Dolby: 3-D, digital cinema, and "Chicken Little"

I spent a couple hours yesterday morning at Dolby Laboratories in San Francisco, talking digital cinema with senior vice president Tim Partridge, who has been with the company for more than 20 years. We met in Dolby's elegant screening room - and the projection booth that serves it.

A few notes:

- Dolby doesn't want to be in the projector business; instead it wants to sell the servers that store digital cinema files securely and the software that enables cinema managers and projectionists to create line-ups of what their theaters are going to show. Partridge told me that the cost to "digitize" one screen has now dropped below $100,000. Eighty percent of that is the cost of the projector (Dolby's screening room uses one from Barco), and 20 percent is the cost of the servers.

- While Dolby has previously only been in the business of delivering high-quality sound, it must get into the image business as digital cinema emerges. Why? Because digital cinema files will carry uncompressed, original audio. The studios don't want to be beholden to any proprietary, Dolby-esque standards. "For a company that built its business in compressing audio - yeah, it's scary," Partridge says. "It's both a challenge and an opportunity to go beyond audio."

- Dolby's "Show Manager" software, which runs on a PC and communicates with Dolby's digital cinema servers, makes it insanely easy to string together a series of trailers, promos, ads, and a feature, by dragging and dropping icons. Tom Bruchs, who was running the projection booth, said that it'll save at least an hour of the projectionist's time - no more splicing together different pieces of film and then checking to make sure everything was OK.

- Emphasizing the security of its servers, Dolby doesn't aim to be the low-price leader in the market. Partridge says that they've shied away from off-the-shelf hardware in favor of stuff that's slightly more expensive, but will meet or exceed the security specs set by the studios' Digital Cinema Initiative.

- Partridge seems to deeply believe that 3-D is one thing that will keep audiences coming out to theaters, rather than watching movies at home: "It might be a stretch to say that every movie needs 3-D. But aren't we trying to make movies as life-like as possible? People said that Dolby stereo would just be used for the Supermans and the Batmans, and not the Woody Allen movies. But now everything uses it."

- Dolby and Disney are already working frantically to get 100 theaters around the country ready to show "Chicken Little" digitally - and in 3-D - this November. The original announcement didn't include many financial details, but Partridge shared a few. The 100 theaters chosen in 25 markets are intended to keep their digital cinema set-ups. "These will be permanent installations," Partridge says. "The exhibitors and the studios will share the costs."

The theaters will use a variety of projectors, but only Dolby servers. Theater-owners won't buy the rig outright, but it sounds like the cost will be defrayed over time, in part by a financing mechanism, and in part by the studios paying "virtual print fees" to the exhibitors - in essence, sending the exhibitors the money they've saved by shipping a hard drive rather than striking a print. (Dolby's system relies on 120-gigabyte Seagate hard drives). No decision yet on which sort of 3-D glasses will be used: red-and-blue, passive polarized, or active polarized.

This looks like it will be a huge milestone for digital cinema. But as always...a lot will rest on the quality of the movie.