Originally published in the February 2010 issue.
An editorial by James Hyder
The giant-screen industry has become more sharply divided than ever by the rapid spread of digital IMAX theaters, and by the industry’s re-defining itself through the specifications established last year by the Giant Screen Cinema Association’s Technical Task Force. The effect of those standards is essentially to divorce the giant-screen world from digital multiplex theaters, regardless of the brand name they carry.
For most members of the GSCA, whether they are film producers or institutional or commercial standalone theaters, this will not be much of a sacrifice. Few multiplex theaters book original giant-screen films, and although some non-multiplex theaters show Hollywood movies, this is already showing signs of declining as studios become increasingly reluctant to make expensive film prints for any but the top performing theaters. Several films have already been released to IMAX digital theaters only, and the day is probably coming when the studios will stop making 15/70 prints altogether.
All this would seem to be moving non-multiplex theaters back to the pre-DMR, pre-Fantasia/2000 days of the 1980s and 1990s, when their only options were original films made by independent producers specifically for the giant screen. Except that today we have a rapidly expanding set of digital technologies that are making more content available at lower cost in a variety of formats.
However, this very variety is creating confusion and uncertainty, and holding the industry back from concerted action that might move giant screens into a bold new digital world. The problem is that there is no obvious digital replacement for 15/70 or 8/70 film projection available today, and it’s not clear that the few possibilities on the horizon will actually be equal, much less superior, to film.
The giant-screen industry would be wise to recall the experience of its much larger cousins, the Hollywood studios and conventional theater chains. The concept of electronic cinema dates back to the earliest days of television and was revived several times over the next half century. But despite these attempts, the latest in the late 1990s, no replacement for 35mm film gained acceptance until 2005, in large part because the proposed systems were all proprietary.
In the early 1990s, the movie industry stumbled through a painful and expensive transition to digital audio, as several incompatible systems, like Dolby Digital, DTS, and SDDS, fought to become the standard, or at least to dominate. None prevailed, which required studios to maintain separate print inventories for all the various formats and theaters to equip their booths with hardware for all or most of the various systems. The competition between these mutually incompatible systems increased the expense for virtually everyone concerned, while conveying no significant benefit to anyone.
So when digital cinema began to emerge about ten years ago, the Hollywood studios took the unusual step of working together with the theater chains and developing technical standards that embodied two important requirements: digital cinema would provide higher image and sound quality than the 35mm film prints it was to replace, and there would be no proprietary technologies. All digital “prints” meeting the Digital Cinema Initiatives specifications would be playable by projectors from all manufacturers. (The specs also provided for encryption to protect the films against unauthorized copying.)
Although some proprietary digital projectors had been tested before the DCI process, it was only after the specs were published in 2005 and accepted by the studios, theaters, and manufacturers that digital cinema really began to take off. Since then, tens of thousands of theaters have been converted to digital cinema, and the pace shows no sign of slowing.
However, Imax Corporation’s digital system flies in the face of the principles of the DCI. It is proprietary and closed: filmmakers must go to Imax to have their films converted to the IMAX digital format, and projectors that support the format are only available from Imax. The company has no such monopoly with the 15/70 film system it developed 40 years ago. Filmmakers can shoot, edit, and release 15/70 films with no participation from Imax Corp. and IMAX-compatible 15/70 projectors are available from other manufacturers.
And yet the studios and theater chains that had instituted the DCI process welcomed the proprietary IMAX digital system with open arms, installing it in some 145 theaters and releasing 12 films to date, with another dozen set to come. So far, the move has paid off for all parties: IMAX theaters (film and digital) consistently outperform conventional screens at the box office.
One reason the exhibitors bought in is that it cost them almost nothing. As joint-venture partners they did not pay the capital costs of the hardware, and although they must split their share of the box office with Imax, they can get out of the JV deal more easily than most lessees of IMAX film theaters.
For the studios, as well, IMAX has been a simple route to incremental revenues. They pay nothing up-front for the conversion of their films with the DMR process: Imax fronts the $1–2 million price tag in return for about 12.5% of the IMAX gross. Peanuts for the major blockbusters that Imax usually chooses, and a nice profit center for Imax.
But the situation for other giant-screen operators, whether institutional or commercial, is not the same as for the multiplex chains. They will not be offered JV deals, but will probably have to sign long-term leases for the hardware, similar to the ones Imax offered for their film systems — deals that will be more expensive up front and harder to get out of. Ten-year leases on 15/70 film projectors that remained functional and state-of-the-art for decades were good deals. It’s harder to imagine any digital system having such a long life.
Then there’s the question of content. At the moment it appears that anyone operating an IMAX digital theater will be wholly dependent on Imax Corporation for content. At the GSCA conference in Indianapolis last fall, the company described its program for converting a “library” of ten non-Hollywood films a year, including several of its own, to the IMAX digital format. So instead of the literally hundreds of giant-screen films from dozens of distributors that film-based giant-screen theaters of all formats can now choose from, IMAX digital customers will have their pick of ten titles.
And they will pay a significant premium for those films since, as we have pointed in the special report in this issue, Imax has changed its position on the cost of conversion. What was originally announced as a “minimal” cost has become substantially more expensive.
Although Imax has said that its digital systems will also be capable of showing standard DCI-compatible programming, why would anyone pay a substantially higher price and commit to a long-term contract for that capability?
What theaters will get with IMAX digital is slightly improved image quality over other digital systems, and the IMAX brand. The question is, will either of those things be worth the price exacted?
Ever since the controversy stirred up by comedian Aziz Ansari over IMAX digital theaters last May, a growing number of consumers and critics recognize that all IMAX theaters are not created equal. Although Imax will never release the figures, it would be interesting to see how IMAX film locations compare on a per-screen basis to IMAX digital theaters. I strongly suspect that the classic giant-screen film-based IMAX theaters like those at the AMC Lincoln Square in New York, The Bridge in Los Angeles, and Regal’s Irvine Spectrum 21 near L.A., account for the lion’s share of IMAX grosses, and that the gap between conventional digital theaters and IMAX digital theaters is much smaller.
Savvy consumers are spreading the word on the Web that only some theaters are “real” IMAX, and as the percentage of those theaters declines, I expect the reputation of the IMAX brand to slip as well. By the time the next-gen IMAX digital rolls out in late 2011, the IMAX name will also be associated with a 3D cable channel, and perhaps consumer products like TV sets. Will the IMAX brand have the same value in five years that it has had for most of the last 40?
At GSCA meetings, Imax executives have tried to assure institutional clients that the company has their interests at heart. In fall of 2008, when only a handful of IMAX digital theaters had opened, CEO Richard Gelfond said that the company hadn’t branded its new system as “IMAX Digital” because it didn’t want to make the film-based theaters appear to be second-class citizens. At the same time he assured them that the digital system would be open to independent filmmakers and inexpensive.
But we’ve already seen how the company has gone back on that promise, and in a television interview a few months ago, Gelfond praised the quality of IMAX digital projectors and referred to film as “a dinosaur.” So much for preserving the reputation of older theaters.
As the pressure of the Ansari controversy mounted last May, Gelfond eventually relented on the question of identifying the different kinds of IMAX theaters, and said the company would “do something” to provide more information to consumers. Five or six months later, links to vague descriptions of the “classic design” and “multiplex design” of IMAX theaters were added to the info bubbles for individual venues on the theater locator map on the Imax.com Web site. But screen dimensions — the main point the critics complained about — have not been posted.
In short, Imax executives have paid lip service to the notion of supporting the classic giant-screen film theaters that made the company’s reputation in its first 40 years. But they have done only the bare minimum to support them at best, and have broken their word in other cases, while actively pursuing a new business model that trades on the IMAX brand’s reputation for excellence while weakening it with every new small-screen theater. The company’s oldest clients have recognized the disdain in which they are held: I hear regularly from institutional theater operators who are angry with Imax management for any number of reasons.
Another important point should not go unremarked. Gelfond and chairman Bradley Wechsler have tried on two previous occasions to find a buyer or strategic partner to acquire the company. It is highly likely that they will use its present success and the recent rise in share prices to do so again in the near future. Both previous attempts failed and caused the company serious setbacks. But assuming they succeed this time, we have no idea at this time who the buyers might be, or what goals and objectives they will have for the company. How will they perceive the 200–300 customers with giant-screen theaters as they take control of a company that is busily moving into the cable television and consumer products businesses?
It behooves giant-screen film theaters that are looking for a way to transition to digital to learn from the experience of Hollywood and the DCI process, and insist that any systems they install be open and non-proprietary. The Digital Immersive Screen Colloquium for Unified Standards and Specifications (DISCUSS) process, initiated by John Jacobsen of the White Oak Institute, is the first step in establishing standards specifically for the giant-screen industry.
It is the duty of the GSCA to help its members, including theaters, producers, and distributors, find a route to the digital era in a way that is beneficial to all parties and does not help establish a monopoly. It can do this by actively seeking out digital projector makers and systems integrators as members and trade show exhibitors, and by presenting professional development sessions at its conference to educate delegates about digital projection technologies and options.
The GSCA should also arrange demonstrations of competing systems so that everyone will be able to judge the pros and cons of each for him- or herself. The first such demo in North America happened in February when Moody Gardens welcomed a handful interested parties to see its new digital 3D projection system in a side-by-side shoot-out with its IMAX 3D projector, after the GSCA’s Film Expo in Los Angeles.
Euromax is doing its part by meeting in March at the Swiss Transport Museum in Lucerne, which has installed a digital 3D system in its IMAX theater. (The museum has also dropped the IMAX brand from the theater’s name, while retaining the projector.)
In the meantime, theaters that are considering converting from film to digital projection should recognize that the digital era offers far more options and flexibility than the analog era did, and that they will soon have a wide variety of options from which to choose. It will not be a simple process, especially for the earliest adopters, but the experience of Hollywood not only provides existing technical standards on which to build, but demonstrates the practical and financial advantages of holding out for open standards.