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Thinking Outside the Can

For years, digital cameras and post-production equipment have been changing the way films are budgeted, shot, and edited. But no matter how films are made today, theatergoers still watch them on 35 millimeter celluloid prints. Even when a film is shot on high-definition video, the distributor has to copy the master onto celluloid before sending it to a theater. Film projectors and the process of printing and shipping prints—a financial line item costing distributors $1 billion annually—have been more or less the same for nearly a century.

But this is all about to change. In the past few months, US distributors have begun to replace physical thirty-five millimeter prints with digital bit streams, which can be beamed to studios by satellite and then shown using digital projectors, devices expected to spell the end of bulky canisters and reels of film. Also gone will be pops and jiggles on the screen as well as dirt and scratches that celluloid collects after several uses. Most important, the advent of digital projection means distribution costs will plummet, bringing down budgets, which will free up billions of dollars each year to produce additional content and significantly reduce the price of placing big- and low-budget films in theaters. According to Screen Digest, if all of the approximately 100,000 screens in the world went digital, distributors could save over $2 billion a year.

Given the huge cost savings, it might be surprising to learn that digital projection technology has been available for many years. But what stalled the transition was finding an answer to an economic question: Who’ll pay for it?

Nearly all of the financial advantages of moving to digital projection go straight into distributors’ pockets, with little if any benefit going to theaters. Understandably, theaters figured ticket sales wouldn’t increase much if films were shown digitally rather than on celluloid. Studios, meanwhile, didn’t want to foot the bill for installing servers and projectors, which cost up to $100,000, nor did they want the responsibility of upgrading and maintaining the new equipment. Theaters, in turn, were weary of getting hammered with replacement costs caused by inevitable innovations that would make equipment obsolete.

To address these and other issues related to the digital transition, Digital Cinema Initiatives (DCI), a consortium of seven Hollywood studios along with theater owners and tech manufacturers, was created in 2002.

DCI’s first order of business, before discussing any economic details, was addressing picture quality. According to Charles S. Swartz, executive director and CEO of the Entertainment Technology Center, a research unit at USC within the School of Cinema-Television where DCI conducted its research, “No one wanted to step back. Sure, prints get scratched and dirty and break, but when they look good, they really look good. The image in digital had to equal or excel what film, at its best, can create. All the testing we did was subject to that underlying premise.” Thanks to Texas Instruments technology, specifically TI’s 2K chip, comprised of 2,048 horizontal mirrors and 1,080 vertical rows or lines, Swartz and DCI were able to meet their aesthetic goals.

In addition to the 2K technology, which most digital projectors use today, Swartz notes, “Now we also have the possibility of 4K projectors, with a lot of promise to reach even higher resolution, which might be good in certain situations, but resolution alone isn’t the only factor that makes a satisfactory image. Contrast and color saturation are equally important.”

This past July, three years after its inception, DCI unveiled version 1.0 of its uniform specifications for digital projection, outlining standards for debated issues such as file resolutions, compression formats, and security requirements. The specs also ensured that replacements costs and upgrades would be mostly avoided, and gave control of the data produced by digital projectors to theater owners, who didn’t want studios to have access to information such as exactly when a film played, which could allow a distributor to interfere with theaters’ decisions like moving a poorly attended film to a smaller theater.

However, notably absent from DCI’s 1.0 release was any mention of who would pay for the transition, leading many insiders to believe the transition still stood at a stalemate.

While DCI unveiled its specs on the West Coast, overseas the transition to digital projection was already well on its way. In the UK, with the economic backing of the UK Film Council, a government entity, over 200 theaters were being outfitted with digital projectors. In Ireland, with the help of Avica Technology Corporation, a California-based digital exhibition company, every one of the country’s 515 screens were in the middle of a similar process, though funded by private entities rather than public organizations.

Using its European arm, Avica raised €40 million largely through third-party investors. The company is providing projectors to theaters on a custodial basis, planning to recoup its costs from distributors, which Avica hopes will hand over the many they currently put towards printing and shipping film—no official deal to do so is in place. If all goes as planned, though, neither the distributor nor the theater will have incurred any cost increases during the transition to digital and, after the switch has been made, distributing costs will go down significantly.

According to Swartz, similar deals are the wave of the future in the US, where the transition to digital is gaining traction. The switch won’t involve government intervention, of course, but instead will occur through the free market. “Third-party entities seem to be the formula,” says Swartz, pointing to film labs or companies like Kodak and others involved in the business of providing images as possible initiators.

One company in the US pushing the switch to digital is networking company Access Integrated Technology (AIX), which last June partnered with one of the leading digital projector manufacturers, Christie Digital Systems. Christie/AIX has since committed to bringing digital cinema to more than 2,500 US screens in the next two years. A few months before the Christie/AIX announcement, Landmark Theaters jumped into the digital projection pool, promising to move to digital formats in all its 59 theaters using Sony’s 4K projectors, which incorporate design specifications compatible with DCI’s guidelines. Another significant deal came this past September, when Disney revealed that its distribution arm Buena Vista Pictures Distribution had entered into a non-exclusive agreement to supply feature films to DCI-compliant Christie/AIX digital projection systems. The announcement, the first of its kind, is expected to be followed by similar ones from other studios, setting the stage for the demise of celluloid prints.

With the transition achieving momentum in the US, Swartz says there’s a strong motivation for it to happen quickly, because, in the short term, while the changeover is occurring, distribution costs will actually increase. Distributors will have to support two separate inventories: film and digital files. As a result, Swartz predicts that by the end of the year, hundreds of screens will be equipped with the new projectors. (As of last July, less than 100 out of a total of about 35,000 screens in the US were equipped.) By the end of 2005, he says that number should rise into the thousands. And by the end of 2007, it could be in the tens of thousands. “We’ll see it everywhere,” he says. “In North America, in Europe, in Asia. The numbers are huge.”

Once firmly in place in theaters, digital projection will not only change how we watch content but also what we watch. Paul Boutin, a Wired contributing editor and technology columnist for Slate.com, predicts, “It’ll be easier to try new things to see if they work or not.” Will theaters beam in the next U2 tour or World Cup match? “I don’t know,” he says, “but it’s almost a given that we’ll see a lot of experimenting. At first, a lot of the experiments will be dumb, but eventually theaters will figure out what works.”

Birth of the Portable Video Player

Lately, no one has figured out what works for consumers better than Apple, which in September, introduced the latest iPod spawn called the iPod nano, a slimmed-down, super-sleek version of Apple’s ubiquitous portable music player. On the same day, Apple also revealed it had partnered with Motorola to produce the ROKR, a cell phone that doubles as an iPod, albeit one that can store just 100 songs versus iPod nano’s 1,000-song holding power and the 60GB iPod’s 15,000. In the world of portable music players, there’s no competition: Apple’s on top with no one close behind. But in the world of portable video players, with Apple still nowhere to be found, the field’s wide open.

“It’s like California right before the Gold Rush,” says Peter Rojas, a tech contributor to Wired, the New York Times, and Fortune, as well as editor-in-chief of Engadget, an online magazine that covers personal technology. “Everyone’s waiting for Apple to create the platform, but it doesn’t look like they’re going to have anything anytime soon.” Will anyone beat Apple to the punch? “I don’t thing so,” says Rojas. “But I wish someone would get their act together.”

There have been some impressive recent releases, though. Unveiled this past summer, Creative’s Zen Vision is “the biggest device out there for the fall,” says Rojas. “Creative really gets it down.” He also points to Sony’s PlayStation Portable as another decent handheld. “It’s vastly underrated as a portable video device,” he says. “Millions and millions are selling. A lot of people are buying them as game devices but carrying them around as video devices. People have realized it has a beautiful screen.”

Maybe Apple is trying to say something through its silence. With respect to handheld video devices’ popularity, some insiders think the devices will never be a mass phenomenon, that there’ll never be vast numbers of people who’ll want to carry around a small screen to watch a movie, even a short. “That might be a fair thing to say,” says Rojas. “But it’s largely culturally specific. People who say portable video devices are never going to happen have never been to Seoul.”

Because so much of commuting in the US takes place in automobiles, audio media takes precedence here: You can listen to audio while driving, but you can’t drive while watching a video. Which is why portable video devices in train-commuting cultures such as Japan and Korea have caught on. Rojas adds that in Asia, people are “slightly ahead of the curve. They’re already using portable video in large numbers, and they’ve been e-mailing and taking pictures using cell phones for years. They’re even watching videos on cellular devices.” He predicts that this phenomenon will soon take off in the US, opening new venues for filmmakers. “Large numbers of cell phones will be video enabled,” he says, noting that cell phone film festivals have already been staged in the US, and companies such as Nokia and Verizon are supporting short-form content.

But not too many people are currently creating content for the format. “The audience is there to be exploited,” says Rojas, “and there’s a dearth of really good content being delivered over the internet and via wireless.” There are complicating factors involved in doing so, though, such as the difficulty of sending and downloading video to cell phones and the fact that you can’t legally rip a DVD to a video handheld like you can a song to an iPod.

At USC’s Entertainment Technology Center, Swartz has performed initial studies to understand how people respond to portable video players. “As a category, they’ll definitely take off,” he says, adding that they’ll be used for a variety of purposes, including watching movies outside the home in, say, a doctor’s office waiting room. “On a five-inch screen, you likely won’t want to watch Lawrence of Arabia,” he says, “but you might watch a Bill Murray comedy, and though it would suffer somewhat, you could still find it to be a very enjoyable experience.” Indeed, comedy rather than dark drama or horror would translate better to the smaller screen, especially because viewing on portables largely takes place in bright environments. (The Blair Witch Project probably wouldn’t be very scary on a five-inch LCD.) Additionally, the devices would lend themselves to content in which you can dip in and out, as well as to short-form content. Made-for-TV video, not as visually-oriented as that made for the big screen, would also be user-friendly. Swartz points out that because portable video devices will at some point in their lives likely be tethered to stationary devices to download content, you might find developments such as kiosks at Starbucks, where, while waiting for your espresso to drip, you could plug in and download a movie, which you could then take home and watch on your 60-inch LCD TV.

To independent filmmakers, this means an increase in outlets and the possibility of bypassing the costly distribution phase. “If a movie’s good,” says Boutin, “it can get around by word of mouth. People might even download a movie widely enough that a theatrical distributor will want to pick it up.”

That said, there was a lot of speculation and forecasting that independent music groups would get picked up by major labels because of their internet play—and that hasn’t happened. “In music, I haven’t seen anybody getting rich without the marketing power of big labels,” admits Boutin, “so I assume that same thing would apply to filmmakers. They would just be getting more people to see their movie. The big question is, ‘Would this then make it easier to for them to get backing for their next project?’“

It also remains to be seen whether portable video devices will follow the iPod philosophy—do one thing very well—say, improving upon the portable DVD player, or go the multi-platform route, possibly combining game-playing, Wi-Fi, and video capabilities. Swartz points to the clock radio as a potential model. “That’s my iconic device,” he says, “because it adds one and one and gets three. As a clock, it does its job very well, and as a radio, it does its job well. Plus, it has a third function, it wakes you up to the radio. That’s something you can’t do with two separate devices, even if they operate perfectly.”

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