Bellingham’s Pickford Film Center is downright neighborly. As the only 365-day independent cinema between Seattle and Vancouver B.C., the Pickford’s mission “is to provide a forum and resource for independent cinema, strengthening community through education, dialogue and the celebration of film.”

Apart from screening movies outside the major studio rotation, Pickford celebrates regional filmmaking with the NW Projections Film Festival, a filmmaking competition for high schoolers, a month long international documentary series, a children’s film festival that provides free screenings for at-risk youth, and outdoor summer movies. They’re also struggling to update their equipment.

Michael Falter is the theater’s director of programming, which means it’s his job to borrow films from movie studios for the Pickford to screen. But the process isn’t so easy anymore. In a move to cut costs, Hollywood’s major studios are banding together to shift film distribution to digital formats, rather than the traditional reel of film. The Pickford can’t afford the upgrade.

The overhaul doesn’t come cheap. For new equipment, the Pickford can expect to fork over $225,000 — $70,000-$115,000 per screen. Like many independent theaters, they’re looking to the community for support. Donations have helped raise $75,261, about 33 percent of what they need for a full digital renovation.

In November 2010, Twentieth Century Fox sent a letter to theater exhibitors across the U.S. and Canada urging them to update their projection equipment to digital formats, as the date would one day approach when major movie studios would cease distribution of traditional, 35 millimeter celluloid films.

Some 25,000 theaters complied, putting themselves in the good graces of one of Hollywood’s largest film distributors. But thousands hadn’t updated. They got another reminder: “The time is now for digital conversion for those theaters that wish to continue to license Twentieth Century Fox and Fox Searchlight motion picture product for theatrical exhibition into the future,” the letter noted.

Fox wants to go totally digital, and they’re not alone. Other key Hollywood studios want to give 35mm the axe too. Some of the biggest players in the business, such as Metro-Goldwyn-Meyer, Paramount Pictures and The Walt Disney Company have united in an effort called Digital Cinema Initiatives (DCI). Their aim: To establish certain, universal specifications for digital cinema that is cost effective, reliable and state of the art.

While going digital seems like a windfall to studio heads, the overall effects could be disastrous for smaller theaters. By cutting 35mm distribution, some industry insiders have estimated that as many as 10,000 screens across the U.S. and Canada could go dark for good. John Fithian, president of The National Association of Theaters Owners, has repeatedly remarked on those mostly independent theaters still operating solely on 35mm technology: “Convert or die.”

While there is no exact date as to when studios will stop 35mm distribution completely, sometime in early 2013 is considered to be the end date. Time is running out, and a digital overhaul has reels of difficulties to overcome.

The industry is trying to shift to something called a Digital Cinema Package (DCP). Instead of shipping bulky, expensive film canisters to theaters, studios will streamline the process and reduce the distribution of movies to a digital hard drive, roughly the size of a paperback novel, as a way to save on dollars.

It costs a Hollywood studio anywhere from $1,200 to $1,500 to strike, or produce, a single 35mm film print. With about 4,000 copies of each film distributed nationwide, the costs add up fast. Movie studio’s spend nearly $850 million a year making film prints. Conversely, a DCP runs a mere $80 and is heavily encrypted and encoded to curb piracy.

To incentivize the process, studios have agreed to subsidize the conversion. Because of the cost savings, studios will pay exhibitors a “virtual-print fee” over the next seven to ten years for movies shown digitally to pay off the investment undertaken by theater exhibitors.

That system makes sense for larger, nation-wide chains. Mega-plexes like AMC and Lowes run only new movies on anywhere from ten to fifteen screens simultaneously, so a digital investment is almost guaranteed to pay for itself with money earned by the fee. But the specifications for DCP were designed mostly for larger, multi-screen chains, leaving many smaller, independent theaters out in the cold.

The $100,000 investment would be crippling for most smaller theaters, many of which have only one screen with fewer than 100 seats. On top of that, theaters like Pickford often show a range of old and new, foreign and archival films — none of which qualify for the virtual-print fee. Relying on returns from the virtual-print fee, which is centered on first release motion pictures produced by studios comprising DCI, would drastically restrict the theater’s programming.

“We’re like the motley crew that’s left over after the primary transition took place,” Falter says of the smaller exhibitors still operating 35mm. “The primary transition had a totally different footprint in terms of who they [studios] were trying to get involved in that early transition, and how they were supporting those chains, and what they needed to make that transition happen as quickly as possible, and that meant giving them a ton of money.”

Tight budgets and thin profit margins make DCP a nightmare, not a benefit, as most small theaters still view things like popcorn sales as an important source of income.

Nevertheless, DCP is attractive and efficient. Digital is cleaner, safer, faster, and in some ways, more reliable. When Falter booked The Master to run at the Pickford, it brought in a new crowd of viewers. As a first run, new release movie shot using film, the Pickford had the ability to offer something that the larger chains in the area couldn’t. But when the first copy arrived in Bellingham, two reels were completely raked.

“We had to call Technicolor and tell them this wasn’t acceptable,” Falter remembers. With DCP, getting a movie ready to screen will be more like loading up a playlist in iTunes — blemish free. “There is an efficiency to DCP,” Falter adds. “There are no scratches and you can load it in no time at all.” In the land of 35 mm film, scratches on prints were a common occurrence. Sometimes films would go missing completely. It even got to the point where studios had no idea which movies they owned the rights to.

And the frustrations don’t stop there. The film industry is hardly keeping pace with technology advancements. Oftentimes, if a theater wants to screen an obscure B Picture, and the print is long lost and now only available on a DVD or Blu-ray, the rights may be available for the DVD, but not the Blu-ray. “The business just hasn’t caught up with the technology yet,” Falter says. “The lag on these things is incredible.”

Studios have already started purging old film stocks in their archives in order to make way for digital archives. Warner Bros. has stopped lending out 35mm films, and Fox will not allow theaters to purchase the rights to movies played on DVDs anymore, only DCP.