Digital tops bill at theater owners' confab

By Reuters

Published: March 13, 2006, 5:20 AM PST

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As the movie theater industry's annual convention kicks off Monday in Las Vegas, the conversion to digital cinema is again on the agenda.

But this year, instead of more talk about digital's promising future, there actually will be an opportunity to assess its practical, real-world applications at ShoWest.

With technical specifications in hand, business models under development, studios coming aboard and theater circuits making plans, 2006 is shaping up as the year digital cinema finally is ready for its close-up. Just don't expect the rollout to take place overnight.

"Every year, we hear that digital cinema is still five years away, and it's still five years away," joked one player embroiled in the process who declined to be identified.

But the process definitely is under way. The stage was set in July, when the Digital Cinema Initiative (DCI) formally released its specifications, establishing a distribution format and addressing security concerns. Last month, the National Association of Theater Owners released its own Digital Cinema System Requirement, building on the DCI specifications to address practical concerns about system reporting and shuffling digital prints among auditoriums in a multiplex.

The final months last year saw a flurry of activity as the forces in the digital universe began to strike alliances. Christie/AIX, the AccessIT subsidiary, announced agreements with Disney, 20th Century Fox, Universal Pictures, Sony Pictures and DreamWorks, while rival Thomson's Technicolor Digital Cinema systems announced service deals with DreamWorks, Sony, Universal and Warner Bros. Pictures, with agreements under way with 20th Century Fox, New Line Cinema and the Weinstein Co.

In December, Carmike Cinemas pacted with Christie/AIX to install up to 2,300 digital-cinema projection systems in the nation's third-largest theater circuit. That same month, National CineMedia--the joint venture of Regal Entertainment Group, AMC and Cinemark that distributes digital preshows and alternate entertainment to more than 13,000 screens--announced its intention to develop a business plan: It eventually could join with one of the other digital cinema systems already in play or build its own digital network on its existing platform. Whichever course it takes, National CineMedia hopes to use its heft to drive down the price of digital installations, pegged at about $90,000 to $100,000 per theater.

In January, the conversion moved one step closer to reality when Technicolor unveiled a beta test that will employ its systems on 90-120 screens belonging to Century Theatres. Meanwhile, Christie/AIX has begun rollouts in the Detroit-based Emagine Entertainment chain and the San Diego-based Ultrastar Theatres.

"After years of planning, developing technical specifications and considering business models, the digital-cinema revolution begins in 2006," said John Fithian, president of the National Assn. of Theater Owners. "All of those three components have come together, and deals are being negotiated now between theater companies and equipment and financial entities. It will take several years for this transition to occur, but 2006 certainly marks the beginning of the transition."

The transition begins
Joe Berthold, president of Technicolor Electronic Content Distribution, added that "2006 is the year it starts, and it's a year of testing," as suppliers bring their equipment up to DCI specifications. "We are still where we were when the specifications were released in the middle of last year," he said. "There are a whole series of things that have to be done in terms of redesigning equipment. Over the next couple of months, we'll be doing interoperability testing and DCI-functionality testing on all the servers and projectors. We won't start beta testing until the equipment is ready and compliant."

AccessIT's Christie/AIX, on the other hand, already has deployed almost 200 systems. "We're certainly delighted with the progress of our rollout to date, including our first digital installations for Carmike," said Chuck Goldwater, Christie/AIX president and chief operating officer. "We're encouraged by the studio support with their increasing distribution of digital content in the (new) JPEG format called for in the DCI specs."

Since it encompasses three of the nation's biggest circuits, National CineMedia's next move could easily tip the balance in favor of one system or another, boosting the fortunes of some manufacturers over others. But Kurt Hall, chairman and CEO of