The choice facing Minnesota's movie theaters is clear. Rewire or retire.
The whirring mechanical equipment that has projected films for the past century is about to go extinct. Taking its place is a suitcase-sized digital system that costs $70,000 to $85,000, four times as much as a mechanical projector.
By the end of 2013, the six major studios will release new titles in digital format only. There will simply be no new 35-millimeter studio releases to project.
With every revolution comes some bloodshed. The extensive, expensive task of going digital means that many small theaters and some chains will fall victim to changing times and technologies. Some industry observers estimate that Americans will lose one-fifth of their cinemas, about 10,000 screens. John Fithian, president of The National Association of Theatre Owners puts it bluntly: "Convert or die."
The cost of outfitting 15 screens with all new digital equipment was among the complex of issues facing the 10-year-old AMC Block E. Minneapolis' only downtown movie theater will close in September.
This is probably the final summer for the Cottage View, one of the last two drive-in theaters in the Twin Cities. Steven Mann, whose locally based theater company operates the Cottage Grove landmark, said he doesn't plan to retool it.
Mann completed work on the St. Louis Park 6, the last of his complexes to go digital, in early August. The tab for converting his 10-theater chain was a daunting $4 million. And it won't bring in additional revenue at the box office, he said.
Joe Minjares, owner of the Parkway Theater in south Minneapolis, is caught in the now-or-never squeeze and uncertain about the future.
"I'm at a loss," he said. "The economy being what it is, getting any kind of funding is difficult. Maybe we can get vault prints from the studios and show old movies, but I'm not sure what the market is for that."
Savings go to the studios
The push for digital began five years ago with the new wave of 3-D movies, gained momentum with the success of 2009's digitally filmed blockbuster "Avatar," and now has taken on the momentum of a tsunami.
Underscoring celluloid's imminent demise, the home of the Academy Awards, once called the Kodak Theatre, was renamed the Dolby Theatre in May following the film manufacturer's bankruptcy.
Digital brings subtle improvements -- brighter projection, no more scratches or blemishes on the image, no melting film to stop the movie -- but the average consumer won't notice much difference in presentation quality.
Cost-focused film studios pushed the conversion process. By one estimate, studios spend $850 million a year making film prints and $450 million getting them to theaters. Studios were eager to stop delivering 80-pound canisters of perishable celluloid in favor of hard drives the size of a paperback book that cost about $100 to ship. Digital distribution also offers anti-piracy controls to keep films from being copied and sold illegally.
"It's always been about the studio. For the typical film, digital is neither necessary nor desirable," said Ted Mundorff, president of Landmark Theatres, the nation's largest independent chain.
Part of the sales pitch has been the promise that exhibitors could use the new gear to present video programming. "Maybe you broadcast the Academy Awards, the NCAA basketball tournament, the World Series," Mundorff said. "But it won't outweigh the cost. I can show a lot of NCAA and still not make up for a $350,000 conversion" for a multi-screen theater.
While studios offer financing agreements to defray a portion of the changeover expenses, "they really don't care if single-screen theaters go away," said Tom Letness, owner of the Heights Theatre. The 86-year-old Columbia Heights showplace, with its vintage Beaux Arts décor and Wurlitzer organ, is the Twin Cities' longest continuously operated cinema. Letness recently converted to digital, but he doubts the new systems will last more than 50 years, like some of his classic reel-to-reel machines.
"This theater has been through sound, different film formats, Cinemascope" and the tinted-glasses 3-D craze of the 1950s, said Letness, a film history buff who maintains a variety of specialized projectors to show films, from restored Vitaphone talkies to 70-millimeter widescreen extravaganzas.
Bigger exhibitors got a break
During the industry's earlier innovations, change was slow; the switch from silent to talkies lasted from 1926 to about 1932. Smaller, less profitable theaters could buy used equipment from early adopters. In the current scramble to retrofit before next year's deadline, it's every exhibitor for himself.
Multiplex cinema chains, which converted early, had an advantage in replacing motors and gears with transistors and chips. Each time they showed a film, they'd receive a partial equipment subsidy, called a Virtual Print Fee, paid by movie studios to encourage the switch to digital. The program favors bigger exhibitors because they show more first-run movies. With those payments, theater owners could recoup much of their equipment investment over seven to 10 years. The VPF will end soon, and exhibitors who are not on board will find their options limited to old films or niche independent fare.
Landmark, which operates the Edina, Lagoon and Uptown theaters, has outfitted all of its local screens with new projectors, but Mundorff predicts that marquees will go dark on smaller cinemas that served their communities for generations.
"If you're a mom-and-pop theater owner in Tattoo, N.D., you've got yourself a problem," he said. "It's a very scary moment for independents."
Minnesota has about 200 mainstream movie theaters. Half of those are one- or two-screen affairs with razor-thin profit margins. For the first month or two of a film's release, the lion's share of money from ticket sales goes to the movie studios, while the theaters are sustained by popcorn and soda sales.
One theater's solution: a tip jar
At a time when bank loans are hard to land, many theater owners are using innovative strategies to finance the new equipment. The Parkway's Minjares is considering a Kickstarter social media campaign to collect Internet pledges. Some outstate theaters have sought tax-increment funding or reorganized their finances, taking contributions as nonprofit organizations.
Others have reached out to the communities they serve. Last fall the single-screen Jem Theatre in Harmony, Minn., 150 miles south of the Twin Cities, turned to the town's 1,080 residents for help with its $75,000 upgrade.
A plastic juice jug on the concessions counter raised more than $7,000 from customers. Owners Paul and Michelle Haugerud found a near-new projector for $55,000 and a local bank agreed to finance the balance. Additional support came from a private community development agency, a philanthropic trust and a fundraiser at a local bar and grill. The effort was so successful that the theater's debt was retired this spring.
"It's taken me a long time" to accept the necessity of investing in new equipment, but that's what you've got to do," said Loren Williams, owner of the discount second-run Riverview Theater in south Minneapolis. He began experimenting with digital media a decade ago, showing local filmmakers' work on DVD digital projectors. He plans to upgrade his system to conform to the new studio standards soon.
"It's the cost of doing business," Williams said, comparing it to the expense of a new heating-cooling system. "Fortunately, we're not operating on the edge, so we'll get by. "
Colin Covert • 612-673-7186