Monday, January 6, 2014

Will 2014 be the year that the independently-owned film theater dies?

2014 is a year that will change the dynamics of downtown forever. From here on out, first-run films will only be distributed via digital cinema projection, or DCP. So if your local theater does not have digital capability, which according to a recent NYTimes article ["Small Theaters in Adirondacks Face Choice in Switch to Digital: Pay or Perish",12/25/13] costs $65,000 per screen, staying in business will be nearly impossible.
The Central Cinema in Seattle successfully launched a Kickstarter campaign
and raised over $60,000 from over 1,000 backers. 

Economic Impact on Downtown's
Simply put, if a theater does not make the transition, they will not be able to show films. And without films, there is no potential for revenue. As one crowdsource campaign to fund digital projection for the Rialto Theatre in Grayling, MI put it, "We have a simple choice: convert to digital projection or close."
These closures can be the death knell of a local commercial district. These theaters not only show films, they are also important community gathering places, hosting many community events and activities year round. Yet changes the change in film distribution will affect many independently-owned theaters, but the statistics are not in yet and so still don't know how many theaters will close as a result of this change. A 2010 study by the American for the Arts of the impact of this requirement in the Adirondacks found that that 60 percent of commercial chain theaters have made the switch, but 100 percent of Adirondack theaters (13) are independent and cannot afford to upgrade. The study also analyzed the overall impact on the Adirondack economy and found the following:

Economic Impact of Theater Closures on the Adirondack, NY Economy*
  • Loss of over 110 jobs 
  • Loss of over $11.4 million* spent above and beyond ticket purchases in communities (at restaurants, taverns, etc.) by the nearly half million attendees 
  • Loss of community gathering venues, affordable entertainment for families and people on fixed incomes, loss of indoor activities for resident and visitor populations when the weather is inclement, loss of community events often donated by the theaters 
* based on American for the Arts 2010 Arts & Prosperity Study

How will Theater's Raise Funds? 
Distributors are offering financing packages (covering approximately 50 percent of the cost of the projectors), but theaters will lose control content and will be required to pay a monthly projector maintenance fee ($4,000 per projector per month). They will also still be required to cover the costs upfront and get paid back over time based on distributor savings in shipping.
What about the banks? There is always the bank...right? Well, not really. We are doing some work in the Central District in Seattle and the Central Cinema, a local movie house that recently succeeded in raising $60,000 for their DCP upgrade, and they outlined the lending situation quite well:
"If we do not make our funding goal then we will have to find another way of making the DCP conversion happen. In the current economy the banks are still quite hard to work with and equipment lease deals are approaching usury. An upgrade of this size is too large to put on our line of credit and credit card rates are out of the question. We may be able to work out a loan arrangement eventually but the best option is still to have the fans of the Cinema help us with this Kickstarter."
So increasingly many are turning to crowdsource funding, and one of the most popular options is A search for "digital projection" on Kickstarter yields 211 projects, 5 of them currently live. Turning to the community is sometimes the only way to go, especially as bank lending remains tight. In the Adirondacks in New York, a non-profit created a "Go Digital or Go Dark" campaign that allows contributors to donate to theater of their choice in one of then communities. The goal, to raise $2.18 million to support the conversation of dozens of community theaters to DCP.

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