Companies:Intel Corp | Dreamworks Animation SKG, Inc.

Earlier this week DreamWorks Animation and Intel announced they're partnering to create next generation digital 3D animation. Today I spoke with DWA's [DWA Loading... () ]CEO Jeffrey Katzenberg and Intel's[INTC Loading... () ] CEO Paul Otellini about the new deal, just before they presented the new technology along with a 3D segment of Kung Fu Panda to the executives at the Allen & Co. conference in Sun Valley.

This new alliance aims to give both companies an advantage as the technology gains a foothold (and theaters). DWA will use Intel technology to speed up its production process and to evolve the strategies they employ to craft the digital images. Meanwhile Intel will use DWA to test Intel technology focused on entertainment and video.

The two CEOs were enthusiastic, Katzenberg saying that Intel "is really coming through for us," and that the technology will entirely revolutionize both the way DWA makes movies and the experience people get at the movie theater. Giving a theatrical experience that's entirely different from what consumers get get from their home entertainment systems is crucial to the future of the theatrical movie business.

But with consumer spending crunched will moviegoers be willing to pay the few dollars more 3-D movie tickets generally cost. Katzenberg says the timing with the economic downturn for the rise of digital 3-D is actually beneficial. He points to the fact that when it's more expensive to go on a vacation or a road trip, the exceptional experience of a 3-D movie is actually a great, affordable alternative.

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The mood was positive. Otellini pointed out that technology costs always come down over time. And when it comes to concern about economic downturn, Otellini wouldn't comment on details of Intel's business as the company is in a quiet period ahead of earnings next week, but he did say that business is generally strong. Three quarters of Intel's business is international and the global markets are quite strong. Katzenberg reiterated the fact that the movie industry tends to be countercyclical; who doesn't want to get their mind off their a troubles with a trip to an air-conditioned, dark theater.

So why did these guys present at Sun Valley? What better access to movers and shakers to show them where technology is headed. (A decade ago Intel demonstrated the PC to the attendees here.) And if conference attendees are impressed, it may help push adoption of the technology.

The presentation they rushed off seemed successful; CEOs raved as they walked out, many looking to find their kids to drag them into the theater to show them the clips. Most importantly, it's this kind of technology that's giving studio chiefs confidence about the future of the theatrical film business. Universal Studio's Ron Meyer and Paramount Pictures Brad Grey both talked to me about how strong their summer has been. The media company stocks are hurting, but the box office is up. And it's technology like this that will add to the box office dollars, and they're hoping, also margins.

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