Technicolor Buys Stake in Real Image Digital

Last week, Technicolor announced that it has acquired a significant interest in Real Image Digital, a developer of digital-cinema technology. As part of the transaction, Technicolor is acquiring 49% of Real Image, with the option of picking up another 11.5% in the future on pre-negotiated terms. Real Image is partnered with the Sarnoff Corporation, which is currently developing technology to compress and encrypt film-quality images for theaters—a process that Sarnoff claims is many times more complex than video compression for the home-entertainment market.

Currently, Technicolor (which brought color to movies 80 years ago) processes and develops film during production, then produces and distributes release prints direct to over 34,000 cinema screens across the US for studios such as Disney, Warner Bros., and DreamWorks SKG. Digital distribution, by satellite or other means, is expected to significantly cut the cost of getting films to cinemas, and do away with shortages of physical prints for unexpected hits.

Real Image says its technology will encompass the full range of processes required to compress, encrypt, and store a film digitally so it can be electronically transported and digitally projected in a "high-quality, copyright-secured format." The company points out that its management group of industry experts has been working for five years to achieve its e-cinema goals through platform-neutral technology.

Technicolor and Real Image expect interest in digital-cinema technology to grow rapidly, after a boost this summer from digital screenings of George Lucas' The Phantom Menace (see Scott Wilkinson's report), Miramax's An Ideal Husband, and Disney's Tarzan. The two companies say they are developing a business plan to provide a complete digital and financial solution for distributors and exhibitors that will allow e-cinema to grow alongside the traditional print-production business.

Lanny Raimondo, Technicolor's CEO, says that "we are taking Technicolor to the next stage of its development. Just as we moved from film to video, and more recently from video to DVD, we are now ready to lead the evolution into digital distribution." Despite the advances in digital cinema, however, Technicolor states that it will be at least five years before digital distribution takes hold, and film will continue to be the principal distribution and production medium for motion pictures for some time to come.