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Hollywood's digital push a boon for Kitchener factory

For more than a century, a film reel running through a projector – the rapid, steady flick-a-flick-a-flick like the noise of a baseball card in a child's bike spokes – has been the sound of the cinema. But now it is fading out.

Canada's two largest theatre chains, Cineplex Inc. and Empire Theatres Ltd., have committed to switching almost all of their screens to using digital projectors over the next year and a half. By the time the Christmas season blockbusters are released in 2012, the old mechanical film projectors, and film itself, will be a rarity at most multiplexes.

The switch to digital is already under way in many other countries, and is about to pick up speed as lower-cost, higher-quality digital movie prints become the norm. The push toward digital comes straight from Hollywood: the biggest studios recognize the value of paying less than $100 for each digital movie print as opposed to film prints, which cost more than 10 times as much. Because of that, they're kicking in the price of the new projectors so that theatre owners adopt the cost-saving technology more quickly.

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But while the end of celluloid may be a sad turn for some film buffs, in one corner of Kitchener, Ont., it is very good news indeed. That's because many of these new digital projectors are rolling off a Canadian assembly line.

"We've invested well over $100-million over the years in developing different platforms, the marketing, engineering, everything … to now be able to roll out digital cinema globally," says Gerry Remers, the president of Christie Digital Systems Canada Inc.

Christie is owned by Japan-based Ushio Inc., but the engineering and production of the equipment happens here, and has deep roots in Canada. The Kitchener facility was formerly owned by a Canadian company that spanned most of the 20th century: Electrohome Ltd., which started out making phonographs in 1907, and later made its name in broadcast TV and in manufacturing television sets.

Electrohome invested in digital projection in the nineties, licensing technology from Texas Instruments Inc. with the thought that digital might be the way of the future. In 1999, as part of the long winding-down of Electrohome, its projection business was sold to Ushio, which had also bought a California manufacturer of mechanical film projectors called Christie. The old Electrohome plant now buzzes with activity; these days, Christie Digital ships roughly 900 projectors a month.

The company is now fighting to dominate the global transition to digital movie projection. It estimates there are roughly 140,000 movie screens around the world that could be digitized, of which more than 50,000 have switched already. Just under half of these have Christie products in the projection room.

In one part of the plant, staff test projectors that have just been built to make sure they're operating correctly. They have to watch hours of movies to do it.

"We all know Avatar, word for word," technologist Rose Murphy says.

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Christie owes a lot of its business to the James Cameron epic (even if Ms. Murphy is asking her boss for a copy of Transformers 3, just for a change.) The new 3-D technology only works with digital projectors, and many theatres began installing them to meet the demand for the multidimensional blockbusters of the past year and a half.

The arrival of 3-D was a boon for theatres because they could charge a premium on the ticket price, helping to offset the cost of the new equipment. But the full switch to digital projection was held up at first by the question of who would pay for it. Since the cost savings go entirely to the studios, the theatre chains argued they shouldn't have to foot the bill for new projectors that cost between $40,000 and $60,000 apiece.

But in 2005, the studios happened upon a solution: the "digital print fee." That means the theatre chains install new equipment with money lent by finance partners. The film studios, which have the most to gain from the digital switch, pay back the cost over time. Empire and Cineplex are now using the "digital print fee" model to fund their digital rollout.

But there are benefits for the cinema owners as well. Digital prints come in a single hard drive rather than unwieldy, heavy film cans, and can run in multiple theatres off one server. For high-demand movies, the theatres used to have to do what they call "yo-yoing," showing the same movie seconds apart in two theatres by feeding the film reel through one projector and into the other projector for the auditorium next door. With digital, they can now stagger show times more freely. And the quality is much better – digital doesn't scratch or wear down over time.

"A brand-new 35-millimetre print v. a digital print, it's very hard to decipher the difference … but when you go to the 200th showing of Harry Potter, it's going to be a big difference," said Cineplex chief executive officer Ellis Jacob.

For its rollout, Cineplex will use Christie machines at its approximately 1,300 screens. Empire has gone with the company's Belgian competitor, Barco.

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The technological change has made the 300,000 square-foot plant in Kitchener an unlikely sight: a thriving centre of manufacturing peopled with unionized workers, that to this day has not been shipped overseas.

"Print costs have been an issue for 100 years. … In a five-year time frame, that's going to be gone," Mr. Remers says. "We're changing the industry dynamics, forever."

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