now is how much longer it will continue to support professional film production and exhibition. The answer is still in years but the number now could conceivably have a single digit, which is a sentence I personally never imagined writing.

By Nick Dager, Digital Cinema Report