Boeing Puts Digital Movie Systems in 23 Theaters

May 23, 2002 12:00 PM, Reuters

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LOS ANGELES (Reuters) -- It falls far short of Star Wars creator George Lucas' hopes, but the Force--the force behind digital cinema, that is--is still with them.

The Boeing Co.'s Boeing Digital Cinema unit said it expects to have 23 digital cinema systems running in theaters around the country by May 16, giving the high-tech method of distributing and showing movies a much-needed lift.

Frank Stirling, executive director of Boeing Digital Systems, said he expects to have as many as 40 systems in theaters by the summer's end and possibly 100 by year's end.

The 23 all-digital theaters are in cities ranging from Seattle to Boston and Wichita, Kan., Stirling said.

The number is far short of the some 2,000 Lucas hoped for three years ago when Star Wars: Episode I--The Phantom Menace debuted in theaters loaded with digital effects.

Attack of the Clones was made digitally, which holds the promise of sharper pictures and better special effects for audiences each time a movie is played.

But digital cinema has been slow to take hold with theater owners due to cost and technology issues. Hollywood's studios, too, are concerned about digital pirates who could steal perfect copies of movies from satellite uplinks, the Internet or DVDs, thereby reducing film profits.

Boeing Digital Cinema, however, believes it has many of those problems worked out, and since early March, it has been contracting with theater owners and Hollywood's studios at a rapid rate to deploy systems, Stirling said.

"At first, there was great interest and no commitment until (this year's) ShoWest, when (Clones producer) Rick McCallum showed his package of Star Wars content. Then something very interesting happened. The next day, theater owners began calling us, and we began negotiating," said Stirling.

PIRATE-PROOF?
ShoWest is the movie theater owners largest convention of the year, where vendors sell everything from popcorn to projectors to theater owners. In recent years, much of ShoWest has centered on the anticipated rollout of digital cinema.

Theater owners, however, largely rejected the idea because they didn't want to pay the estimated cost of one system, which is as high as $150,000 for an advanced projector, computer servers and satellite dishes or high-speed wiring.

Owners went on a spending spree in the 1990s to upgrade theaters, which led to many bankruptcies in 1999 and 2000. But by 2001, the industry had returned to moderate health.

Stirling declined to give pricing details on a Boeing system because each owner has different specifications.

He said, however, that some Hollywood studios--he did not name names--have agreed to pay a digital distribution fee to Boeing to help offset installation costs.

That helped solve one major issue of theater owners who argued the studios should foot the entire bill because they gained the most by the reduced cost of distributing films.

Still, digital cinema does offer owners the not-yet-proven opportunity of using empty theaters for alternative events like showing rock concerts, sporting matches or corporate meetings.

Stirling said Boeing's contract often calls for revenue sharing if owners are able to boost sales with its system.

He added that the history of Boeing's various units in operating satellites and in processing highly encrypted data for the government as a defense contractor helped convince the studios that Boeing could thwart digital movie pirates.

Boeing digital cinema hopes to be among the first to tap into a market that Stirling said could be valued from the hundreds of millions to the billions of dollars in years ahead.

Nobody really knows the eventual size of the market, but what everyone seems to agree on is that digital cinema is the wave of the future for making and showing movies.

Boeing faces competition from a joint venture of wireless phone-maker Qualcomm Inc. and Technicolor, as well as from photography giant Eastman Kodak Co.






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