Digital projection has overtaken film as the primary means of exhibiting a motion picture in a theater. But while digital may be the future, it has relegated some theaters to the past. According to many in the industry, new movies will eventually cease being released on 35mm film. An era will end, taking with it any related businesses that are unable to adapt quickly enough.
The call to convert from celluloid film to digital began more than a decade ago, but the effects were not felt strongly until recently. In 2011 Twentieth Century Fox announced that they would no longer be distributing product on 35mm film. The two largest producers of film stock, Fuji and Kodak saw a 70% decrease in motion picture film production in 2012, with Fuji announcing it would end production of print stock this year. Kodak declared bankruptcy in 2012.
The blockbuster success of films like special effects driven films such as Transformers, The Avengers, The Hobbit: An Unexpected Journey, and James Cameron’s Avatar turned the digital conversion process into a high priority for theaters. In the wake of Avatar the number of worldwide digital screens more than doubled. The popularity of 3D movies drove the adoption of digital projection even further. Prior to digital 3D projection, it was felt that there was little value added to the exhibitor by converting to digital. The explosion of digital 3D quickly demonstrated that the demand and the technology far exceeded the business model.
The three most prominent multiplex chains in the United States (Regal, Cinemark, and AMC) make up about 17,000 of the nation’s 39,500 screens. According to John Fithian, head of the National Association of Theatre Owners (NATO), “32,000 of the total screens in the US are now digitized.” That’s 80 percent — but when you factor out the [largest chains], the number falls to about 60 percent.” These exhibitors were initially reluctant to convert to digital, a process that would cost billions. Studios were also reluctant, as releasing versions of a film on 35mm and digital was costlier than distributing one or the other.
Five major studios reached an agreement with the theater chains called the Virtual Print Fee, or VPF. The VPF is a subsidiary paid by the distributor of a motion picture, offsetting the cost of installing digital equipment and maintenance. The VPF allowed the major theater chains to make the conversion.
To accommodate the cost of upgrading to digital projection, smaller theaters and non-profit organizations often find success through alternative methods of generating revenue, including donations, crowd-funded campaigns, and grants. Seattle’s own Central Cinema and the Northwest Film Forum (NWFF) both reached out to their member base this year with Kickstarter campaigns; both met their contribution goals.
The NWFF was able to raise $50,000 to convert. More than 400 supporters helped them meet their goal in only 40 days. “Increasingly, donors want to know exactly what they are supporting. Our need to make the digital conversion at the NWFF was so specific, and so easy to make clear to those who were not already aware of this global issue, that it lent itself to a crowd-sourcing platform. Additionally, it’s something everyone who comes to our cinema gets to enjoy, so it made sense to give “everyone” the opportunity to partake in the campaign and feel a rightful sense of ownership in this community organization”, said Line Sandsmark, Development Director at the NWFF.
Some theaters are financing the conversion through third-party groups that pick up the tab and are reimbursed by theater owners and through fees paid by movie studios. Because theaters must meet certain profit levels, it can be difficult for owners of smaller movie houses with fewer profits to qualify for these opportunities.
Private foundation grants are available as well, but to date these are scarce for Washington-based theaters. This July, the Gates Family Foundation committed funding to a grant program through Downtown Colorado Inc., a nonprofit organization seeking to provide technical assistant to rural theaters. The grant will provide funding to rural theaters for conversion to digital projectors, but only in the State of Colorado.
In truth, smaller theatres, or those lacking the active membership of organizations such as NWFF may have a more difficult time converting. Often the associated costs can be much higher, and require more complicated fundraising efforts, an example being the ongoing digital conversion campaign at The Grand Cinema, home of the Tacoma Film Festival. The Grand is working to raise $344,000 to convert by the end of this year. Thanks to the generosity of their community, they are very close to their goal and supporters who donate by Sunday, September 15, will have their contribution matched. Please consider helping them cross the finish line.