NEW YORK -(Dow Jones)- Hollywood's bright lights could dim on Eastman Kodak (NYSE:EK) ( EK) as digital cinema eclipses the company's century-old monopoly on film distribution in Tinsel Town.
Movie studios, filmmakers and major theater chains are stepping up efforts to digitize movies, which will make Kodak's traditional 35mm film a quaint antique. It's just the latest challenge vexing the Rochester, N.Y., company as it struggles to shift all of its business into the digital arena. And if the past is any indicator, Kodak may not move fast enough against more nimble competitors. In fact, smaller upstarts are already in partnerships to get digital cinema in many of the U.S. movie theaters.
Similar to the emergence of digital cameras, Kodak is making moves to adapt to this changing reality by trying to position its own digital cinema unit, created a few years ago, to be a key player.
Kodak's presence in the market remains relatively small and its respected brand name in the film industry may not translate amid a field of players that have made key strides in digital delivery and installations.
"The point is the technology is not unique to anyone. Just because a company is unknown doesn't mean they don't have a high degree of technical skills to put together a product," said Michael Karagosian, a consultant to the National Association of Theatre Owners.
Indeed, Access Integrated Technologies Inc. (NASDAQ-NMS:AIXD) (AIXD), or AccessIT, a small outfit based in Morristown, N.J., has converted about 88% of the movie screens in the U.S. that have switched to digital cinema thus far in a partnership with Christie DLP Cinema projectors. The company began working with the movie studios in 2004 and is responsible for financing the digital conversion in the movie theaters by charging studios a one-time virtual print fee the first time a movie plays on screens that they install.
Underscoring the push of digital cinema, Regal Entertainment Group (NYSE:RGC) (RGC), Cinemark USA and AMC Entertainment, representing 14,000 movie screens, joined forces earlier this year to create Digital Cinema Implementation Partners. The venture is aimed at fostering the expansion of digital cinema and has gained the alliances of Warner Bros. Entertainment, a unit of Time Warner Inc.'s (NYSE:TWX) (TWX) and General Electric Corp.'s (GE) Universal Pictures.
So far, about 9% of the 37,000 movie screens throughout the U.S. and Canada are digitized. With the rebirth of three-dimensional movies, industry experts project that most major theater chains will be digital by the end of 2010, with overseas markets following suit a couple years later.
"Film will eventually go away and be replaced by digital files," said Bud Mayo, chief executive of AccessIT.
