The subsidy is paid in the form of a fee per booking of a movie, intended to match the savings that occurs by not shipping a film print.
[1] The first public demonstration of digital projection for cinema took place at ShoWest in 1999,[2] and it was readily apparent that the technology was further ahead than the business model.
But exhibitors knew their audience, and could see that digital projection was only a replacement technology, creating new financial liabilities, and not new revenue.
Further, film projectors had a lifetime of 30 years with relatively small annual expenditures in maintenance and replacement parts.
On the other hand, exhibitors felt they would be lucky to get 10 years of service from a digital projector, after which there would have to be a refresh in capital expenditure.