Hollywood's digital dawn, clouded for years by concerns about rollout costs, may finally be at hand.

Driven by emerging alliances of studios, tech firms and Wall Street investors and exemplified by Technicolor's recent pact with Century Theaters a fundamental change in the business model of theatrical distribution has begun to make the conversion of the nation's 36,000 movie screens a reality.

The benefits of digital cinema using bits and bytes to record, transmit and replay images, rather than using chemicals on film are clear to the majority of the industry: it's extremely easy to use and by Hollywood standards, costs virtually nothing.

Studios now spend more than $700 million each year getting copies of films to U.S. theaters. But digital films are essentially large computer files that can be written to a DVD-ROM, encrypted and sent through broadband cable or shipped via satellite. With virtually no shipping expenses, it doesn't cost the production company any more to open a film in 100 theaters than it does one.

The hang-up has been the cost of equipping theaters to show the films. The cost of a projector, server, satellite dish and the other gear required to show a digital film is roughly $100,000 per screen, a price theater owners have been loathe to absorb.

Disney and Dolby offered a glimpse of the new business plan with this fall's 3D distribution of "Chicken Little." Under the old model, studios paid about $1,250 per film print. In the new scenario, the studio in this case Disney pay a "virtual print fee" of about $1,250 to the digital equipment provider in this case Dolby. The suppliers will use that money to recover the costs of making the digital equipment over a number of years. The theater owners no longer pay the print fees, but are responsible for some digital maintenance and some installation costs, roughly $10,000 for each screen.

"In what are now the 'old days' for the exhibitors," said Bill Mead, publisher of industry publication and Web site DCinema Today, theater owners would make "a modest investment in equipment that would last as long as the theater lasted. When digital technology came in it was different, because it's much more expensive equipment that takes a certain level of expertise to maintain and operate."

Technicolor Digital Cinema, a unit of electronics maker Thomson, last month reached a deal to install digital projection systems for 90 to 120 movie screens owned by Century Theatres Inc. The deal will allow theaters to receive films, concert footage or other content via satellite, the Internet, or in the form of a small, reusable hard drives.


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