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Digital 3-D Movies Coming To A Theatre Near You?

The third dimension is coming soon to a theater near you. No I'm not talking about a movie, but rather a high-stakes drama involving the biggest movie studios and theater chains, enmeshed in a battle over who and how the transition to digital 3-D will be financed.

Now finally, Hollywood's biggest studios are close to making a deal with a consortium of movie theater chains that includes AMC, Regal, and Cinemark. This $1 billion deal would convert 15,000 screens to digital projection systems, enabling theaters to show 3-D movies.

This isn't your grandfather's 3-D. The system is higher-tech and doesn't leave you with a headache. Most importantly for the theaters and the studios they split their revenues with, 3-D showings can earn up to five times more per screen than 2-D films. The experience is so compelling theaters can pack their 3-D showings and charge a couple of dollars more per ticket. And with home theaters more luxurious and high-tech than ever, the 3-D experience is something that can't be recreated at home, giving moviegoers good reason to make the trip to a theater.

20th Century Fox is already backing plan, as long as other studios sign on. Today the Financial Times is reporting that Walt Disneyand Viacom's Paramount Pictures are about to sign a contract with the movie theater consortium, called Digital CInema Implementation Partners (DCIP) which is also in talks with Universal Studios. Once four studios are on board, DCIP will launch $1 billion in financing, led by JP Morgan Chase. The whole process has been slowed down by both the reluctance of studios to get on board and the tigher credit markets.

But now it seems we'll see an announcement of this deal moving forward by the end of September. And just in time. There are just a handful of digital 3D movies this year -- including "Fly Me to the Moon" which opens on 500 screens this weekend. But next year the real pressure is on, a record 13 3-D films are scheduled, including some big budget flics from some big names, like "Monsters vs. Aliens" from DreamWorks Animationand Jim Cameron's "Avatar." Right now there are just 5,000 digital cinemas in the US, and just 700 of them can show 3-D movies. Neither movie theater chains nor the studios want to miss out on the box office bump from the mass moviegoing audience that will be interested in next year's 3-D slate.

Studios and theater chains have been battling over who should pay for the 3-D systems. Both will benefit from a revenue bump from the higher ticket prices. But the upfront costs are significant, and theater chains have been pushing for studios to take more responsibility, pointing out that digital systems allow studios to digitally distribute the films themselves, avoiding the costly hassle of physically shipping reels of film. Now with the studios getting on board, it looks like it's finally happening.

Video: The biggest players in the movie industry are in the process of putting together a deal to bring the third dimension to a big screen hear you.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.