Entertainment Industry To Spend $3 Billion By 2005 To Convert 21,000 Theatres To Digital

Moviegoers Get Better Image And Sound Quality

31-May-00

The next five years will see the beginnings of a revolution in the way that movies are distributed, according to the latest report, ""Digital Cinema,"" from SRI Consulting's (SRIC's) Business Intelligence Center (B-I-C). Although the transition will take many years to complete, by 2005, movies encoded as digital data files - either recorded on optical disc and physically shipped or broadcast via satellite - will increasingly replace film prints as the preferred method for distributing movies to theatres. ""If digital cinema can be branded and promoted as a new high-performance, high-tech experience and if theatre operators don't have to bear digital cinema's immediate deployment costs, then exhibitors may welcome digital cinema as a way to differentiate their theatres and attract more moviegoers,"" said Paul Di Senso, senior Media Futures analyst. Digital cinema - or electronic cinema - can both lower movie-distribution costs for studios and provide other important benefits that aren't directly related to saving money: Cost-reduction benefits: - Elimination of film prints. Hollywood studios could eliminate the $2,000 to $3,000 that they pay for each film print - an expense that can represent 10 percent of a movie's production budget. With the typical U.S. release opening on more than 3,000 screens, a per-print cost of $2,500 means that the distributor pays more than $7.5 million for film prints. - Lower handling costs. Currently, film canisters ship to studios' regional distribution hubs and then go via truck to the individual theatres that the hub serves. Although the same physical distribution system would be necessary for disc-based movies, satellite-based digital cinema distribution could eliminate the need for truck rolls. Also, a secure process for erasing digital movies once their run at a theatre is complete would eliminate the current need to return and destroy film prints. - More efficient response to demand. Distributors would no longer have to second-guess audience turnout for a new movie when they are deciding how many prints to make. If a movie hits big, digital copies can be quickly distributed via satellite to more theatres in the area where demand remains unmet, and the theatres that already have digital copies can show the movie on more screens. Correspondingly, distributors would never again duplicate too many prints for a poorly received movie. - Lower theatre-construction costs. High-bandwidth in-theatre data networks would replace the complex and expensive-to-build film-transport systems that now physically run film between the different projection rooms in a theatre multiplex. However, exhibitors will gain such construction-cost benefits only after all films are distributed electronically. Until then, they will see added costs if they must support dual infrastructures necessary for film-based and digital cinema systems. Non-cost-related benefits: - More consistent image quality. As 35mm prints age, their image quality declines markedly. With digital cinema's digital images, however, people watching the movie six weeks after its release will have the same experience as those who attended the movie's premiere. - Improved sound. A digital cinema file's digital sound recording capabilities can be superior to the limited and compressed digital sound encoding that today's audiences experience. - New release options. Digital cinema promoters sometimes claim that the new technology will allow simultaneous global release of new movies, thereby reducing pirates' ability to copy a movie in one region and sell videos in regions where the studios haven't yet released the movie. Although digital cinema undoubtedly offers greater release flexibility, the value of simultaneous global release is questionable. Such a global movie release would be both expensive and risky. For example, it would require a studio to invest large sums in expensive local marketing campaigns around the globe well before a movie's box office appeal is established. - New revenue sources for exhibitors. Once a satellite-based digital cinema infrastructure is in place, exhibitors potentially could supplement their revenue from features with new sources of revenue from the remote display of live events such as concerts or sports. About The Media Futures SRI Consulting's Media Futures helps businesses worldwide plan for the digital future, providing companies with technical, competitive, and demand insights into the emerging world of digital information, communications, and entertainment. About The Business Intelligence Center SRI Consulting's Business Intelligence Center provides clients with a system of integrated research intelligence and customized services to help define new market opportunities, identify and communicate future challenges, formulate and implement business strategy, and develop innovative products, processes, and services. About SRI Consulting SRI Consulting (http://www.sriconsulting.com), a wholly owned subsidiary of Silicon Valley-based SRI International, works with companies worldwide to identify market opportunities and develop strategies for competing in today's technology-driven marketplace. SRI Consulting combines strategic business consulting with technology expertise to help companies develop and commercialize new products and leverage new technologies into competitive advantages. These consulting services are backed by SRI International's 50-year heritage as a pioneer in developing new products and markets.

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