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Small theaters struggle as Hollywood goes digital

Associated Press Modified: September 6, 2012 at 8:16 am •  Published: September 6, 2012

CRETE, Neb. (AP) — The Isis Theatre hasn't changed much since it opened 86 years ago in southeast Nebraska, a stone's throw from the grain elevator and railroad tracks that cut through town.

But in the past few years, the movie industry has changed dramatically, and unless the Isis' owner comes up with $85,000 soon to pay for new digital equipment, residents of Crete, Neb., may have to drive 40 miles to Lincoln for a night at the movies.

It's a prospect that owner Thom Reeves doesn't want to ponder, but like thousands of small-theater operators across the country, he hasn't found a way out.

"This is my passion, to give back to the community," Reeves said. "I love this movie theater. I love what it does for the students I have employed there. We love our patrons. It's such a positive experience going on, and we're just a little sad this conversion is hitting us. How do we survive?"

For small-theater owners, the problem is the sudden switch from 35 mm film, an industry standard since about 1910, to digital — a format that's cheaper for both studios and distributors, and doesn't scratch as traditional film will. The switch means theater owners must buy new projection equipment, computers and a sound system.

Film studio 20th Century Fox has said it will phase out 35 mm film altogether by the end of 2013, and other production companies are expected to follow suit. Traditional film is expected to vanish over the next few years, despite the upcoming U.S. release of "The Master," which was shot with the rare but much higher definition 70 mm film.

Big chains can afford the digital transition, which can be cheaper when buying in bulk for multiscreen theaters. But those who own smaller theaters with one or two screens typically must take out a bank loan to pay for the equipment.

A film industry program can refund up to 80 percent of the cost to theater owners, but the payments are made gradually through fees based on the number of movies shown. To qualify for the help, theaters must have certain profit levels and show a minimum number of films, leaving many small operators without help.

Some small, independent theaters created a cooperative, the Cinema Buying Group, to pool their resources and participate in the industry program, but the cooperative also required a review of each theater's financial strength and other factors. Many of the smallest theaters didn't qualify or were hesitant to join.

Patrick Corcoran, a spokesman for the National Association of Theatre Owners, said costs of converting to digital average around $70,000 per screen. About 60 percent of the nation's 5,750 theaters have switched to all-digital equipment, he said.

The switch to digital began with the 1999 release of "Star Wars Episode I: The Phantom Menace," and accelerated with such computer animated films as Disney's "Chicken Little" and the 2009 Hollywood blockbuster, "Avatar," Corcoran said.

"In some markets, it's going to be a tough climb," he said. "But if you want to be in business as a first-run movie theater, you have to go digital."

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