Technicolor Drops Out of Digital Business By CARLOS MARTINEZ Staff Reporter Technicolor Digital Cinema, one of only two digital movie projection and equipment makers in the U.S., has decided to stop marketing its equipment and developing new technology until Hollywood’s top film studios agree on a standard for digital filmmaking. The move leaves the Boeing Co. as the sole major developer of digital film equipment for motion picture studios. Nick Dager, editor of Digital Cinema Report, a trade publication based in New York, said Technicolor wants to reduce its investments in a technology that may not have a future. “The market is drying up and they don’t want to spend any more in an environment like that,” Dager said of Technicolor Digital, adding that only a handful of Hollywood features were shot digitally this past year. Company officials say they have invested “millions” in digital technology, but even Dager is unsure how much Technicolor might have actually spent. “A few million is safe to say,” Dager said. While “Star Wars” director and producer George Lucas has been a staunch advocate of digital technology, studios like Warner Brothers and Universal have yet to see the benefit of large-scale use. “We’re still studying the technology,” said Universal spokeswoman Amanda Schuler, echoing a Warner Brothers spokesman. The decision to abandon digital technology is a setback to Technicolor’s two-year-old diversification strategy, an effort to move away from film and blank videotape manufacturing and into digital cinema, DVD and CD services and manufacturing. It remains one of the biggest videocassette, DVD and CD manufacturers in the country. Technicolor Digital is a Burbank-based unit of Technicolor Inc., which in turn is owned by media conglomerate Thomson S.A., headquartered in Paris. Thomson does not break out Technicolor Inc.’s earnings. The last year the company was independent, in 2000, it reported $216.6 million in net income on $1.52 billion in revenue. At one time, Technicolor Digital said it would install its equipment in 1,000 theaters around the country by the end of this year. Last year, the company reported it had actually gotten into 31 theaters and now it refuses to say how many of those systems are in use. According to the National Association of Theater Owners, about 80 movie theaters in the U.S. have installed digital film equipment, Technicolor Digital CEO Dave Elliott said a tough economy compelled many theater operators and film companies to abandon plans to acquire digital film equipment. Richard King, a spokesman for AMC Entertainment Inc., which operates 2,790 screens nationwide, said that, with equipment costing $200,000 and up, theater operators prefer to wait for a sign from studios before investing much of their own capital. And, Elliott said, studios like companies in other industries are not making substantial investments in new technology at the moment. He would not say how much revenue Technicolor has generated from its digital film business since it began operating last year. Boeing has continued to market its digital cinema systems across the country but would not comment for this story. Doug Darrow, business manager for Texas Instruments Inc.’s DLP Cinema, said his company is developing projectors for digital cinema, but has yet to take any products to market. He blamed the studios’ inability to come up with a standard for digital filmmaking. The major studios established the Digital Cinema Initiative LLC in 2000 to write industry standards for digital cinema, but little of substance has developed so far. Issues such as resolution quality, piracy safeguards and method of delivery remain up in the air.