Las Vegas – There was a lot to digest at the recently concluded Showest convention, ranging from matters of life and death (digital conversion, access to diverse movies) to the frankly frivolous (healthier snack foods). On balance, one left with the sense that at least the distribution sector was 1) on relatively stable economic ground and 2) aware of potential problems ahead and taking preventative measures to blunt future turbulence.

The event has long been associated with a lot of phony tinsel. At one time the majors orchestrated lavish meals with the crème de la crème of movie royalty in attendance and the goody bag distributed to delegates was brimming with pelf. That’s seriously been pared back to not quite austere realities.

Oscar Levant said of Hollywood that once you stripped away its phony tinsel, you found the real tinsel underneath. The observation is not without foundation; one might even say that it’s bred into the very fabric of the industry. Still, for those willing to hack through the jungle of tinsel, there was something of substance to be discovered.

If there was any doubt of the primacy of the digital experience (particularly the 3D kind that’s spurred Avatar and Alice in Wonderland to record breaking heights), certainly the likes of Christie, Technicolor and Sony were there to remind us all. A veritable torrent of emails streamed in announcing sales, demonstrations and the like and to make the have nots anxious to get on board.

There are presently about 7,900 3D screens in North America (3,800 with 3D capacity) and they provide a very disproportionate amount of the box office for the aforementioned blockbusters and really all the digital 3D movies that have sprung up in the past three years. To be more precise, 22% of the screens are providing half the box office for these films and the added bonus is that theater owners can charge ticket prices about 50% greater than for conventional films.

It also means that there are an awful lot of theaters that don’t have digital, especially those operated by folk with fewer than 20 screens in their arsenal. One of those small fry told me he was shopping around for digital projectors. He wanted the absolute best viewing experience and added that he had no idea where he was going to get the financing (as high as $100,000 a screen) to install in even a single auditorium.

The industry has one initiative called the virtual print fee in which distributors pay an amount toward each digital print as a means to defray theater owner costs of buying projectors. However, you don’t get it unless you have the equipment which is a bit of a Catch-22.

That’s led to the National Association of Theater Owners to form the Cinema Buying Group specifically for independents with limited screens and financial resources. They met in closed session on the last day of Showest to address obvious survival issues. It was the biggest single meeting of the event with close to 300 attendees.

In the event that solutions prove frustrating, the landscape will be dotted with a lot of Last Picture Shows in the future. “Some people aren’t going to make it,” admitted NATO president John Fithian. “But it’s an issue we’re addressing now and that gives us time to take serious action.”

Fithian thinks it might be five to eight years before film distributors stop making 35mm prints. Another exhibition exec pegged it more in the range of 10 years in the offing, factoring such details as actual production capacity, maintenance issues and the great unknown – new developments and retro-fitting.

“What’s the tipping point,” asked one distribution exec. “We’re at 20 percent now, but what happens at 40% and 60%. At a certain point we won’t have the volume to maintain present discounts on prints with the labs. Our price per unit will increase and that cost is going to be passed on to the exhibitor. Some are going to be in a real financial vise.”

Technicolor debuted its 3D digital projectors in the midst of Showest with the come-on that it was cheaper (it’s offering a three-year lease program) and of high quality. The latter claim was debatable. Presentable might be a more apt description and that might be a sufficient compromise for the moment for those that want digital capability as soon as possible. But where does it leave cinema owners when the lease expires? Presumably when that window closes Technicolor will have developed a more quality competitive system … and perhaps not.

Sony Pictures Chairman Michael Lynton provided the event (unintentionally) with its most amusing running gag. Lynton gave the opening luncheon keynote address that was largely fueled with gung ho rhetoric about theater owners being the most important ally of the studios (“the farmer and the cowhand should be friends”) Then, abruptly, he switched gears and focused on how his closest allies ought to be stocking their candy counters with more healthful alternatives. He cited alarming statistics on childhood obesity, studio conducted polls, initiatives through government programs in a thorough-going, heartfelt plea to bolster his cause. Lynton suggested fruit, yogurt, trail mix and healthy drinks as possible menu items.

“Every couple of years the Center of No Fun comes up with a report about how bad popcorn is,” chimed in theater owner Tony Kerasotes a couple of hours later at a panel. And everyone from Fithian to Motion Picture Association of America Chairman Dan Glickman at the very least viewed the concession stand issue as a non starter; some felt Lynton had over-stepped his bounds, others that alternatives existed and they weren’t about to dictate what patrons chose to buy.

“I’m willing to look at the issue,” said a senior executive with a major chain. “I’d just ask that Mr. Lynton address our concern about studies that show that cell phones cause brain cancer – particularly the ones from Sony Ericsson.”

No such levity was accorded the “windows” imbroglio that recently came to a head when Disney announced an expedited release in ancillary mediums for Alice in Wonderland. Fithian attempted to downplay its importance by noting that a resolution was reached quickly in which latitude will be given for “limited exceptions.” In English, it allows event pictures released during traditionally slower movie going periods (think March and September) to be able to get those films out on DVD for peak sales periods in the summer and holiday periods.

The truth is that a quickened DVD release is, by most accounts, just a peak under the lid of Pandora’s Box. Apart from the fact that exhibition (and other sectors) simply does not trust Disney chairman Bob Iger, there are greater concerns about the impact video-on-demand could have on movie going. Lynton detailed in his address how a switch from buying to renting DVDs (credited to the current economic recession) had devastated that revenue stream. In 2009, theatrical box office exceeded DVD rental and sales for the first time in five years.

Iger has already indicated he will present a proposal this year to the FCC that would allow Disney to stream directly into homes in HD. At this point what and when has been left vague and that makes a lot of people nervous. NATO is girding to ask some hard questions when the proposal finally has some form and Fithian seems palpably concerned that without specifics into could glide through the Committee.

Certainly part of the trepidation stems from the template created by IFC and Magnolia that has evolved into simultaneous or near simultaneous release of alternative movies in theaters, VOD and DVD. With rare exception those films rarely gross more than $1 million theatrically.

Fithian attended Sundance for the first time last year and prepared a study about the theatrical box office of independent film. The results clearly demonstrated a slow but consistent decline in revenues during the past decade and his concerns are both that it not be replicated in the mainstream and that something be done to bring back alternative and adult movies.

“We need diversity in the marketplace,” said Fithian. “Without it there can not be growth in movie going.”

March 23 , 2010

– by Leonard Klady

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