-By Alex Ben Block

The Princess Quay cinemas, which sit atop a scenic tri-level shopping complex in the Northern England town of Kingston Upon Hull, regularly play the hottest Hollywood movies -- but their projectionists have never run a single foot of film through the sprockets of a projector.

The 11-screen complex was constructed from the ground up by Vue Cinemas, the third-largest exhibitor in the U.K., as a model for the future of exhibition in the post-film age. "It was 100% digital, no 35mm projectors running; we had a library server and everything," says Mark de Quervain, sales and marketing director at Vue Entertainment, which also operates 66 theaters in the U.K. and one each in Portugal and Taiwan. "So it was pretty much the first digital multiplex in Europe."

There were naysayers, he recalls, who warned it was too soon to go all-digital. They argued theatrical trailers and some movies weren't available in digital, which could cost them if a hot ticket came along that was available only on celluloid.

"It really was a good test to understand the staffing, training, the technical, how many films are available in digital, how many trailers can you get in digital and so on," de Quervain says. "We had reported at last year's (Cinema Expo International) that trailers were difficult to get a hold of in digital but it's getting easier all the time."

In rapid succession during the past year, major movie distributors including Disney, Fox, Sony and Warner Bros. have begun making most trailers and movies available in digital as well as film. As exhibitors gather in Amsterdam for Cinema Expo -- which runs June 22-25 -- there's no more pressing question than when to convert to digital and how to pay for it.

So far, conversion of analog screens to digital in developed countries worldwide hasn't happened as quickly as expected. Anthony

Marcoly, president of sales and distribution at Walt Disney Studios Motion Pictures International, says most of the close to 2,500 digital screens outside the U.S. are one-offs in multiplexes specifically added to show 3-D movies.

As in the U.S., conversion to all digital presentation won't occur until financing sources open, and that depends on the global credit crisis. That isn't stopping aggregators from doing deals in Europe, Asia, Russia and elsewhere based on the U.S. model of "virtual print fees" paid by studios to pay back the cost over time. The money needed now has to be borrowed, and that has not been possible since last fall. So while multiplexes worldwide rush to offer 3-D on at least one or two screens per location, the existing theaters are still firmly in the analog world.

The U.K., where booming boxoffice is up more than 16% for the first quarter, is a good example. By global standards, it has been a leader in digital and

3-D but since the economic crisis hit, conversion there to 2-D digital "essentially, more or less, ground to a halt as I think it probably did in most territories at the tail end of the autumn of last year," says Phil Clapp, CEO of the U.K.'s Cinema Exhibitors Assn.

That didn't mean the end of all digital, though. "The focus in the recent past has been on installation of digital 3-D screens," says Clapp, who projects that by year's end there will be about 600 digital 3-D sites from a total of 3,600 screens in the U.K.

Disney alone, which will be showing "Up" in Amsterdam in 3-D, will offer 17 new 3-D movies during the next couple years, according to Daniel Frigo, executive vp and GM at Disney International, who says the booming U.K. boxoffice so far this year has been fueled by 3-D movies. "We had 'Bolt' recently released across Europe and what was fascinating was the boxoffice for 3-D was anywhere between 30% and 50% of the total take on far fewer prints. That was just tremendous."

Exhibitors have taken notice. "Every multiplex in the U.K. will have a 3-D screen by Christmas," predicts Martin Dowley, managing director of Digital Cinema Media, which provides preshow advertising to cinemas.

Dowley notes digital eliminates the cost to ship the cans of celluloid, makes it easier to offer advertisers last-minute content changes that can be beamed to theaters. He says their research shows U.K. audiences "are loving the 3-D experience," and his company plans ads in 3-D as well.

It's not just happening in the U.K. or Western Europe. Across developing Eastern Europe, Russia, India and China there's a theater building boom and they all are including one or two 3-D ready screens. The opening of new theaters is inevitably followed by a rise in boxoffice in that territory.

"We see 3-D worldwide grossing two and a half times the 2-D screens," Disney's Marcoly says. "That's been the incremental factor (in digital conversion). Is that going to continue? We'll see. But obviously right now from the consumer there's a big appetite for 3-D."
-Nielsen Business Media