Taki's Mag

If we’re going to bail out an entire industry, how about drive-in movie theaters? Fewer than 400 remain in America and they all need roughly $100,000 each to switch over to digital because the studios are phasing out the 35mm format. To rescue all those drive-ins would cost around $40 million. Obama spent more than that on advertising buys last month alone.

Unfortunately, drive-in theaters live in the real world, and when something no longer makes economic sense, it dies. As consumers, moviegoers have had it so good, it’s enough to make a libertarian blush. I can go to Amazon.com right now and get movies the second they leave theaters for $3.99. If I’m willing to plop down about $20 for an HDMI cable with an adapter, the whole family can watch it on TV in the living room. Our cable provider offers the same deal via On Demand and for $10 a month, my Roku box presents me with more options than I have time to watch. If I’m willing to break the law, Chinatown is overflowing with bootlegs, and getting any movie in the world is as easy as typing “Pirate Bay.” The only people who still go to stores to rent videos are Luddites.

The studios have bounced back from this barrage of freedom by giving us more reasons to give them our money. Though theater attendance is down in recent years, 3D has justified higher ticket prices and kept the movie business profitable. But theaters need a digital projector to show 3D movies, and after Avatar exploded, theaters that could afford the switch got a digital projector. This fast-forwarded the transition to digital and now we’re looking at the end of the 35mm format. Films will no longer be made on film.

Drive-ins have staved off annihilation before. Despite a steady decline since the boom of the late 50s, they kept going strong through the late 70s when blockbusters such as Star Wars became so popular, big theaters would have to buy extra copies to meet the demand. After the initial rush, these copies would be lying around and drive-ins would get first-run movies cheap. In 1977 I saw Star Wars at a drive-in and it’s one of my fondest childhood memories. My parents packed pillows and blankets and we sat on the car hood eating popcorn as a life-size Death Star got blown to smithereens. We have at least three generations whose best childhood memories came from the drive-in and it’s hard to stomach the possibility that they’re done for good.

Paul Javener owns the Stardust Twin Drive-In Theater in Chetek, Wisconsin, and he “built that” with his own bare hands in 2008. The theater nets about $10,000 a year, so spending what he estimates will be $130,000 to go digital means it would take 26 years of giving 50% of his profits to the projector debt. “And even then it wouldn’t make sense,” he adds, “because this is digital equipment we’re talking about here, so it’s only going to have a lifespan of seven years.”

The old projectors were built like tanks and many of those from the early 1930s (when drive-ins began) are still up and running. “The booth that ours came in has graffiti on it talking about when Kennedy was shot, so it probably goes back to at least the 1960s,” Javener says. He says when he built his theater, he thought he had a fun and relatively profitable business that would last forever. Unfortunately, the combination of an inferior economy and superior technology may leave him with a theater that only lived for a few years.

Up in Canada, drive-in owner Keith Stata also saw an indestructible projector and a theater that’s been in a holding pattern for decades and figured he had a good investment on his hands. He figured wrong. “I’m sitting here looking at my retirement go up in smoke,” he told the National Post of the imminent digital apocalypse. Belinda Eckman over in Jamestown, NY agrees: “Digital is coming,” she says with that dry sense of humor all drive-in owners seem to have. “The sky is falling.”

The studios have been warning this time would come for a while. It costs around $2,000 to make a 35mm print, while sending a digital file is as easy as mailing a $100 hard drive. Soon it will be as simple as transmitting it through the Web for free. Having the drive-ins pay the $2,000 themselves seems like a solution, but at the $8 per ticket or so that small drive-ins charge, that’s 250 customers merely to recoup the cost of the print. Playing old movies seems like another option, but those movies don’t exist for the most part. The studios usually burn old copies of films and the few that remain are so deteriorated they’re unwatchable. Besides, most people don’t want to go to the drive-in to see an old print of American Graffiti. They want to see the blockbuster that came out an hour ago.

One compromise the studios have come up with is to offer theaters some of the savings made from not printing celluloid. They’re called Virtual Print Fees. The way it works is that every time a theater takes a first-run movie, the studio pays off a little bit of their projector debt. The contract comes with a lot of strings, including a pricey servicing fee to maintain the equipment, plus the studio gets to decide which movies you can show on “your” new digital projector. You’re also only eligible for these fees if you get a first-run movie out of the gate. Theaters that take films more than a month old are not eligible. It’s a lopsided agreement reminiscent of the “360 deal” that record labels came up with to make their money back after Napster.

What’s worse, drive-ins have to deal with ambient light and much larger screens, so the projector’s quality has to be much higher than that of normal theaters. If the theater doesn’t meet industry standards—meaning it’s not compliant with Digital Cinema Initiatives (DCI) requirements—it won’t get to show the movies.

What’s even worse, drive-ins have a very short season in most climates and even that is cut short by how crappy movies become in September. (Why is that, by the way?)

What’s way worser is that it’s almost impossible for drive-ins to get loans. Banks aren’t interested in your collateral when it’s likely they’ll be left with a rotting screen in a concrete field.

What’s even worsest is that in the past, most small businesses had been using their houses as collateral to get through tough times. Today most homes are worth less than they were five years ago, so using them to finance loans isn’t even an option.

None of this doom and gloom even matters, however. The big picture is that a digital projector costs more than most drive-ins seem to net for an entire year. Some have ignored the numbers and tried the conversion anyway. The first drive-in to go digital in the whole country was the Spud Drive-In of Diggs, Idaho. They went bankrupt soon after and have recently reopened using an old analog projector.

This is what life is like in the real economy. You build something with your own two hands but you’re still at the market’s mercy. Javener estimates that about 80% of theaters have converted to digital, but that mostly includes big theaters or VPF deals. The remaining 20% are the little guys, including most drive-ins. But like all good entrepreneurs, he has some tricks up his sleeve. He may have to close down his drive-in at first but as others collapse, they will have to sell their digital projectors at a reduced price. It will be a struggle but if there is a way to continue the drive-in, he will find it. When that happens, he’ll be able to look at his refurbished creation and say, “I built that—again.”

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