Kodak, TI Set Stage For Digital Cinema Expansion

Recent breakthroughs in digital technology could light a new path for the nations movie theater operators, after thousands of screens were darkened by bankruptcy.

While excess theater capacity looms as the immediate problem, the major theater owners also need more entertainment fare and greater flexibility to survive in a media-saturated world, experts said.

For those willing to invest in equipment, salvation could arrive on a beam of light transmitted by new digital projectors or carried through fiber-optic lines that would complete a circuit from the editing room to the distributors to the audience.

And movie houses may become another venue for corporate conferences and training seminars once the broadband connections are in place.

While the delivery system may be years away, the technology that allows the formatting and exhibition of digital cinema appears ready for prime time. And a pair of visionary financiers - Philip Anschutz and Gary Winnick - seem to be intent on completing the last mile to the projection booth with high-speed fiber, an achievement that could create interactive cinemas for new forms of entertainment, conferencing or education.

"The transition to digital cinema is in its early stages, but by 2004, it will be on a fast track to long-term commercial viability," said Eric Scheirer, a Forrester Research analyst. By 2006, Forrester projects, one-third of the U.S. big screens will be digital.

By-products of the digital cinema push will include high-definition home theater sets and lightweight, inexpensive digital projectors that can be tied to a laptop computer for corporate presentations.

Paving the way to the fast track are new products from Eastman Kodak and Texas Instruments.

Kodak, which has invested in digital cinema with the same fervor it showed for film, is preparing to release an innovative format that doubles the resolution quality for digital images. At the same time, Kodak has invented a digital "watermark" designed to detect and prevent film piracy.

The advances are expected to build a stronger case for digital cinema, which is now playing in 38 theaters.

"We think digital cinema has to be better than film to be viable," said Glenn Kennel, Kodaks program manager for digital cinema in Los Angeles. "Todays prototypical equipment is not quite there. Probably the biggest shortcoming is resolution."

While current technology is capable of displaying 1.2 million pixels on the silver screen, Kodaks digital cinema projector raises that to about 3 million pixels. The Kodak system includes custom software that uses Sun Microsystems servers and supports the loading, scheduling and playback of features, trailers and preshow content on multiple digital screens.

TI, meanwhile, continues to improve projectors after its Digital Light Processing projectors displayed digital versions of Planet of the Apes last summer, the third digital release from 20th Century Fox.

TIs field demonstrations began in June 1999 with all-digital showings at two North American locations of Star Wars: Episode I - The Phantom Menace. Since then, 30 movies have been released in all-digital form. TI has 38 digital projectors in theaters and 16 in post-production facilities.

While the new technology is appealing to the major theater chains, the bankruptcy quagmire is the major restraint on buying the equipment. Analysts said if the digital equipment is going to be bought at $75,000 per screen, then studios will have to carry much of the cost.

Add two fiber-optic pioneers to that scenario, and you begin to get a clearer image of the future of digital cinema. Qwest Communications International financier Anschutz bought Edwards Theatre Circuits and United Artists Theaters out of bankruptcy, and acquired the debt of Regal Cinemas. Global Crossing founder Winnicks investment group, meanwhile, bought a major stake in Loews Cineplex Entertainment after that chain filed for bankruptcy.

Since former oilman Anschutz is rarely known to invest his money for his own amusement, analysts expect a convergence of his Qwest fiber-optic play with the theaters.

While Qwest and rivals such as Qualcomm and Technicolor audition for the starring role in digital cinema, aerospace giant Boeing is taking off first with plans to install satellite distribution systems in 10 theaters in December. Boeing also will open a network operation center in Hollywood to manage digital film distribution.

Once the theaters are connected by fiber or satellite technology, they can become interactive arenas for concerts, sporting events, conventions and other live events. Still, movies are expected to pay the bulk of the freight.

Kodaks Kennel said, "The general feeling in the exhibition arena is that those things are interesting, but they dont expect that to carry the load."