Digital Conversion Could Shut Down Small Movie Theaters

By: Brent Runyon
Published: 10/19/12

The only remaining movie theater in Falmouth may close in the coming months because of the expense of installing new digital projection equipment.

“It’s either we convert or we close,” said Brian E. Hanney, owner of the Falmouth Cinema Pub at the Falmouth Mall. Converting means buying digital projection equipment to replace 35-millimeter film projectors at a cost of about $65,000 per theater screen. New equipment for all four theaters at Falmouth Cinema Pub would cost $260,000.

Last week, Regal Nickelodeon Cinemas on Route 151 in North Falmouth closed because of declining revenues and to avoid the cost of upgrading the equipment.

“We’re being told that whoever doesn’t convert by the end of this year” will no longer be able to exhibit first-run Hollywood movies, Mr. Hanney said. “It’s either make the investment or close the doors.”

The conversion deadline has been discussed for years, but is finally imminent, Mr. Hanney said.

Apart from the cost, the conversion process is fairly easy and takes about one week, Mr. Hanney said. But whether that investment is worth the long-term payoff is a question he still has to answer.

Sometime next year, Hollywood studios that distribute movies to theaters will phase out celluloid film prints, he said. “They’re not going to be making 35-millimeter prints anymore,” Mr. Hanney said, referring to the physical film that runs through projectors that has been exhibited in the same way for over 100 years.

Entering A New Era

Nationwide, about 64 percent of the 5,732 movie theaters have already converted to digital projection, said Patrick Corcoran, director of media and research for the National Association of Theater Owners. Those theaters comprise about 80 percent of the 40,000 screens in the country, he said.

Many of the remaining theaters already have deals in place to convert to digital projection, but others will likely close, Mr. Corcoran said. Exactly how many theaters will close is impossible to know, he said.

Converting to digital distribution saves the movie studios about $1 billion every year, so the studios are contributing through financing plans which will cover about 70 percent of the conversion cost, he said.

Locally, movie theaters at Mashpee Commons, Cape Cod Mall, and the Cape Cinema in Dennis have already converted to digital cinema projectors.

Thomas Tsakolos, owner of Heritage Theaters in Sandwich, has upgraded two of the eight screens at his theater to 3-D digital projectors at a cost of $200,000 and plans to upgrade two more at the beginning of the year.

“I don’t have a choice, I’ve got to change,” he said. “You’ve got to go with the flow, otherwise you’re going to stay behind. Welcome to America.”

Already, some films are only offered on the digital hard drives that are a little bigger than a deck of cards. Those drives are loaded onto a computer server and projected through high-powered digital projectors onto the screen.

Regal Cinemas spokesman Russ Nunley said the company will convert all of its 522 theaters and 6,610 screens to digital projectors before the end of the year.

Converting the Nickelodeon was not worth the cost, he said. Regal still owns the 9,600-square-foot Nickelodeon building and 2.94 acres of land, and is selling it for $575,000.

For the theaters that have already converted, Mr. Nunley said, one advantage of the new digital cinema projection is the quality of the image compared to the traditional film, which can scratch easily. “It is a pristine presentation each and every time it plays,” he said. “It plays just as well on its one hundredth showing as it does on its first.”

One reason that film distributors are pushing theaters to convert is the high cost of shipping the heavy cans of 35-millimeter film around the country. The lightweight hard drives can be produced and shipped at a fraction of the cost, he said.

Smaller Theaters Being Lost

One result of the conversion trend is that smaller theater chains that cannot afford to purchase the new equipment are being purchased by larger ones, Mr. Nunley said.

Eric Hart, the owner of the single-screen Cape Cinema in Dennis for the past 27 years, upgraded to digital cinema projection last year at a cost of $85,000.

The theater still has 35-millimeter projectors to display films only distributed in that format. But the majority of independent movies today, including foreign films, are now distributed on the digital hard drives, he said.

The cost of producing a digital hard drive is about a third as much as producing a 35-millimeter print, he said. “You can make the hard drive and distribute it to the theater for about $500,” Mr. Hart said, while the cost of each 35-millimeter print is between $1,500 and $2,500. “You could put a film on 1,000 screens for a third of the cost,” he said.

The hard drives are also reusable, he said, which saves the movie studios money over time. But it is unlikely that customers will see a drop in ticket prices, Mr. Hart said, especially with the cost of upgrading the equipment.

Mr. Hart said film companies are offering financing plans for theater owners by offsetting the cost of the projectors against the savings from the digital projectors. But he chose to finance the cost of the new equipment himself to avoid paying fees.

Other theaters are trying different ways to pay for the conversion. The Coolidge Corner Theater in Brookline has started a fundraiser to convert all of its theaters before the end of the year, which will cost about $223,000.

As for the customers who enjoyed the art house movies and foreign films that filled the screens at the Nickelodeon for most of the past 40 years, Mr. Hart said the most popular films will likely play at the other local theaters.

Some multiplex cinemas played “The Intouchables,” a French film with subtitles, this summer, he said.

But Mr. Hart said he thinks it is unlikely that the Nickelodeon Cinemas or another art house cinema will reopen in Falmouth or the Upper Cape. “The Nick was really struggling and has been struggling for the past 10 years,” he said. The theater also closed for nearly five years in the early 1990s.

Nationwide there are not many new movie theaters being built, he said. There is a trend toward opening new nonprofit visual and performing arts centers that screen art-house style movies, and also exhibit projections of operas, theatrical productions from elsewhere in the country along with live music and theatrical performances.

Someday the Cape Cinema will transition into that business model, he said. They already screen productions of the Metropolitan Opera and the National Theatre through the digital projector. “Eventually, the Cape Cinema is going to become a visual and performing arts center,” he said.

In Falmouth, there are other ways to see the types of films once offered at the Nickelodeon, said Judy Laster, director of the Woods Hole Film Festival.

“We’re actually increasing the number of screenings to weekly at the Captain Kidd and monthly for the Cotuit Center for the Arts,” she said.

The Woods Hole Film Festival will try to fill in some of the gaps left by the closing of the Nickelodeon, she said.
There is still a desire among people in Falmouth to see those films, she said, and also to see them communally rather than in front of television screens in their homes.

The Woods Hole Film Festival does not have the expense of upgrading equipment because it does not present films in large-screen format. They have direct access to the filmmakers and project the films from Blu-ray discs rather than the digital projectors used at movie theaters.