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Thursday, June 23, 2005

Financing the roll-out

Christie Digital Systems, which makes digital projectors, and Access IT, which provides software and services to manage those projectors, want to get 2500 digital projectors into theaters over the next two years. Cost per theater: about $100K.

The news here is that Christie and Access IT have set up a subsidiary, Christie/AIX, to cover the cost of rolling out all those digital projectors and related gear and recoup it by charging 'virtual print fees.'

"That means movie studios would repay the debt each time a movie is displayed on the digital projectors," according to the piece in Investor's Business Daily.

A bit more detail in this Reuters article, which says that:

    For theater owners, the cost of the 10-year contract would be roughly equal to installation and maintenance for a current film projector, and for studios the "virtual print" expense for a digital movie would be about the same as a film print, the companies said.

    "The design is to make this essentially cost neutral" for theater owners and studios, said Bud Mayo, chief executive of Access Integrated Technologies.

    Fees from installation and maintenance contracts and from the virtual prints would give Christie/AIX a return on its investment, Mayo said.

I wonder: if this `virtual print fee' is even slightly higher for the studios than circulating an actual print, does that create a disincentive for them to go digital? And for theater owners, we're still talking about a cost of installing and maintaining a new projector (even if that's stretched over 10 years) - when many of them may consider the current projectors they own to be just fine.

The overarching question here is, we know the quality is better. Piracy may actually decline. But what's going to drive the shift to digital distribution and exhibition? My suspicion is it will have to be a stream of content - a series of films, or perhaps live events - that is available only digitally, only in theaters.

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