We're About to Lose 1,000 Small Theaters That Can't Convert to Digital. Does It Matter?

Michael Hurley owns the Colonial Theatre in Belfast, Maine as well as the Temple Theatre in Houlton, Maine. He runs a website for movie theater owners and is a member of the National Association of Theatre Owners. And he’s desperate.

Like many theater owners, Hurley sees a very real possibility that nearly 20% of all theaters in North America will disappear because they can’t afford digital projection — but what he doesn’t see is anyone talking about it. He wrote Indiewire recently and asked if we could help and we’re hoping that this editorial will be a start.

We also want to know what you think. In a VOD world, does it matter if we lose up to 1,000 theaters? And if it does matter, we’re in also in a Kickstarter world — so what could be done to change it? — Indiewire Editors

Read an update to this article: Studios Abandon Film, Small Theaters Struggle — And There’s a Happy Ending

If the transition to digital projection was “Titanic,” it would swiftly proceed to the crew making the following announcement: “Will the wealthy and strong please step into the life boats. Will the weak and poor, most of the women and children, please step back away from the lifeboats and have a nice day.”

Need more movie metaphors? The towering bridge that theater owners must cross to reach digital cinema is on fire. The dam is springing leaks and about to fail. Take your pick: The 35mm bridge between distribution and exhibition is about to collapse, burn or blow up. Left behind will be thousands of theaters worldwide.

“Convert or die.” This is how John Fithian, CEO and president of the National Association of Theatre Owners, has repeatedly set the terms. It’s crude, but at least we knew where we stood. The conversion stampede was on.

And it worked. Many theaters that never thought they’d go digital are now adopting at a fast pace. One of my theaters, The Colonial Theatre, will be 100 years old in April. We’re in the midst of conversion; I accept and embrace that day. Every time I see platter scratches, or receive a scratched and dirty print, or deal with a particularly odd projectionist, I look forward to it more and more.

But it hasn’t happened fast enough. At the end of 2011, Fox announced they’d no longer release product in 35mm “sometime in the next year or two.” Also ending soon: The VPF, or virtual print fee. Since 2009, film distributors have paid VPFs to exhibitors. Based on the difference between the cost of a celluloid print and digital delivery, it’s designed to help theater owners offset the cost of a digital cinema retrofit, which costs about $65,000 at the low end. (A new projector, by comparison, was about $20,000 — but that was before you’d pay people to take them away.)

The VPF has helped some, but not all. As a result, NATO recently estimated that up to 20% of theaters in North America, representing up to 10,000 screens, would not convert and would probably close. “Convert or die,” indeed. And that’s from someone representing theater owners.

This isn’t the first time technological evolution has hit the film and exhibition industry, but in the past the development of new equipment was steady, orderly — and slower. That meant as early adopters grabbed the latest contraptions, there was a healthy market in used equipment for the smaller and less-profitable theaters.

However, small towns developed their theaters back when everyone went to the movies all the time; many theaters in operation today could never be built with today’s costs and the slowing pace of theatre goers. And for all of Hollywood’s so-called love for small towns and the dreams that grew out of the thousands of theaters as films unreeled, there’s been an abysmal deafening silence on their impending doom.

Someone asked me, “Why does it matter?” It’s an excellent question. Does it matter that a thousand small theaters may close in the USA? What would be lost?

I think of the millions of dreams and careers that have taken flight in a movie theater. I know that the economic development power of movie theaters has been profound. People want to live where there are theaters. For the same reason that every successful city center, mall and downtown works to attract and keep a movie theatre, small towns all over the world stand to lose a foundation that has kept them connected to the world. I believe the loss is unacceptable.

However, the brain trust in Hollywood seem committed to playing a game of diminishing exhibition returns and appears ready to write off huge swaths of the ticket-buying public. You can bet that the same people who spent $150 million to make “Mars Needs Moms” have crunched the numbers and believe they can live with a lot fewer theaters in this world.

Other countries handle this differently. In some, the conversion is a national priority paid for by government grants. But here, if you have a historic theater the equipment does not even qualify for tax credits.

I wish I could see where this is going and how it will all play out. The pace is fast and will not slow. At a very near point if you do not have digital, you will not show a movie. There will be tightening pressure. Knowing all the government players involved, I cannot see how the film industry working in cooperation with NATO, both of whom you’d suspect might benefit by a creed of “leave no theater behind,” will instead be allowed to kill off thousands of theaters and screens.

I can imagine (and hope for) state-level, even national antitrust action as the scale and certainty of mass theatrical extermination starts to become clear. For now, it’s a thousand brush fires that people are fighting individually. What happens when they start to fight together?

Digital cinema has great promise that’s being realized. It cannot be that as we take this great leap forward that we leave behind so many.

If this was a movie… Remember “Independence Day”? Bill Pullman plays the President and asks the alien, “What do you want from us?” And the answer was, “Die.” That’s the level of options faced by many of our fellow theater owners as they deal with the distributors, our “convert or die” representatives, the expiring VPF, the lack of any used equipment and all the varied powers driving this digital train.

Someone ought to change the ending to this movie.

You can find Mike Hurley at his site, BigScreenBiz, and at mike@pilut.com. A version of this editorial will also appear in the March print edition of Screentrade.





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