Projector maker Ballantyne of Omaha‘s Q3 2007 figures are in and it is evident that digital cinema is starting to eat into the company’s revenue and profits. Net revenue is down 3.5 per cent compared to a year ago and gross profit was down from $2.2m to $2.1m – not a huge drop, but still a step in the wrong direction. In repsonse, Ballantyne is stocking up on digital projectors and are being candid about the underlying causes in their Q3 2007 filing:
John P. Wilmers, President and Chief Executive Officer of Ballantyne, commented, “As expected, our Q3 results reflect the ongoing impact of the exhibition industry’s transition from analog to digital projection technology. Our digital equipment business grew over last year but from a small base, helping to somewhat offset the decline we expected in our traditional film projector business. As we progress through the transition to digital, we are actively looking at ways we can streamline costs related to our legacy film products business and improve overall operating performance while still being able to properly serve our customers.
“Subsequent to the close of the third quarter we were successful in extending our participation in the rollout of REAL D 3-D technology, providing 24 digital projectors to Regal Entertainment Group. The project was in conjunction with the October release of The Nightmare Before Christmas, an animated feature in Disney Digital 3-D.
Wilmers then goes into details about the acquisition of Canadian cinema screen maker Marcel Desrochers Inc. (MDI), which might seem starange in the middle of digital discussions, but remember that with RealD still top dog for digital 3D, the need for silver screens is expected to go up in the future. Overall, the outlook is digital, digital and more digital:
“We continue to anticipate a broader scale rollout of digital cinema projection equipment in 2008 and have been building digital inventory, performing expected integration work and bolstering our service capabilities so that we are well positioned to satisfy customer orders. Our dialogues with customers reaffirm that service represents both an important growth opportunity as well as a key point of differentiation for our company.”
The filing does not go into detail whether the growth of digital cinema installations is saturating the market for second hand 35mm projectors or whether new multiplexes are exclusively installing 2K projectors, but both of these factors are likely. While the Christie/AIX 4,000 deployment is nearing its completion and DCIP’s big push is some months away yet, there is still time for Ballantyne to ride the digital wave into more profit.