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Digital cinema projection and distribution moved one step closer to the mainstream this week as three major theater companies announced their collaboration on a digital cinema business plan.
National CineMedia (NCM) founding members AMC Entertainment, Cinemark USA and Regal Entertainment said they would work together to bring down the cost of digital cinema equipment through volume purchasing for NCM members' 13,000 movie screens. The group will also try to develop a financing structure for the purchase of digital cinema equipment to include exhibitors, distributors, investors and others.
"Once the financing model and equipment volume pricing [have] been established, our founding partners and other exhibitors who participate will have ultimate responsibility for deployment of digital cinema systems," said NCM Chairman and CEO Kurt Hall in a statement.
Ushering In Digital Movies
The major Hollywood studios have agreed on some degree of standardization for digital cinema, which would lower distribution costs and boost theater quality, but only after a significant investment in new digital projection and distribution equipment. Theater operators, such as the NCM members, are a critical component of the move to digital movies, but they are struggling with lagging box office sales 
and tougher competition from home digital video solutions.
The NCM initiative is particularly significant to the transition, according to Yankee Group senior analyst Mike Goodman.
"For a long time, we've heard the studios talking about the digitization of movies," he told TechNewsWorld. "The roadblock -- or speed bump -- has been the theater groups. They're the ones who have to pay for and install the equipment."
Coming Soon to Theaters
NCM is uniquely positioned, said CEO Hall, to assist with the industry transition to digital movies in theaters.
"NCM has successfully designed, deployed and operated its national Digital Content Network (DCN) for several years," he noted, "and has significant experience distributing its advertising pre-shows and various forms of live and pre-recorded digital content, including sporting events, concerts and independent films."
The DCN is expected to include more than 11,000 movie screens by next year and will provide an ideal, upgradeable platform for Digital Cinema Initiatives (DCI) specifications, Hall added.
Studio Support Required
Theaters stand to gain from the move to digitization in two ways: by attracting more moviegoers with better quality projection and by incurring lower distribution expenses, said Goodman. However, the costs of upgrading may outweigh the benefits, he noted.
"The theater owners like it, but they could take it or leave it," he remarked.
To make cinema digitization a reality, the movie studios likely will have to invest in the transition, Goodman suggested.
"They're the ones who really want this," he said.
Home Movie Pressure
The NCM announcement highlights the need for movies to advance along with consumer electronics technology, Jupiter Research vice president Michael Gartenberg told TechNewsWorld.
"I think it's a recognition of the advantages digitization can bring to the marketplace," he said, "particularly when [theaters] are coming under more competition from digital home technology."
It is unlikely that theater operators or movie studios will have to pay for the digital upgrade on their own, Gartenberg added, indicating a sharing of the cost is more likely.
"Everyone's got a vested interest in making this happen," he said.
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