Movie Theaters Moving Towards Digital

ShoWest--the annual conference for movie distributors (divisions of media companies) and exhibitors (movie theater chains)--is underway in Las Vegas. This is where the movie studios show off their big products they hope will be blockbusters to get the theater owners excited to fill their seats. It's also where all the suppliers to theaters show off their wares. An entire Las Vegas conference hall is filled with the latest popcorn and hot dog machines and fancy movie theater candy (my favorite part), as well as plush stadium-style seats.

There's good news. After years of concerns about a declining box office, the mood is optimistic following news of a record box office in 2007. A number of the theater companies have consolidated or gone public, and they're installing state of the art technology and seats to make their theaters that much more appealing. The movie theaters owners and studios are together moving towards digitizing the 38,000 movie theaters nation-wide, which is a way to cut the cost of making and shipping prints (they can be distributed digitally) and a way to upgrade quality.

Digital projectors are expensive--the whole package about $75,000 per screen--but they're the first step in creating a 3D experience, for which theater owners can charge more. The theater owners aren't covering the cost of installing digital on their own. Every time the equipment is used to show their films, the studios have agreed to pay a fee, called a Virtual Print Fee, to help cover the equipment costs. No loss for the studios, as they're saving on "P&A" --the cost of physically delivering reels of film around the country.

This year at ShoWest there's lots of buzz about the "preshow," the chunk of ads that runs while you're waiting for the previews to run. I find them pretty annoying and I'm not the only person. But now companies like National CineMedia (a consortium of AMC, CInemark and Regal) and Screenvision are trying to fix that. They're weaving those annoying ads together with clips and behind-the-scenes from upcoming releases from Disney (DIS) , Warner Bros (TWX), and NBC Univeral (GE) (parent company is GE which also owns CNBC). It's a way to generate more revenue for the theaters and now it's easier to keep those ads updated than ever. For digital theaters, different ad spots can be brought in via satellite, and mixed and matched. And the more targeted and updated the ads, the more money theater owners can make on them.

Comments

[Lisa]

Does DTSI still have a business selling digital projectors?