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Digital deadlineSmall cinemas face big investment as projection format changes

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Assistant manager Tyler Schulley prepares to thread a reel of film from the platter system to the projector at the Ephrata Main Theatre in Lancaster County. Photo/Amy Spangler
Assistant manager Tyler Schulley prepares to thread a reel of film from the platter system to the projector at the Ephrata Main Theatre in Lancaster County. Photo/Amy Spangler

Early in “The Godfather,” Marlon Brando's character, Vito Corleone, promises to make a film industry executive “an offer he can't refuse.”

That's what Steve Brown says he faces as the movie industry shifts to digital projection.

"Basically, the studios gave the theaters no choice," said Brown, who owns the two-screen Ephrata Main Theatre with his wife, Karen.

And because the systems are so expensive, "the small-town theaters are in danger," he said.

Penn Ketchum, owner of Penn Cinema outside Lititz, disagrees.

"We don't see it as us being the victim of an inevitable migration," he said. "We see it more as an exciting opportunity to enhance the quality of our presentation."

Nationwide, the movie industry has been moving rapidly toward digital projection in recent years. Today, with the large chains such as Regal and AMC Entertainment having made the shift, the transition is "in the endgame," said Patrick Corcoran, spokesman for NATO, the National Association of Theater Owners.

About three-quarters of the nation's 39,700 movie screens have converted, Corcoran said. Sometime in 2013, the major distributors are expected to stop making film prints, he said.

For the studios, the economic argument for digital prints is unanswerable. Film prints cost about $1,500 to $2,500 apiece, compared with about $5 or so for a digital copy, Brown said.

Distributors expect to save $1 billion a year in print and distribution costs, according to NATO.

The problem is the upfront cost of digital projectors, which is about $70,000 per screen, Corcoran said. That's a big drop from the $150,000 the gear cost six or seven years ago, but it's a huge expense for small independent theaters to absorb.

Besides the Ephrata Main Theatre, the Browns own the adjacent restaurant Lily's on Main. Brown said he is talking with Ephrata community leaders about possible fundraising events to help finance the digital conversion.

"We'll have to get the community involved," he said. "Ephrata has a lot of pride."

The MoviE-Town Theater in Elizabethtown hasn't made any decisions on conversion, Manager Shawn O'Brien said. The complex has eight screens, with auditoriums ranging from 84 to 224 seats.

"For us to make the adjustment is a huge financial investment," he said.

Dan Koch, who manages the single-screen Allen Theatre in Annville, agreed about the expense but said he likes the convenience of digital systems. You can program in the movie showtimes and maintenance is minimal, he said.

"It's so easy," he said.

Penn Cinema completed its digital transition two years ago, the first theater in Lancaster County to do so, Ketchum said. The theater boasts 14 screens, including the county's only IMAX system.

The No. 1 reason for going digital is the viewer experience, Ketchum said. Film prints wear out; digital does not. People watching "The Avengers" in the last week of July saw the same pristine image quality that audiences saw on opening night, he said.

It was a conscious choice for Penn Cinema to commit early to digital, and it meant foregoing profit-taking to reinvest in the business, Ketchum said.

"We made a strategic decision that we always wanted to be at the cutting edge of presentations," he said.

That investment is paying off, he said. Penn Cinema is the highest-grossing independent theater in its designated market area, which includes most of Pennsylvania, Delaware and New Jersey, Ketchum said.

Going digital gives theaters flexibility, Ketchum said. Digital projection allowed Penn Cinema to show "The Dark Knight Rises" on all 14 screens for its midnight debut, creating a memorable event for more than 2,000 customers, he said.

Penn Cinema shows simulcasts such as Super Bowls and Metropolitan Opera performances and will be able to show "The Hobbit" this winter at 48 frames per second, twice the standard frame rate, as director Peter Jackson intends, Ketchum said.

NATO, the trade group, worked with studios to ease the changeover process, Corcoran said. Studios agreed to pay negotiated "virtual print fees" to movie theaters that convert to digital, in effect sharing some of their cost savings. The fees remain in effect for several years and can defray about 70 percent of the changeover price, Corcoran said.

However, studios will stop negotiating those fees in September, Brown said. After that, theaters will have to finance conversions on their own.

Brown said he expects the cost of digital projectors to keep dropping, especially after the fees expire. For that reason, he is continuing to delay pulling the trigger on going digital.

"We're going to ride the horse as long as we can," he said.

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