Technicolor Article in Business Week

I wrote about Technicolor's digital cinema strategy in the current issue of Business Week.

From the piece:

The shift from film to digital will be a crucial test for Technicolor, a storied Hollywood name that invented the cameras, lenses, and film-processing techniques that made possible classics like The Wizard of Oz. In time, all theaters will likely get their movies in electronic bits, beamed via satellite, stored in a theater's computer servers, and shown with high-resolution digital projectors. That will cut out the current process of making 60 pounds of film and shipping it to multiplexes in battered metal cans. Technicolor is the world's biggest supplier and distributor of those film prints, with a revenue stream estimated to be worth about $900 million by Screen Digest, a London research firm. That business is expected to vanish slowly over the next decade, which is why the company is so focused on making the transition to digital.

But Technicolor, which was bought in 2000 by Thomson (TMS ) of France for $2.1 billion, is up against an aggressive new entrant, Access Integrated Technologies (AccessIT), as well as Digital Cinema Implementation Partners (DCIP), a joint venture of the three biggest theater chains, Regal Entertainment (RGC ), AMC Theatres, and Cinemark (CNK ). This summer could be the tipping point in the digital transition, as the number of U.S. theaters capable of showing movies in digital form finally exceeds 10% of the 35,000 U.S. screens.

This was originally a longer piece that got a bit more into the nuances of digital cinema financing, and I plan to post that version here in a week or so, once the Business Week story has had its run.

But here are some of the interesting issues that I touch on (and a few I don't) in this shorter piece:

- AccessIT has been the most aggressive player, in terms of outfitting screens for digital cinema
- But Digital Cinema Implementation Partners will decide what equipment gets installed in 14,300 screens owned by Regal Entertainment, AMC Theatres, and Cinemark; that company could choose to work with Technicolor, AccessIT, or do its own thing
- So far, many digital releases have been delivered via hard drive to theaters. But AccessIT CEO Bud Mayo says his company is already delivering about 60 percent of its content via satellite, and plans to be at 100 percent before 2007 is out.
- Most theater chains pay a portion of the cost of the digital cinema equipment that gets installed, but some are still taking a hard line about not paying anything. National Amusements president Shari Redstone told me that since the studios are the ones who save money, by not having to produce and ship thousands of film prints for each release, she isn’t paying anything for the 120 systems Technicolor is installing at her multiplexes during the current one-year test. “We’re not charging more for tickets, and we’re not getting any additional benefits,” Redstone says.

Clearly, it'll be a challenge to turn a profit building and operating a digital cinema network...