Digitalization can bring back profits to the cinema industry. It seems hardy disputable that digital filming leads to movies of a better quality with the potential to have more frames per second (48 to 60 instead of the traditional 24fps). As the transfer of data (4K) is extremely high, due to the high image and sound quality, viewers will prefer to benefit from this in a venue which can support this quality (instead of piracy or waiting for the tv/dvd conversion). In addition to this, James Cameron states that digital filming renders the process easier to use and more maleable for edition. This frees the editing process, making it less restricted on producers to make a movie like they imagined. The icing on the cake is that digital filming is cheaper than regular (and especially 35mm) filming. This is extremely beneficial to independent producers, and increase the competition with the mega-studios who now control the cinema industry. In oder for this to be successful, cinemas have to play the game and invest in the proper technology. The main problem with shooting a movie at a 48fps rate is that the regular cinemas only have the capability to show it at a rate of 24fps. This creates lag in the movie, and disrupts the experience for the user. Investing in digital technology, as James Cameron states, goes hand in hand with THX and the sound quality model they have innovated and build upon for the past years. Moreover, digital hard drives are much more durable than film, which gets scratched and jittery due to physical deterioration. In addition to all this, as digital renders filming cheaper, it should, in theory, render screening cheaper too (once the sunk costs of equipment has been taken into account), as well as transport costs (one hard drive instead of the usual 6 rolls of 35mm film). Cinemas could then increase their revenues or/and give customers better rates.
Cinema revenues can be divided into three stages: snacks and beverages, advertisement, and the movies themselves. Needless to point out that movie theaters sell their snacks and beverages at a very high margin. Advertisement occurs before the showing of movie, and cinemas have squeezed out profits by negotiating 'trick' start times and ear-blasting volume for their advertisers. What is really interesting, however, is the profit margin cinemas make on the tickets sold for the movies. It would make sense that, as this is the main offering in the industry, the higher profit margin would come from that product. Well, this is not the case. It would seem that cinemas, through their deals with the studios, usually make a 50% markup on the tickets. This would be rather healthy if only most of this revenue was not eaten up by maintenance. One way to increase revenue is to cut costs, and this is where digital comes in to save the day. As previously stated, digital is cheaper to acquire, transport and maintain (and is more durable) than film.
For more info, check out:
Digital Cinema Report:
http://www.digitalcinemareport.com/node/2334
A peek into movie theater economics:
http://arstechnica.com/old/content/2006/01/5905.ars
The popcorn palace economy:
http://www.slate.com/id/2133612/
James Cameron on Digital Cinema:
http://www.youtube.com/watch?v=qn5oCA8YVYs
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