business news in context, analysis with attitude

by Kevin Coupe

Among the things that I love finding for this space are instances when fundamental changes take place in industries … changes that perhaps might not even have been expected just a few years ago.

Just such a case has been highlighted by the Los Angeles Times, which reports that Paramount Pictures has informed theater owners around the US that Anchorman 2: The Legend Continues was the last movie that it will release in 35-millimeter film. The Wolf of Wall Street, the studio's holiday release, was released only in digital format.

The story notes that "Paramount’s move comes nearly a decade after studios began working with exhibitors to help finance the replacement of film projectors with digital systems, which substantially reduce the cost of delivering movie prints to theaters.
In addition to relying on digital hard drives, theaters are installing satellite systems to digitally beam movies into cinemas. That could significantly lower the cost of delivering a single print, to less than $100 from as much $2,000.

"Digital technology also enables cinemas to screen higher-priced 3-D films and makes it easier for them to book and program entertainment. As a result, large chains have moved quickly to embrace digital technology: Ninety-two percent of 40,045 screens in the U.S. have converted to digital, according to the National Assn. of Theatre Owners."

Of course, this means that eight percent of the nation's theaters now cannot show Paramount films. (This means, for example, that they can't show any new Star Trek movies.)

The Paramount decision is seen as significant because it now seems more likely that other studios will do the same thing, now that Paramount has given them cover. Some are suggesting that by 2015, film - at least when it comes to major releases - will be a thing of the past.

The Times notes that there is a certain irony about the timing, since Martin Scorsese, director of The Wolf of Wall Street, has been an enormous advocate for film preservation … and now, it is his movie that is blazing the all-digital trail.

The central business lesson here, it seems to me, is the importance of recognizing that technology was changing what many would have seen as one of the industry's core values, and then embracing that change with investment dollars. It ends up that film is not what makes film special … and that content may be more important than delivery systems. What makes movies like Philomena, Inside Llewyn Davis, and Nebraska special is not how they are projected on the screen, but the direction and the writing and the performances and the music and all the other work that goes into crafting such works of art.

But one other point. This shift works against small independent theater owners, which are less able than the big chains to convert to new technologies. And I can tell you that more often than not, I will drive past a dozen or more movie screens to go to the great Loew's/AMC multiplex in Port Chester, NY, which is the best place in the region to see movies. But … I also can tell you that there are weekends where we will go to the Garden Cinema, in Norwalk, CT, a smaller, dingier theater where old-fashioned film projectors are still used … and we go there because the Garden generally has smaller, more specialized releases that don't do enough business to be interesting to the bigger guys.

Content matters. Having a differential advantage matters.

That's the real lesson that every business needs to remember.

It is an Eye-Opener.
KC's View: