WSJ -- Who Will Pay for Digital Cinema ?
MEDIA & MARKETING
March 28, 2002
'Star Wars' Forces the Question: Who Will Pay for Digital Cinema?
By ANNA WILDE MATHEWS
Staff Reporter of THE WALL STREET JOURNAL
No one in the movie business has pushed harder for digital technology
than George Lucas and his Lucasfilm Ltd. His coming "Star Wars:
Episode II -- Attack of the Clones" is the highest-profile film ever
created with digital cameras, and it incorporates cutting-edge
computer-generated imagery in every shot.
But when the film rolls out to theaters on May 16, all that digital
wizardry will be transferred to low-tech rolls of celluloid that run
through old-fashioned film projectors. Indeed, after years of hype
surrounding the high-tech future of motion pictures, there still are only
27 U.S. theaters where moviegoers can see a film that's projected
digitally, though industry officials say there may be more digital screens
in operation by May.
"Am I disappointed? Deeply," says Rick McCallum, producer of the new
"Star Wars." "Has it taken too long" for digital cinema to emerge?
"Incredibly too long."
Despite an aggressive push
from equipment
manufacturers, the transition to digital cinema remains bogged down.
The biggest problem is the cost: outfitting one theater screen digitally
can take $150,000 to $200,000, and no one has yet figured out how to
divvy up the expense for an industrywide shift. In addition, some of the
technology is still evolving, so theater owners and studios are both
reluctant to invest in equipment that could quickly become outdated or
may not meet eventual industry standards.
Digital projection would transform a business that has been synonymous
with film since it was invented nearly a century ago. Instead of celluloid
rolling through a mechanical projector, the new medium uses digitally
rendered images created by computer chips made by companies such as
Texas Instruments Inc. and Victor Co. of Japan's JVC. Rolls of film are
replaced by digital files beamed to theaters via satellite or fiber-optic
lines, or distributed in the form of computer discs. Advocates say the
technology eliminates many of the visual problems of film projection,
including wear that affects the prints after many showings, and flaws
due to old or poorly operated projectors.
It's a radical shift that would save movie studios hundreds of millions of
dollars in film-print production and distribution costs. But it carries risks
as well, including piracy of the digital files and a backlash from
filmmakers, many of whom say the current generation of digital
projectors doesn't match the visual effects of film at its best. "We
embrace new technologies, but not at the expense of quality," says
Steven Poster, president of the American Society of Cinematographers.
Lucasfilm's Mr. McCallum responds that even today's digital projection would be a big improvement over
what most moviegoers see at their local multiplexes. Those who watch Episode II on digital screens "should
be able to see a totally flicker-free film, which I think explodes on the screen," he says. Most important, the
digital projection "looks exactly the way you made it," he says.
For their part, theater owners want movie distributors to
shoulder much of the financial burden of installing the new
systems, since the studios are likely to garner the biggest
financial windfall from eliminating the cost of creating and
shipping film prints.
So far, "the business model for digital cinema from the
point of view of the exhibitor is very difficult," says Kurt
Hall, chief executive of United Artists Theatre Circuit Inc.,
one of the theater companies controlled by Denver
billionaire Philip Anschutz.
The studios are moving cautiously, though they have
begun releasing many major films digitally, as well as on
film. The seven biggest studios are expected to soon
announce a joint venture that will do research and testing
on digital-cinema equipment. The goal would be to come
up with quality benchmarks on issues such as picture
appearance, encryption and digital compression, which
allows the huge digital movie files to fit in less computer
storage space.
According to people with knowledge of the matter, the
new initiative is expected to receive $5 million to $10
million in funding from the studios, and will have an 18- to 24-month time frame. Big theater chains are
unlikely to invest in expensive digital equipment before the guidelines emerge, so they won't be forced into
expensive upgrades later.
The studio venture would initially be less ambitious in scale than some earlier industry discussions, which
had included a business plan to pay for the rollout of digital equipment. But people with knowledge of the
matter say a scheme to help fund the expansion of digital cinema could emerge at a future date.
At the same time, several other companies are proposing their own plans to back digital projection. Boeing
Co. says it expects to have around 40 systems in place world-wide in the next few months -- with the hope
that they will be ready in time for the new "Star Wars" movie. The company hopes to use digital cinema as
a high-profile example of its ability to use its satellite technology to move the films across the country.
Meantime, Technicolor Digital Cinema, a joint venture between Thomson Multimedia SA's Technicolor and
Qualcomm Inc., which last spring announced a plan to fund 1,000 digital screens, now says it aims to have
more than 250 installed by the end of this year. Eastman Kodak Co. says it plans to begin selling its
digital-cinema system early next year for about $100,000 per screen, though all digital cinema systems are
expected to drop sharply in price once theater owners begin making big orders.
Many digital-cinema backers had argued that the new "Star Wars" would be a catalyst for a quick digital
conversion because of its near total use of digital technology. For example, when actors like Samuel L.
Jackson spar in light saber duels, only the handles of their weapons are real; the glowing blades are digitally
generated. Some hoped that Mr. Lucas and Lucasfilm, in their enthusiasm, would give digital theaters an
earlier release of the film or other advantages. But the company doesn't plan to do that, says Mr. McCallum.
Episode II is expected to open in more than 3,000 theaters, and on multiple screens within many of them.
Instead, Lucasfilm will promote digital theaters in its marketing materials. Though its plans aren't complete,
Mr. McCallum says the efforts could include listing digital screens in print advertising and on the popular
starwars.com Web site, which is closely watched by the saga's most dedicated fans. "All we're trying to do
is give audiences a chance to see the film we actually made," he says.
Lucasfilm has another goal, though. Its THX division, which certifies theaters that meet certain
performance standards for sound and other characteristics, will soon announce that its has certified its first
digital cinema equipment -- a service for which it plans to charge a fee. A THX official says the list of
certified equipment will include computer servers and projectors, among other gear, and involve several
manufacturers. THX also hopes to get paid by theater owners to set its technical seal of approval on digital
theaters.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
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