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Digital Cinema a Hot Topic Among ShowWest Atendees

5 Mar, 2002 By: Nicole Sperling

LAS VEGAS — A panel of exhibition representatives from throughout the world agreed Monday that the issues affecting the theater industry are remarkably similar from country to country. The main concerns voiced by moderator John Fithian, president of National Association of Theatre Owners, and his panelists — MPA of Canada executive director Adina Lebo; Guy Morlion, president of the International Union of Cinema Owners and president of the Cinema Federation of Belgium; and Mitsuhiko Okura, chairman of Japan's Association of Theatre Owners — were the issues surrounding the implementation of digital cinema and the threat it represents if not done correctly.

Rather then referring to the digital cinema conundrum as a chicken/egg problem — where distributors don't want to make digital content because there aren't enough digital theaters, and exhibitors are reluctant to put in digital theaters because the content isn't available — the panelists were clear in pointing out that the real issues surround cost structures, standards and business plans.

According to Fithian, even if digital films were readily available, "we would still not run right out and put digital projection in our theaters."

Lebo and Morlion said they have worked diligently with NATO to exchange views on digital cinema and together with other theater representatives drafted a letter in December signed by 18 countries explaining the need for a global standard before digital implementation can begin.

"Most important of the issues is a question of standards," Morlion said. "It's a waste of time to pursue digital cinema until those questions are solved."

The foreign representatives also pointed to operational issues, encryption standards and the lack of a clear business plan as major blockades to the rollout.

"Everybody knows digital will be there," Lebo said. "Our major members have test sites because the technical and operational questions need to be answered. How much will it cost to service a system when it goes down and how long will it be down? The pioneering efforts will help you see what's in place and what isn't."

Lebo also added her thoughts to the business plans that are evolving. "There are a lot of pitfalls to the business plans that are out there," she said. "If the people who pay are your partners, how does that partnership continue?"

Okura pointed out that once standards are reached and prices come down, digital cinema will be good for Japan. He also said that the Japanese government will subsidize the costs of the digital projectors for small-cinema operators through a low-interest loan -- a benefit U.S. theater operators can only dream of receiving.

But it wasn't all moans and groans from the international exhibition community. In an earlier panel Monday, Andrew Cripps of United International Pictures, the international distribution arm of Universal, Paramount and DreamWorks, issued statistics on the state of international film distribution. Last year, the international community benefited from 21 films grossing more than $100 million in box office revenue, compared with domestic distribution grossing $100 million on 20 films.

Cripps also pointed to multiplex development increasing grosses to record numbers for the United Kingdom, Germany and France.

But Cripps still wants to see more and better-targeted trailers shown before films in addition to creative marketing campaigns that "sell dreams and cater to aspirations."

He also pointed out what he called "the ugly things" theater owners do that he believes threaten the industry. Included in his list are loyalty cards, predatory pricing, premium offerings to customers that feature no recompense to the distributor and focusing on nonfilm revenue sources like screen advertising, which cuts into trailer time.

"These things steal market share and do nothing to bolster the industry," Cripps said. "It splits the interest of exhibition and distribution, which should have common goals and objectives to replicate the good achieved in 2001."

When panelists were given the opportunity to reply to Cripps' comments, loyalty cards received mixed responses.

According to Fithian, a vast majority of his members think loyalty cards can be both dangerous and useful. "They can drive loyal customers to your theaters but can also depress price points and shave margins off of the industry," he said. "There has been mixed results depending on how they are used. Loyalty cards may drive customers, but if everyone implements them, you just depress the market."

However, pursuing nonfilm revenue sources remains an area many exhibitors are committed to, especially as digital cinema plans are unveiled. Canadian and Japanese theater owners are pursuing ancillary revenue opportunities mainly surrounding the viewing of sports programming on the theater screens.

In the United States, the votes are mixed.

Said Fithian: "Some of my members believe it won't work, and we won't make any significant money on anything other than movies. But some believe it's the only reason to do digital."

Fithian was extra careful in emphasizing that whatever happens with digital and whoever pays for it, exhibition will remain in control of the content inside its theaters. "In exhibition, we believe these are our buildings and we control what goes on inside. This applies to all content, screen advertising and trailers. We don't want to turn into brick-and-mortar operations that are controlled by theaters."

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