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The Next Victim of Digital Movies

The switch to an all-digital movie format heralds the extinction of not only 35 mm film movies, but also older, historic theaters, such as my local movie house, as I recounted last year. Now there's another bit of Americana that's becoming endangered: the drive-in movie theater.

Where once there were more than 4,000 locations during their heyday in the 1950s, the number of drive-ins still in existence has dwindled to 368 today. With the cost of conversion to digital projection running upwards of $80,000, most of these small, family-run operations can't afford the cost. The industry anticipates the conversion to digital in the U.S. will be completed by year's end and globally by 2015, so the prospects for drive-in screens going dark very soon runs high.

It's not just moviephiles lamenting their potential demise: Japanese automaker Honda Motor  (NYSE: HMC  )  is worried too, and in a bid to heighten awareness of the possibility, it launched Project Drive-In, a plan to donate five digital projectors to drive-in theaters that receive the most votes in an online competition.

Although it's a bit ironic that a so-called foreign automaker is trying to help save what is a uniquely American experience -- where are Ford and General Motors in this? --  it underscores the problem faced by the owners of drive-ins and local movie houses: The rush to save money by the studios is fundamentally changing the way we watch movies, and not necessarily for the better, either.

Even though I don't go to the movies very often, at least two or three times a year I try to make the trek to Warwick, N.Y., to capture a bit of that nostalgic bit of movie-watching at the nearest drive-in to me. While there's no longer a clunky audio box to hang from your car window anymore -- today you just tune in to a radio station to hear the action on the screen -- participating in this more intimate viewing experience brings back memories of a simpler time that's slipping away, and besides, you can't beat watching a flick while nestled among the apple orchards.

The industry is in the midst of a tumult that first saw movie houses carve up their theaters to fit in more screens, and then the conglomerates took over with Regal Entertainment (NYSE: RGC  ) , Cinemark (NYSE: CNK  ) , and most recently Bow Tie Cinemas, which bought the Clearview chain from Cablevision, consolidating the movie-watching experience into the hands of fewer chains. The result has been a proliferation of megaplexes with a dozen screens and rising ticket prices.

Drive-ins, then, are among the true last remaining independently owned theaters in the country.

IHS Screen Digest's Cinema Intelligence Service estimates that by 2015, 35 mm film will be no more. News Corp.'s (NASDAQ: NWS  ) Twentieth Century Fox studio was the first to announce its move to all-digital distribution in the U.S., and Hollywood anticipates it will cease film distribution by year's end. The creation of Digital Cinema Initiatives by Fox, MGM, Paramount, Universal, Sony, Warner Brothers, and Disney became the driving force behind the movement, creating standards for the industry to follow and setting deadlines to achieve the goal.

The National Association of Theatre Owners says 86% of the nearly 40,000 screens in the U.S. and Canada have already made the switch, yet even some chains like Carmike Cinemas (NASDAQ: CKEC  ) , which shows second-run films in its discount theaters, might have to make some hard choices if it can no longer get print films. 

For the studios, the conversion is a no-brainer: It costs about $1,500 to print and distribute film, but just $150 for a digital version. While there is an incentive program in place to repay drive-ins up to 80% of the cost for converting, the owners are still hard-pressed to front the money. The United Drive-In Theatre Owners Association estimates only 50 to 60 drive-ins have made the move thus far.

Despite the absence of American automakers helping to create awareness of the risks, Honda has already received more than 830,000 votes from moviegoers for their favorite drive-ins and has received more than $19,000 in contributions to help defray the costs for more theaters.

There's only a little more than two weeks to vote in Project Drive-In. Most drive-in theaters typically close in winter, and the likelihood they won't reopen their screens in the spring means the time to vote for your favorite drive-in is now -- then head out there and watch a movie, or jump in the back seat like you used to for a little different entertainment.

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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


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