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My digital dream homework assignment at Show West.

I’ve been attending Show West and East for about 14 years. This year the show and the industry was as energized as I have ever seen it since 98-99 when people were simultaneously overbuilding and riding the dot-com stock wave: it was all about to end abruptly with the dot-bomb, bankruptcy, theatre closings and consolidation. Just when we were about to get the party started…..9-11 happened. And all the while digital hung over us like a helpful or murderous cloud (who knows) which could not be resolved. In 2002-2005 The End of Movie Theatres was a common news story. And we wondered the same. Even as our industry wobble stabilized the digital masters kept working to resolve, 3-D came forward, and alternative content went from an unlikely joke to reality. This entire time, post 9-11, has been an exercise in course setting. Where are we going? How will we get there? Can we survive? This year these questions have been answered by digital projection and delivery, 3-D, and “other stuff” besides movies. My sense of the industry now is that our direction is clear and we are on our way. It feels optimistic and positive.

I came at this digital thing as a guy who initially thought that while interesting it would never happen in my “theatre owning lifetime”: I am 57 years old and I was wrong. It is happening, it is underway, and it will be something I have to deal with.

I looked at all the equip, talked with everyone, it’s all great and you are sure to get screwed if you choose the wrong projector, hardware, software, provider, etc. But that is for the little people.

What happened to speed things up? Two words: alternative content. Whether it’s Hannah Montana or the Metropolitan Opera, DIGISCREEN, 3-D, etc. what they all have in common is that it is content and technology that has now been proven to work, that one form or another of digital delivery and projection is the only way to put it on the screen, and that people want this stuff and will pay more for tickets.

I am not a techno geek. I will not get into 2K or 4K or the various management systems, projectors, delivery systems or methods, etc.

I will also not get into all the details of the legal end such as virtual print fees. That’s for you folks who like the fine print.

My point of view is this: I own two theatres. I have a lot in common with people who own smaller theatre and chains. Even if you own 40 locations you are still in my boat when it comes to digital content, delivery and projection. We will play the cards we are dealt.

Here’s my conclusions.

1. “It” is happening.
2. You will have to get some form of high quality and/or digital projection sooner or later: probably sooner.
3. You can start today with a high end video projector: Met Opera, DIGISCREEN, etc. require varying degrees of high quality data/video projection that $4-10,000.00 will do a very nice job with.
4. 3-D requires the real honest to God digital projection and will probably be the engine that pushes most of us over into our first digital projection system. If you want 3-D you will have to digit up.
5. Conversion will not happen all at once, at a blinding speed, or in one way.
6. CBG is your only hope if you want muscle. They are doing a great job. Some smaller operators always say we need a union or some such: Cinema Buying Group is doing it for you on this issue like no one else will ever. Fee is 100.00. One word: Join. They now have nearly 4000 screens if I recall the # right and they will get the technology and specs and price right so that we come out fair. Could Wayne Anderson say twice as much in half the time? Yes, but don’t hold your breath. Wayne is half story teller and half preacher and a volunteer. I am very impressed with CBG and thankful they are in existence.
7. Do I need to know everything? NO. You can drown in this stuff. I do not have the expertise or the time.
8. When will prints dry up? I believe it will be a drip, drip, drip of less and less prints as time goes by. It will not be radical or all at once but bit by bit, or frame by frame, there will be less prints, and more pressure to digit up. For those of us in the extremities of the boondocks: it means you’ll be working harder to get 35 mm prints. You will know this when it happens.
9. Should you buy now? From everything I have heard and digested: the only real reason to buy now is if you want 3-D. Otherwise: the equipment and technology continues to evolve at too rapid a rate. If you buy digital now be prepared to have it be useless in 5 years.
10. When should I buy? When the equipment, technology, delivery, security keys, etc. has shook itself out. That is happening now and will continue to do so over the next few years.
11. Can I hold out and not buy this stuff? Probably not. You’ll watch your competitors eat your customers with 3-D and alt content like Hannah and also you’ll slowly be edged out of prints.
12. How much will it cost? Currently +/- 60-65,000.00 per screen not including 3-D.
13. Will there come a cut off day for prints? Not in the near or foreseeable future.
14. Is 2k better than 4k: who knows? I could not tell.
15. Can you tell the difference between digital and 35mm? YES/ I look for a lack of dust, splices, scratches, or anything other than clean and crisp. I don’t notice any of the digital vs. print accessing our dinosaur brain that Roger Ebert has talked about. I don’t fall asleep easier or pay less attention to digital. It’s as good good or better than 35 MM from a seat perspective. In the booth there is endless potential for screw ups that will be completely impossible to repair locally. Another good reason to wait.
16. What is slowing this down? A war between technology and hardware developers: do not get in the middle of this war unless you have deep pockets. Even the biggest of the big chains are slowing down deployment due to this digital arms race that will end badly for someone of one side or the other.
17. we will be adding a digital and 3-D cinema link onto our home page so that we can all follow this ad nausem at the various places such as SMPTE, etc. that are talking about it.
18. What should I do now? Pay attention and get a good video projector. Hook up with DIGISCREEN, etc. Unless you want 3-D in which case you need to step up.
19. Doesn’t digital suck? Yes. Just like computers and airlines and oil burners. No matter if it is screw ups with hard drives, hardware, software, bulbs, etc. etc. it will certainly happen. It’s a new world. We’re going to have to live with it. The good thing is that we have a lot of good company and they swing a big stick.
20. there must be something I forgot…..

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Michael Hurley
Impresario

A couple of corrections to Mike's post above:

The CBG membership fee is $150 annually, and a bargain for what it will mean for independent theatre owners. Mike mentioned the cost in his post as being $100.

The CBG currently has over 8,000 screens in its membership, Mike mistakenly placed the total at 4,000.

Rick

Why join CBG now?

I received a letter from national NATO back in Nov. of 2007 that said that the CBG Digital cutoff date has passed. That it is now too late to join and benefit from their digital program. They said that they had sent out several notices in advance as to when that date would be. I checked all the correspondence that I had received from them and couldn't find any cut off date anywhere. I asked all my booking accounts and several other theatre owners as well and NONE of them had ever heard of a cut off date from CBG.

Doesn't sound like they did a very good job of getting that information out.

So what's the story? Has that date passed, and is it too late to join or not? If it's too late there is certainly no reason to join them now.

You would think that if they truly have independent exhibitors futures as their top priority they would still want as many members as possible to help get the best deal.

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR>Originally posted by RoxyVaudeville:
<B>Why join CBG now?

I received a letter from national NATO back in Nov. of 2007 that said that the CBG Digital cutoff date has passed. That it is now too late to join and benefit from their digital program. They said that they had sent out several notices in advance as to when that date would be. I checked all the correspondence that I had received from them and couldn't find any cut off date anywhere. I asked all my booking accounts and several other theatre owners as well and NONE of them had ever heard of a cut off date from CBG.

Doesn't sound like they did a very good job of getting that information out.

So what's the story? Has that date passed, and is it too late to join or not? If it's too late there is certainly no reason to join them now.

You would think that if they truly have independent exhibitors futures as their top priority they would still want as many members as possible to help get the best deal.</B><HR></BLOCKQUOTE>

The cutoff date passed in November 2007. As a CBG member from its inception, I recall a cutoff date for the purposes of D-Cinema being discussed from the first few meetings. I also clearly recall the CBG publicly pleading with independents to join, during ShoWest, ShowEast, and in NATO artilces published in BoxOffice. The BoxOffice article also mentions the possibility of a cutoff date being imposed.

I recall myself posting on this very forum, that people who do not join the CBG will procrastinate themselves right out of business, and then complain down the road that they were not given enough opportunity or warning about the importance of joining.

Frankly, it does not benefit the CBG from a negotiating standpoint to have new members join AFTER substantial negotiations have taken place, since those theatre owners did not have the good sense to join at the time when their extra screen numbers would have mattered most, which is BEFORE negotiations have taken place, not DURING, or AFTER.

The CBG negotiates for deals on behalf of its members, not potential members who procrastinate for so long that they cut themselves out of the deal, and then bitch and moan that they weren't given enough notice about a cutoff.

We are truly sorry that you missed seeing the "CBG is cutting off membership" banner that we flew over your house. Next time, we'll send over a personal singing and stripping telegram to every single theatre operator, just to be certain that everyone gets the message.

Rick

Re: CBG membership. I was not aware the sign up date had passed. None the less: having an 8000 screen membership negotiating with manufacturers-software-distribs will help everyone enormously no matter if you are a member or not. The results of that CBG union will reap benefits for all.

Further: I spoke with a number of cinema equip suppliers who deride the CBG saying that they will be able to supply the same equip for less. Maybe so. But that's after the fact of the CBG's efforts. It makes no difference as it will still be good for all of us as CBG will have driven the development of the stuff in a positive fashion and driven down the price at the same time. If independent suppliers then come in for less: only better. We'll see.

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Michael Hurley
Impresario

I phoned an independent theatre owner friend of mine a day before the cut-off date and asked if he had signed up. He, too, did not know anything about the cut-off date.

I have only been in this business for 18 mos. Twice I had thought about joining: 1) was about 1 year ago, but did not because I have a hard time not knowing what benefits I will get without them being told to me first. For example: I own 4 video stores. I am a member of the NEBG (a buying group). BEFORE I joined I was given concrete examples of how I can save money or what benefits I could get.

2) Was last fall (before the cut-off date) on the encouragment of my old film booker (I do it myself now). What I did not like about it (and the sole reason I was going to join was becaues of D-Cinema), was the part about "seasonal first-run theaters" would NOT be part of any VPF program but would get equipment in 8 to 10 years. I am not too excited about getting hand me down equipment.

I am again thinking of joining, but I do not have my hopes too high at this point. I certainly understand that there will not be enough equipment for everyone to get right away. I certainly understand that the big 3 chains will get their equipment first due to their size. I certainly understand that studios will support VPFs for the larger grossing theaters first. I certainly understand that allocation of equipment inside CBG could be on a first in basis.

So.....any small theatres (less than 250k in gross ticket sales) out there feel good that they will have access to digital equipment?

like Leeler has asked: Is there room for us small folks in the future like there is now?

I think Roxy will be in biz as long as he wants to be. His posts are thoughtful, informitive and based on years of experience. No amount of procrastination will result in being put out of business if you have money in the bank, good credit, or a good cash flow. The price of D-cinema continues to go down. In 5 to 10 years who knows what the costs will be.
One thing about this business i have noticed is how fast different issues come and go. Just a couple of years ago we were wondering if we would still be viable in five years as studios were talking about closing the theatrical window. Today the hot button topic (some would say hot head) is D cinema. Take a breath, relax, the answers will eventually become clear. For me I talk to my friends at American Cinema from time to time about D cinema and listen to their advice and wisdom. They tell me the price will continue to drop and I should wait-this(and starting a D-cinema savings account) is what I will continue to do.

D cinema savings account good idea.

aka "capital reserve"

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Michael Hurley
Impresario

I doubt that I would have joined CBG even if I had known of the cutoff date. I don't need them. As I mentioned in an earlier post several months ago, when the time comes that I decide (if I decide) to convert to digital, I will look for the best deal available and write a check. I've been in this business for over 40 years, and I have saved and invested to the point that I don't have to worry about financing a digital conversion. Of course I don't want to pay any more then I have to, but on the other hand I don't want to be locked into any deals that in any way controls how I use my equipment. And since I'm subrun, I'm not eligible for VPF anyway.

I have always been a lover of theatres, moreso then movies. I hate to see any theatre close, especially small town theatres. My concern is not so much with my own theatre but those of other independents. I see nothng but storm clouds on the horizon. I actually think that part of this conversion to digital is being done as a way to weed out low grossing theatres. Then open all movies in large plexes owned by a few giant chains, then move directly to DVD etc. No more small market theatres, no more sub runs.

The decision that I will have to make is whether it makes sense to spend that money to convert when I'm so close to retirement? I have a group right now that would like to buy my theatre, create a not for profit corporation, and use it as a community theatre for plays, concerts and public meetings. I'm just not ready to retire at this point, but maybe it would be the wise thing to do.

[This message has been edited by RoxyVaudeville (edited March 24, 2008).]

JUST SAY NO Roxy........You would go crazy if you retire!

We are hesitant to upgrade any of our theatres to D-Cinema. It seems like the technology is constantly improving and we do not want to be stuck with an obsolete system ten years down the road. We also pride ourselves on our on screen presentations, and I find the 35mm film when properly handled to look superior to D-Cinema. With the exception of one of our theatres that is second run and gets used prints, none of our prints get scratched or dirty. We hire real projectionists and use on-line film cleaners with film-guard for every showing. Whenever we buy a theatre we always replace the sound systems, and evaluate the projection systems if we feel we need to we replace all the booth equipment. Our customers expect the best from us and I do not want to dissapoint them with a sub par D-Cinema system.

The grosses from the independents are still important to the studios. Don't sell yourself short. At the CBG meeting, Wayne gave a stat(I don't remember exactly what it was), but I was surprised how high a percentage of total gross came from independents.

As far as the deadline date. I thought it was fairly well known...if you attend Nato sponsored events, read newsletters, etc... I beleive you can still sign up, BUT become part of a 2nd negotiating group. I think there are 8000+ screens in the first group (before the deadline) and then 100ish screens in the 2nd group (after the deadline) CBG is a good thing. If you think you could negotiate the same price for 2 screens as someone with 8000 screens...good luck.
The big 3 may not necessarily get their projectors first...no one knows yet. It will be market by market, is all that has been said. It depends on the deal that gets done. If CBG does their deal before the big three, some members of CBG MIGHT see their projectors before the others. There are only x number of vpf's available...who knows if more will become available later. Who knows, whomever wins the bid with the CBG might also win with the big three too?

I made a few phone calls today concernig this subject to manufacturers of equipment and the traditional middlemen. PLease anyone feel free to dispute these summations:

Most importantly the level of VPFs has dropped significantly from $1200 or so to anywhere from $400-800 in the past year. We all know that the studios will pay as little as possible (as would any of us in their shoes would do as well). That does not bode well for the CBG deal. (according to the folks I talked to) those in the CBG deal may have to pay $25,000 or more ( I recall that being $8-10,000 last year) to get equipment (again not my words but theirs).

Those who have the money to buy equipment, will have access to the equipment with few constraints except maybe the window of installation.

All in all, I feel much better today than I did yesterday about the whole subject. And since I am seasonal first run, the CBG deal will not be for me. (But it may be for many of you)