Revenge of the Nerds

By: Adam L. PenenbergWed Dec 19, 2007 at 8:11 AM

Arin Crumley and Susan Buice were just art squids with a handful of credit cards, a digital camera, and very patient parents. Now they have a (long) shot at the big time. How the digital wave gives power to the little people and reshapes the way movies reach the world.

Crumley and Buice in their Brooklyn flat.

Buice and Crumley are early examples of the millions who will flow into this filtration process. It's a process that may have some unlikely by-products of its own--possible alliances, say, between low-rent filmmakers and theater owners, who in the past have been separated by a gulf of power and influence. The rise of digital makes it easy enough to imagine a day when theater owners look to the Internet to find movies (or compilations of shorts, or animation, or any other sort of content that can be screened) to supplement the list coming out of Hollywood or the not-so-indies. Even now, they could gauge an audience's interest in advance--based on metrics such as the number of downloads or click-throughs--and deliver specialized, microtargeted content on nights when they're tired of showing Rocky VI to an empty house. Remember, Buice and Crumley's online presence translated into a packed theater, with real tickets.

Of course, there are a number of things delaying that day. It would cost about $3 billion to convert all 36,000 movie screens in this country to digital, and the process has barely begun. But as Bud Mayo, president of AccessIT, a company that offers financing and expertise to theaters looking to convert to digital, explains, delaying that process leaves a lot of money on the table. "You have a $9 billion domestic box office, and that's using 15% of available seats," he says. "If you can impose digital cinema and all its benefits, and attract 5% more customers to fill some of those empty seats, that's a $3 billion to $4 billion opportunity."

Adding to the power of the digital model is the fact that the big studios themselves stand to benefit from digital conversion. The studios now spend upward of $10 million to dispatch 35mm prints of a single blockbuster, at $1,500 per print, to the thousands of theaters across the country (and $5 million for a more modest release). A digital release would bring that number down to about $200 per movie, transmitted at the push of a button.

Within 10 years, your local cinema will probably have digital capacity (although it may retain film technology for a time, to appease the purist Hollywood directors), and this will profoundly shift the economics of the movie business. AccessIT alone plans to convert 10,000 screens by 2010, by ponying up the up-front costs. (In return, film studios pay a $1,000 fee per screen the first time a film is shown, which Mayo says would generate about $15,000 a year per screen.) AccessIT then transports the film via satellite or fiber-optic cable from a central server; theater owners could add advertisements or trailers, track concessions, and even monitor lights remotely. They would have the technical capability to change their lineup on the fly, substituting 3-D rock concerts, video-game competitions, religious revivals, World Cup matches, versions of a movie dubbed in Chinese or Spanish, or indie efforts like Four Eyed Monsters.

"The studios are afraid of the loss of control that digital sets forth," says Ira Deutchman, president and CEO of Emerging Pictures, another company that converts theaters to digital. "Once you have digital equipment, exhibitors can play whatever they want on a given day. This changes the balance of power between exhibitors and Hollywood." Standing between the studios and the theaters, however, are the distributors, and they still wield enormous clout. "If a theater pulls a movie before the contract stipulates, it's going to have a problem," says David Zelon, head of production for Mandalay Filmed Entertainment. "It's worse than getting sued: You won't get the next big picture."

Zelon says Hollywood studios aren't losing any sleep over the ascendance of digital filmmaking or its ancillary benefits to small-scale indie directors. "Every once in a while, you'll get a My Big Fat Greek Wedding or The Blair Witch Project. But you really need a studio-marketing campaign. At the end of the day, you need stars, because the first question people ask about a film is, 'Who's in it?'" he says. "Without mass marketing, you won't capture the attention of a mass audience, and the Internet is not a viable way to attract a mass audience."

Famous last words. But even if Zelon is right, that doesn't make movies marketed and distributed over the Web negligible. If 85% of a cinema's seats lie fallow every year, a hundred smaller movies that attracted a following would become a force, while a thousand events--from films to sports events to rock concerts--could represent a revolution. How long could theater owners turn their backs on that kind of upside? If they caved, how long could distributors afford to with- hold their films, especially as more theaters joined the digital ranks? And perhaps most important, how long would studios back distributors in that battle if they could deliver their films directly to theaters in a few minutes, for a fraction of the cost?