Answering the Question: Is Film Really Dead?
by Michael Karagosian
©2000 MKPE Consulting All rights reserved worldwide
Published in the February 2000 issue of System Contractor News
Film is dead! Long live digital cinema! Or so the pundits might like you to believe. The truth is that film is no where near dead, and digital cinema, while a potent replacement for film, is really much more than that. But we'll get into the story of digital cinema a little later.
Let's start with film. Film is the primary image format of today. There is no disagreement that its image quality is unequaled by any digital projection format. But we rarely get to see the best of what film has to offer in the cinema. Exhibitors are famously spendthrift, and there are relatively few screens having state-of-the-art film projectors delivering the rock steady images that are possible. Studios have to watch their costs, too. High speed duplication of prints is necessary to keep the cost down, but it does not guarantee the best picture to the viewing audience. Technicolor, whose dye transfer print technology was first introduced commercially with Disney cartoons in the 1930's, has been working on a relatively high speed dye print process that, true to their trademark, produces a spectacular color image on screen. Buena Vista's (Disney) 13th Warrior was released last year in this format on a limited basis, with great reviews.
While today's digital projection can provide compelling competition for standard 35mm exhibition, it still offers no competition to the visual impact experienced in Large Format (LF) houses around the world. Once considered a museum novelty, LF is now growing into its own as a commercial format. As with standard exhibition cinemas, LF is also experiencing a building boom, and the number of commercial 15/70 theatres is expected to surpass the number found in museums and non-profit venues by the end of this year. (If you're not familiar with the jargon, 15/70 stands for 70mm film where each frame is 15 perforations wide, a format made popular by IMAX. This versus 5 perfs per frame for the standard 70mm exhibition format. 15/70 films can also be printed down to the 8/70 format, 8 perfs per frame, whose screen count is also growing.)
The number of LF productions are growing, too. Fourteen new 15/70 films were released in 1999, including Disney's Fantasia 2000, versus one production in 1990. Those numbers may seem tiny next to the 500 or so films reviewed by the Motion Picture Association of America (MPAA) last year. But LF has established itself as good business. It has been said that one LF theatre can produce the revenue of three standard exhibition screens. One day we may see digital projection in these theatres, but today these are solidly film-based, and the growing number of LF theatres entertain audiences with the most stunning visual images that film can offer.
Digital cinema, however, is busy making itself known in the standard 35mm exhibition world. It is here that digital cinema has the potential to overtake. Promoters of the format point to the low cost of distribution and the robust quality of the picture. Several players have made their mark in the sand concerning digital cinema, and in less than a year of public attention, there's already been one casualty. Cinecomm, one of the many faces behind the original digital screenings of Phantom Menance, has disappeared from the scene after losing the support of Qualcomm, who chose to go it alone. Digital cinema has great potential, but it's only in its infancy, and there remains a lot of growing up to do.
Demonstrations of digital cinema have been taking place across North America. Texas Instruments, whose DLP Cinema projector prototype is today's choice for commercial digital exhibition, has placed 12 of their projector prototypes in cinemas across the US and Canada. Note the use of the word "prototype" and not "beta". These are proving sites, particularly for TI as they attempt to establish their technology as fit for the grueling 14x7 work weeks that feature movie exhibition often demands. Movie studios are using these sites to learn from audience reaction, too. Digital cinema presentations are not highly promoted. You can learn the locations where digital cinema is being presented, along with show times, at http://www.dlp.com/cinema. As a side note, TI is planning to license their technology to a few select projector manufacturers by the 2nd quarter of this year.
Given the momentum that digital cinema is developing, what and who is driving it? The answer to this question is complex. In as much as the more progressive movie studios are trying to drive this technology, in some ways they are merely reacting to the same trends in technology that have been driving the music industry.
Consider the financial impact. Having sat in digital cinema standards meetings where I commonly hear words such as "we only want to replace film", one has to wonder if that's really true. The numbers speak otherwise. Put on your thinking hat and follow some of the higher math. The studios spend approximately $1B annually reproducing films for distribution to exhibitors in the US. And there are 35,000 screens in the US. If we were to take that $1B in savings from one year and buy 35,000 digital projectors, they'd have to cost $28,500 each. Considering that these will be the best HD projectors around, that would be a fantastic price if you could find one! More realistically, though, these projectors are going to cost around $200,000 each, at least in their early years. At that price, they might pay for themselves in 7 years. But hold on here, we all know that 7 years in the digital world is next to eternity. Those projectors will be obsolete and in need of replacement before then, requiring additional investment. With a scenario like that, it is conceivable that the payoff in digital cinema for the big movie studios could take 10 years or more.
Our higher math indicates that digital cinema is a costly replacement for film. Is digital cinema still good business? Of course. It is more than an upgrade from film, it is a whole new medium. Digital cinema opens many new doors, from expanded sources of cinema entertainment and new advertising revenue, to grander forms of movie entertainment. Think of movie productions that have different scenes and different endings each time you see them, or movies with special effects such as those seen today only in theme parks. Digital cinema is the path for differentiating cinema from the home. It's an investment in the future.
It is also an investment in maintaining control of the distribution channel. There is a big risk here as well for the studios. They could easily fall into the same trap as the music companies. Digital distribution will not only open the door for direct distribution from low-cost desktop-style studios, but it will also open the door for direct pirated copies of first-run releases over the Internet. What could be more devastating to the studios than that?
What lies in the studios favor today is the high cost of the exhibition-grade digital projector. If the projectors were cheap, then digital cinema would be ubiquitous. Even if the studios stubbornly stuck to film distribution, the temptation would be there for major producers to distribute their digital productions directly to the exhibitors, bypassing the studios. Fortunately for the studios, the projector cost remains high, and their financial assistance is strongly needed to get digital cinema rolling. That leaves open a window of opportunity that won't stay open for long. Now is the time for the studios to jump in and define the medium to their liking.
Does the word reinvention come to mind? The movie studios are ripe for it. On one end, they're getting squeezed by independent, low-cost, high quality desk-top productions, and on the other end, they could be bypassed completely in the distribution model. What choice do they have but to embrace technology and reinvent themselves?
Complicating the situation, and any complication works for the studios at this point, is the fact that there is no regulatory agency or trade organization that has the power to enforce international standards in digital cinema. The Society of Motion Picture and Television Engineers (SMPTE) has established a technology committee for digital cinema titled DC28, under whose umbrella a series of study groups started this year. These study groups are not authorized to establish standards, however. SMPTE historically creates engineering documents that describe existing methods introduced by industry. They have not served as a regulatory agency, i.e., SMPTE does not have in its scope the ability to stamp products as compliant to a standard and prevent them from being marketed if not compliant. SMPTE is expected to eventually introduce recommended practices, possibly standards, for digital cinema. It could be years before this happens. And the risk exists that American-generated standards will not receive international support.
As one industry friend of mine has said, who for his own protection I will refrain from naming, "digital cinema is a free-for-all." This is true right now, but again, a little chaos at this time works in the favor of the studios. I.E., no standard is better than a standard that doesn't fit their business model.
Having mentioned chaos, let's look at what's on the near-term horizon. We're going to see the battle of the business model. First, there's the pay-per-view model. Real Image Digital, a company backed by Technicolor and with technology support from the Sarnoff Corporation, has announced that they will be installing beta sites of their digital cinema system in February. Real Image supports a pay-per-view business model, where they provide the equipment and the studios pay Real Image to show movies on their system. It's a very intriguing idea, and it will certainly have its time in the sun, but it doesn't fit the current distribution model. More importantly, it doesn't preserve control of the distribution channel by the studios. Another player, AndAction, has announced that they too intend to provide complete systems, with a focus on secure transmission of the media file. They haven't announced their business model, but from talking with them, they recognize the importance of preserving the studio's control of the distribution channel. Other players are in this, too. Cinea, who describes themselves as the only "spinoff" of Divx, is working hard on a delivery and security method. Qualcomm is working on ASICs (application-specific integrated circuits) for compression and security, and hope to support all business models.
There is time for the battle of the business model to play itself out. Early digital cinema systems are bound to be very manual in nature, without sophisticated satellite or land-based network links back to the studios. We see this already in the digital demonstrations that are happening today. It will take a few years for the technology to mature, not just the projection technology, but also the delivery methods, with their associated security and management systems. As this progresses, we'll see true beta sites where these technologies are put to test.
Given the creative history of cinema, I don't expect there to be a shakeout where only one system is clearly the winner. Remember, there is no regulatory agency here to enforce a single standard. Just as technology has brought digital cinema to the forefront in movie presentation, technology too may provide the way to allow creative competition at several levels, hopefully without creating chaos for the exhibitor. DSP technology has the potential to support a variety of compression and decryption methods, by downloading code right along with the media file. A future movie producer, for instance, might license the encryption and compression technology du jour for digital distribution of their movie. Digital cinema is destined to continue the rich and wildly creative history of cinema.
If you haven't noticed, I've carefully avoided the use of the term eCinema in this article. I, along with many other authors, have been guilty of using this term in the past. The term is problematic. eCinema encourages visions of ecommerce and etailing, visions which no studio wishes to promote. Today the term digital cinema is used to avoid any association with Internet sales of movies. In large part, this change took place at the request of the studios. Just as the studios have taken it on themselves to advantageously name digital cinema, the studios will take it upon themselves to advantageously define it. They will do so without the benefit of a regulatory agency, and without the benefit of standards. But they will do it to survive.