Digital
Cinema:
The Nexus Between Technical and Business Considerations
As the industry gathers for the 35th
annual ShoWest convention, issues regarding the coming
transition to digital cinema permeate many conversations.
From the trade floor to sponsors rooms to discussions
in the hotel hallways, were all talking digital. Much
progress has been made planning for this momentous change
in the way we do business – and much work remains
to be done.
NATO continues to pursue three primary antecedents
to the transition as established by our membership. First,
exhibitors believe that the quality of digital cinema must
exceed that of film. Second, cinema operators worldwide
seek global, uniform technical standards to promote interoperability
and compatibility of equipment. Finally, theatre operators
seek a fair business model before the transition can begin.
On these three goals, we see mixed results.
We are pleased with the progress of digital
cinema quality. With 2k projectors available now, and even
higher quality
equipment coming in the future, we believe that digital
cinema technologies have come a long way in a relatively
short amount of time. Continued improvement is necessary
and certain to happen.
The inability to address basic business issues
prevents
completion of the technical standards. |
Similarly, much has been accomplished on
standards work. Our studio partners have produced significant
technical
specifications through their joint venture – Digital
Cinema Initiatives (DCI). NATO has worked to support the
efforts of DCI by meeting regularly with DCI executives
and providing input, suggestions and commentary on the
draft specifications as requested. DCI, in turn, has been
very responsive to the input of our industry. We are grateful
for the work performed by DCI. Indeed, in most substantive
areas, DCI’s technical specification work has progressed
appropriately and has provided important leadership for
the coming transition.
Exhibitor representatives also continue
to participate in the essential work of the Society of
Motion Picture
and Television Engineers (SMPTE). We are pleased that SMPTE’s
DC28 Technology Committee has made tremendous progress
developing digital cinema standards.
On the issue of business modeling, however,
I believe that more progress is needed. Dating back to
2000, NATO has
called on our studio partners to come together with us,
to the extent permissible under the law, and develop
a fair business model. In early 2004, we have made some
progress
but have much more work to do.
The inability to address basic business
issues also prevents completion of the technical standards.
Particularly in
the area of digital cinema security, there is a strong
nexus between technical and business considerations.
Simply put, the technical standards for digital cinema
cannot
be completed until some basic business questions are
answered.
Along with our European partners in the
Union Internationale des Cinemas (UNIC), NATO described
many of these important
questions in a letter to DCI and SMPTE on Dec. 18
(the full
text of the letter is available on the NATO Website).
In this space I will offer only three examples of
those
many questions. When, if ever, should the digital
distribution and exhibition of a movie be prevented and
the movie
screen left to go dark? What content (e.g., movies,
trailers, shorts, etc.) should be included in an
inviolate set
of
digital files that cannot be separated? For what
universe of distribution (cinema circuit, cinema complex,
or
cinema auditorium) should digital movie files and
de-encryption keys be targeted?
Technology standards cannot be complete
without answers to these and many other related business
questions.
The answers also have critical impact on theatres,
as the
issues are determinative of whether cinema operators
continue
to control their own operations.
We have seen some progress and some positive
reaction to our letter in December. And we are hopeful
that
studios and exhibitors can resolve these questions.
The technology
and business issues involved in digital cinema
are intertwined, and must be addressed together.
Otherwise,
the transition
will never begin. 
