BUSINESES PUT FOCUS ON DIGITAL FILM.

Byline: Dave McNary Daily News Staff Writer

One of the ironies of the movie industry is that while movies feature more and more digital wizardry, the actual projection machines being used to show the movies at local theaters hasn't changed much in the past 50 years.

In the 21st century, however, that'll change. Exactly how movie projectors will change - and how that will change Hollywood and the companies that supply the behind-the-scenes product - is open for debate. A very heated debate.

Prototypes of digital projectors - one by Texas Instruments and the other by Hughes-JVC - have been demonstrated that promise to give long-lasting movies that equal the quality of pristine film prints to theaters willing to pay the hefty price.

The potential impact of a change like that on some of Hollywood's leading businesses is staggering. Multimillion-dollar companies that employ thousands of people in the region will have to switch over to the new technology as early as 2001.

Or perhaps not, others contend. Some Wall Street analysts warn the new projector technology has two major drawbacks that could eventually be fatal - the massive installation costs and the difficulty in getting Hollywood studios and theater chains to agree on which format will eventually be adopted, digital projectors or an enhanced 35 mm projector.

``It looks like this could be war,'' said Ron Jarvis, president of the six-plant Technicolor Worldwide Film Division, in response to a recent promotional blitz for digital projectors. ``We believe 35 mm film is here to stay for a long time. I personally believe the quality of image from digital projectors is not as good as film and should not be wished upon the public.''

Some analysts also believe the digital projectors are far, far away from reaching multiplexes.

``I think it will be at least five to 10 years before digital projectors are used,'' said Michael Legg of Prudential Securities.

Analyst Jeffrey Thomison of Hilliard Lyons agreed, noting that the digital systems will cost as much as $140,000 compared with $20,000 for a conventional projector.

``There are many obstacles to overcome and that makes it more long-term than a lot of people realize,'' he said. ``It's not going to happen next month or next year.''

If digital movies caught on, it could be a massive blow to a pair of well-known players within the exhibition industry - North Hollywood-based Technicolor Worldwide Film and Hollywood-based Deluxe Laboratories, the top suppliers of prints to theaters.

Jarvis insists Technicolor, a division of British media conglomerate Carlton Communications, has not been standing still amid the growing expectation for digital projectors. For example, it is relaunching its dye-transfer process, using a photo-mechanical system rather than a photo-chemical one, leading to major improvements in color quality and durability.

``We've completed building two monstrous production machines in North Hollywood and we plan to process millions of feet this year,'' Jarvis said.

Additionally, Jarvis said, Technicolor will demonstrate in April further advances that will cut costs and reduce the risk of piracy. ``We're doing this with the idea that other technologies are out there,'' he added. ``We don't think that film has been developed to its fullest extent.''

Those technologies also are likely to be used at Technicolor's DVD plant in Camarillo, Jarvis said.

Legg asserted that the current quality of the digital images on a large screen falls short of matching the sharpness and color of conventional 35 mm prints shown on a projector at the rate of 24 frames per second. ``It's not there yet, in my opinion,'' he said.

Wall Street appeared to be unfazed Monday by the prospect of a digital takeover suggested by a New York Times story. Stock of Ballantyne of Omaha Inc., which has 65 percent of the domestic market for movie projectors, took a slight hit by falling 31.25 cents to $8.375 a share.

Ballantyne, which has maintained the position that conventional machines will remain the dominant technology for at least a decade, has a bright future,Legg said. ``Ballantyne will be a part of digital projectors if that becomes mainstream technology,'' he predicted.

Thomison agreed, saying, ``Ballantyne has the dominant brand, reputation and relationships. I think people are mistaken when they think digital technology will crush Ballantyne, because I think it will actually benefit them.''

Woodland Hills-based Panavision Inc., the leading maker of conventional motion picture cameras, also could see profound changes if digital technology catches on, even though movies would still be shot and edited on 35 mm then transformed to digital format. But Panavision has already been introducing digital products that, among other things, allow directors to include optical effects on the set.

Stock of Panavision was unchanged Monday at $10.3125 while American Depository Receipts of Carlton rose $2.375 to $50.75.