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Panel: Who's going to pay for the digital
evolution?
Jan. 28,
2002
By
Chris Marlowe
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Digital
technologies have disrupted and influenced business strategies
and changed the way content is distributed and marketed.
That was the assumption posed by
Rohit Shukla, president and CEO of Larta, as he opened a panel
discussion Thursday evening titled "Digital Cinema:
Hollywood's Emerging Challenge."
No one disagreed with the assumption.
"We're involved in a massive
evolution, not a revolution," said Robert J. Dowling,
editor-in-chief and publisher of The Hollywood Reporter. "It's
inexorable, and the only question is how we're going to
adapt."
In fact, the main issue
that engaged the panel was the question of who will pay for
the conversion to digital.
Moderator Russ Ferstandig, founder and president of
Mobius Research, founder and head of Miramax's Digital Cinema
Initiatives and founder of the Electronic Cinema Initiative,
predicted that the exhibitors will shoulder the cost. He said
that each screen will cost $250,000 to convert, but that this
need not be a capital expense because the required equipment
could be leased for $1,400 a month.
He added that such alternative content as sporting
events, concerts, and distance learning would mitigate the
expense and make new revenue streams possible. "It's going to
go beyond the movie industry," he said.
Although nobody doubted that change would happen,
some panelists felt that the conversion was taking too long.
Others disagreed, countering
that rushing in was all too likely to result in disastrous
mistakes. Christopher Cookson, Warner Bros. chief technology
officer and executive vp, argued that it could be catastrophic
to spend a great deal of time and money on one of today's
competing standards if that standard was not the one that
prevailed.
Cookson questioned
some of Ferstandig's opinions, pointing out that no one would
finance leases on equipment with such a risk of being quickly
outdated. Pointing out that prints cost $12,000-$15,000 per
screen per year, he said that the cost of digital needed to
beat that because the alternative uses approach is just
theoretical.
"We're all
infatuated with the technology, but the economics aren't
right," agreed Michael Karagosian, digital cinema consultant
to the National Association of Theatre Owners.
Robert Mayson, general manager of
cinema operations at the entertainment imaging division of
Eastman Kodak Co., detailed some of those economics. With each
movie having a "dwell time" of four to five weeks, there are
10 prints required per year per screen at an approximate cost
$1,500 per print. There are 108,000 active screens globally, a
number that will rise to as many as 122,000 within five years
due to expansion in Russia, India and China. Rounding off,
Mayson calculated that, "at 100,000 screens, the price of
prints is $1.61 billion."
According to Mayson, that works out to a price
point of $75,000 per screen before digital cinema would be an
attractive proposition — far lower than the cost today.
Other financial aspects are
important too. As Cookson noted, digital content is easier to
store, convert and repurpose.
"Digital cinema could consider the entire install
base of high-end home theaters," Dowling added. "That is an
attractive proposition."
"The
day is not long in the future," Cookson remarked, "when the
quality of the picture in the home is better than the
theater."
There are other
concerns besides funding, including the lack of degradation in
a digital movie copy. "A sustainable performance quality is a
quantifiable benefit," Williams said. "It will evolve into a
reasonable capital expenditure."
Others believed the studios should bear the cost.
Alan Silvers, director of technical services for digital film
mastering at Cinesite, noted that the studios will be the
first to save money: "$800 million on distribution alone," he
said.
A great deal of the
discussion was what Shukla described as nebulous, however.
Late in the evening Silvers spoke of the unmet need to discuss
bigger issues, such as the effect on post-production and the
cost of creating both film and digital movie copies during the
transition. He also said that the digital cinema blurred the
lines between the DVD group, the post group and the mastering
group and that this trend deserved examination.
Elizabeth Daley, dean of the USC
School of Cinema and Television, hosted the participants and
audience at the Stanley Kubrick Sound Stage at USC's Robert
Zemeckis Center for Digital Arts. The event marked the release
of "Hollywood Unstrung 2," Larta's research report on digital
cinema and entertainment delivery.
Larta is an independent, nonprofit company that
advises the investment, technology, and startup community of
Southern California. It receives part of its funding through a
contract for services with the Division of Science, Technology
and Innovation of the Technology, Trade and Commerce Agency of
the State of California.
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