Of the little under six thousand screens that were equipped with digital projectors using DLP Cinema or, in very few cases, Sony 4K technology by the end of 2007, the vast majority is to be found in North America. From representing around 30% of the world’s offer of digital cinema, this area has grown in only two years to represent almost 80%.
Despite considerable growth rates and although it is the world’s second largest market, Europe is still some way behind, particularly when we consider that the total number of screens in the Old Continent amounts to over three quarters of America’s whilst, where digital is concerned, the ratio falls to one fifth.
To explain North America’s leap forward, reference is always made to the publication of the DCI specs in 2005 and the adoption of a business model that aims to finance the transition, the so-called VPF, particularly suitable for a market characterized by the limited number of players. Not only do the 6 studios account for around 90% of distribution in the United States, but the main exhibition companies control numbers of screens that are inconceivable for Europe: Regal, for example, which is the number one exhibitor, counts as many as 6,763 theatres out of the country’s total of approximately 39,000.
In a decidedly more fragmented context, such as that of Europe, where alongside the studios that control an average 70% of the market there are hundreds of distribution companies and a range of exhibition companies, the VPF model not only meets with practical difficulties of application but can certainly not be considered the universal solution. From several sides – exhibitors with less negotiating power but also public institutions – voices of concern are being raised as to the “victims” that would fall to VPF. “Federating” or “integrating” the screens considered less attractive by the studios has, for example, become the objective of an initiative such as the Norwegian one by Film & Kino, described in issue no. 38.
However, it is significant that the specific demands of the small to medium-sized exhibition companies have come to light in the United States, too. Here, NATO, the exhibitors’ association, has created CBG, a buyers’ group to which 600 US and Canadian companies belong, for a total of eight thousand screens, which aims to make the transition to digital possible even in chains which would not be able to benefit from the VPF model on their own. Acting as “integrator” after a selection process which also saw participation by Technicolor, Kodak and Digeserv, will be Access IT, which will not only install the equipment – corresponding to DCI specs – but will also provide the necessary training and assistance to guarantee a smooth transition from 35mm to digital. Wayne Anderson, Managing Director of CBG declares: “Our mission is historic: ensure that independent cinemas survive and thrive in the digital age.”
Elisabetta Brunella
29 August, 2008
Italian Distributors and Exhibitors Discuss Digital
On 8 July Anec - the association of the cinema exhibitors in Italy – organized a Professional Day in Rome devoted entirely to digital cinema and 3D. A formula which drew a large number of participants, from the areas of both exhibition and distribution. We talk about this to Paolo Protti, President of ANEC, starting out by asking him his opinion of how it went.
After a meeting restricted in numbers, this is the first time that exhibitors and distributors have met in a public context, to talk about the digital transition. The high point of the Day was certainly when we heard four distributors, representing both the Majors and Italian companies, explain their approach to digital. But what I want to emphasize is the importance of the intense dialogue, in which the key figures were not only the speakers themselves but the many exhibitors and distributors seated in the audience. The spirit of the Day was marked by a professional attitude and the sincere intention to understand how to collaborate and take steps forward together.
What messages emerged from the world of distribution?
First of all, the willingness to contribute to the cost of updating the theatres technologically, recognizing the need to find a new balance in a situation that sees the savings on the side of distribution and the costs on that of exhibition.
The ways this objective will be reached still have to be defined: the representatives of the majors made no mystery of their preference for the VPF model, which implies a good deal of involvement by the so-called “integrators”, even though they have stated that they are open to contemplating agreements with other interlocutors, for example joint purchasing groups, still taking VPF as their reference point. From 01 and Filmauro came signs of an opening towards identifying an “Italian way” to the digital transition.
Clearly, the next step will have to be the establishment of a technical model.
The various interventions by representatives from the world of exhibition revealed both a positive attitude as well as reserves, linked mainly to the fear that it might be impossible to access the digital technology, thus excluding theatres that are more outlying or less competitive commercially. What is the Association’s position on this situation?
The Association is clearly committed to making sure that the digital transition takes place as evenly as possible, even though it is impossible to ignore market dynamics. We must be aware – and the distributors repeated this several times – that the dream of making all films available on all screens will not come true thanks to digitalization. The business negotiations between distribution and exhibition will continue as usual: this is another reason why the distributors stated more than once that the mechanism of sharing costs for equipping theatres will remain quite separate from the negotiation of the rental fee. We on our part take a favourable view of those initiatives – such as the one set out in the letter of intent signed by 19 exhibitors for a total of 340 screens and probably destined to attract new partners – which concentrate on aggregation and synergy. Without doubt the digital shift is a serious matter if large numbers are concerned.
Elisabetta Brunella
After a meeting restricted in numbers, this is the first time that exhibitors and distributors have met in a public context, to talk about the digital transition. The high point of the Day was certainly when we heard four distributors, representing both the Majors and Italian companies, explain their approach to digital. But what I want to emphasize is the importance of the intense dialogue, in which the key figures were not only the speakers themselves but the many exhibitors and distributors seated in the audience. The spirit of the Day was marked by a professional attitude and the sincere intention to understand how to collaborate and take steps forward together.
What messages emerged from the world of distribution?
First of all, the willingness to contribute to the cost of updating the theatres technologically, recognizing the need to find a new balance in a situation that sees the savings on the side of distribution and the costs on that of exhibition.
The ways this objective will be reached still have to be defined: the representatives of the majors made no mystery of their preference for the VPF model, which implies a good deal of involvement by the so-called “integrators”, even though they have stated that they are open to contemplating agreements with other interlocutors, for example joint purchasing groups, still taking VPF as their reference point. From 01 and Filmauro came signs of an opening towards identifying an “Italian way” to the digital transition.
Clearly, the next step will have to be the establishment of a technical model.
The various interventions by representatives from the world of exhibition revealed both a positive attitude as well as reserves, linked mainly to the fear that it might be impossible to access the digital technology, thus excluding theatres that are more outlying or less competitive commercially. What is the Association’s position on this situation?
The Association is clearly committed to making sure that the digital transition takes place as evenly as possible, even though it is impossible to ignore market dynamics. We must be aware – and the distributors repeated this several times – that the dream of making all films available on all screens will not come true thanks to digitalization. The business negotiations between distribution and exhibition will continue as usual: this is another reason why the distributors stated more than once that the mechanism of sharing costs for equipping theatres will remain quite separate from the negotiation of the rental fee. We on our part take a favourable view of those initiatives – such as the one set out in the letter of intent signed by 19 exhibitors for a total of 340 screens and probably destined to attract new partners – which concentrate on aggregation and synergy. Without doubt the digital shift is a serious matter if large numbers are concerned.
Elisabetta Brunella
29 July, 2008
XDC Announces VPF Agreements with 6 Studios
XDC is the Belgium-based company created by the EVS group and operating in several European countries to act as integrator in the cinemas’ transition to digital technology, by proposing solutions that aim on the one hand to boost the availability of digital content and on the other to finance technological innovations. Many will recall the proposal made some years ago: the installation of an electronic or digital system on the basis of a sort of a monthly fee to be paid by the exhibitor.
XDC has recently started a new phase: at the closure of the Cannes Festival, the company announced that a non-exclusive agreement, along the lines of the Virtual Print Fee, had been reached with four studios to finance the adoption of DCI compliant digital systems on 8,000 European screens. A similar announcement followed a month later, concerning the agreement with Sony Pictures and Universal.
The six major US distributors agree on the one hand to make their digital content available for the European market and, on the other, to allow XDC a contribution proportional to the amount they will save by distributing their films in digital format instead of on 35mm.Thanks to this mechanism, the cost of the digital transition would be shared approximately two thirds by distributors and one third by exhibitors.
We talk about this to Fabrice Testa, Vice President Sales & Business Development at XDC.
Let us consider your agreement from the point of view of European exhibitors interested in shifting to digital: how could their theatres become part of the “happy few”, that is the 8,000 screens (out of 30,000 operating in Europe) that are your objective?
According to the VPF model experimented in the United States, the studios’ contribution will be paid directly to XDC, which will act as intermediary, initially bearing the costs of purchasing the digital projection systems. The contribution will be calculated on the basis of the quantity of product from each major projected by every individual screen. Very pragmatically, I would therefore encourage those interested in taking part in the scheme to contact us: evaluations will be made case by case, in relation to the number of cinemas and screens to be converted to the new technology, their seating capacity and the number of tickets sold, as well as the market share represented by the films of each of the majors in question, of course. In principle, any theatre could “generate” this type of contribution, whatever the number of mainstream movies it projects: however, we have to be certain that the costs of the operation will be covered within the period of time established (10 years).
This confirms the opinion of those who believe that VPF is not the “universal panacea” for what is one of the major impediments to the digitalization of cinemas, i.e. how to redress the balance of costs between distribution and exhibition. What will happen to theatres that do not meet the VPF requisites?
It is clear that cinemas whose programming is based mainly on domestic or local films or in any case on those not distributed by the majors will hardly be able to benefit from the scheme. This is another reason why XDC has foreseen a leasing formula that will make it less of a financial burden for the cinemas themselves to purchase the equipment, whilst at the same time ensuring XDC’s technical assistance.
Digital cinema the Norwegian way: immediately and for everyone. The project backed by the Norwegian Government presented at a seminar in Kristiansand
Small but fast. This is how the Norwegian market’s shift to digital might be defined, according to the information emerging from the international seminar organized at Kristiansand by Norgesfilm and by Nordic Digital Alliance. In a country of four and a half million inhabitants, who buy around 12 million tickets a year in their 230 cinemas, most of which are owned by the municipalities, the digital adventure had already begun in 2001, with advertising on the big screen shifting to the electronic format. The adventure continued with the launch of two trials, run in 2006, based on a total of 33 fixed digital projection systems and one mobile one. These experiments were conducted on the one hand by Nordic – Norway’s Digital Operability in Cinema – a consortium in which the participants were, amongst others, the University of Trondheim and Unique Digital, the company responsible for digitalisation of advertising – and, on the other hand, NDA – Nordic Digital Alliance. The latter organization counts amongst its owners Arts Alliance Media, based in London but with a Norwegian founder – Thomas Hoegh –, and the cinema in Kristiansand, one of the big 7 on the Norwegian market. Today in Norway digital screens have reached a total of 40 (two of which have Sony 4K technology) out of an overall 440, thanks also to the private initiative of the cinemas in Bergen (4 screens) and Lillehammer, with a projector financed by the national film library. But the Norwegian recipe for digital would not be complete without a basic ingredient, which is Film&Kino, the organization that brings together the Country’s municipal cinemas and collects, on behalf of the Government, the tax on cinema tickets (about 2.5% of ticket price) and on DVDs, which brings in approximately 10 million euros a year, destined for the Norwegian Cinema & Film Fund.
Film&Kino has had free rein in using the “extra money” deriving from savings on the use of this annual income, which today amounts to a little over 15 million euros. This figure provides the basis for financing a digital transition that is meant to be not only quick but also complete. “The Norwegian Government,” Lene Løken, director of Film&Kino points out, “believes it should guarantee wide opportunities for access to cinema-going for all citizens, including those who live in areas where the cinemas would not be able to find a commercial balance, if left at the mercy of the market. Therefore, in a country like ours, where around fifty screens generate 90% of the box-office, public institutions have set themselves the objective of ensuring that the digital transition will involve all 440 of the present screens, creating benefits for the smaller theatres and giving them new opportunities.”
Film&Kino has had free rein in using the “extra money” deriving from savings on the use of this annual income, which today amounts to a little over 15 million euros. This figure provides the basis for financing a digital transition that is meant to be not only quick but also complete. “The Norwegian Government,” Lene Løken, director of Film&Kino points out, “believes it should guarantee wide opportunities for access to cinema-going for all citizens, including those who live in areas where the cinemas would not be able to find a commercial balance, if left at the mercy of the market. Therefore, in a country like ours, where around fifty screens generate 90% of the box-office, public institutions have set themselves the objective of ensuring that the digital transition will involve all 440 of the present screens, creating benefits for the smaller theatres and giving them new opportunities.”
The economic model that has been identified to cover the total cost of the operation, estimated at around 50 million euros, was described by Jørgen Stensland, director of the Film&Kino consultants: “The investment by Film&Kino and the cinemas, which will amount to around 33 million euros, will cover 60% of total expenditure. The remaining 40% will be generated by distribution on the basis of the VPF agreements that we are negotiating with the studios, if we reach an agreement. Film&Kino will act as the credit institutes’ guarantor for the whole operation. We foresee costs being amortized in six years, although as a precaution contracts will be signed for eight. Theatres can choose how to pay their share in a variety of ways: everything up front, for example, or by a leasing agreement of up to six years. Special contracts will be signed with cinemas that are already equipped, as long as they have equipment that meets DCI specifications.” The Norwegians thus have clear ideas on digital: all, “no-one excepted”, will have to meet the objective and it’s quality DCI 2K for all of them, including travelling cinemas. “Using this strategy set up by public intervention,” continues Stensland, “we are facing up to an ambitious challenge: to obtain from the digital transition only the advantages it promises. On the basis of what we are learning from the two trials, which are being regularly monitored by an independent body, we foresee that the winners will be high-budget films and art-house movies. A larger number of popular movies and more quality titles will be available more quickly, even in small cinemas, which will improve their financial balances. And there will be more opportunities for European films.”
Projects for the distant future? “Practical short-term prospects: we calculate between 12 and 16 months to roll-out,” is Stensland’s reply. “We are a small market and wish to proceed all together and have projectors and servers before the suppliers are flooded with demands for huge quantities from bigger markets and companies. And we also have the advantage of having a single body to guide the transition and manage the different phases.” So digital the Norwegian way: immediately and for everyone.
Elisabetta Brunella
18 June, 2008
Interview with Lorenzo Branca, Director of Digital Cinema, Cinemeccanica – Milan
Interview with Lorenzo Branca, Director of Digital Cinema, Cinemeccanica – Milan
A graduate in electronic engineering from the University of Pavia, Lorenzo Branca has been with Cinemeccanica since 2004 and coordinates projects for the development and installation of digital projection systems in cinemas.
How do you view the development of digital cinema?
Following a slowdown towards the end of 2007, I have noticed a considerable recovery, both in actual installations and in contacts with new clients in the first few months of 2008.
What do you think this increased interest by exhibitors is due to?
Without doubt to the greater availability of product: on the market there are more films distributed in digital format and more alternative content. But it is the spread of 3D that has given such a boost.
Cinemeccanica operates internationally: from your privileged observation point, do differences emerge between the various markets in relation to the development of digital and the economic models that support it?
As regards financing, in Italy there are high expectations of public institutions, whilst the VPF model that has been adopted on a wide scale only in the United States is considered with some perplexity. This is mainly for “cultural” reasons: the exhibitor wishes to continue owning his equipment. The figure of the intermediary, the so-called “integrator”, foreseen by VPF, risks being considered an extra link in the supply chain and one whose usefulness is not acknowledged.As regards Europe, there is constant evolution in western countries, whilst the surprise comes from eastern countries, such as Russia, Romania, Croatia and Slovenia. Even though contacts do not always become contracts, the interest there is growing constantly and there is a stronger desire to follow agreements through.
Who are your “typical” customers? What do they demand?
There are various types of clients. The first to come along were our traditional clients who have always taken on the role of pioneers in the field. They immediately started experimenting with the new technology. Amongst our more recent customers there are also those who are not yet fully acquainted with the product. The initial idea is to purchase a digital projector to gain experience. However, very soon in the case of multiplexes, the customer realizes that at least 2 installations are needed to pass programming from one theatre to another as the film gradually starts to draw smaller audiences. Moreover, fitting a digital projector in a medium-sized theatre optimizes 3D screening, which is what exhibitors are trying to concentrate on because it attracts a great many spectators and makes it possibile to increase ticket prices. In Russia, for example, no digital equipment is sold unless it also supports 3D.In many cases, we can say that enquiries come on impulse, often in the wake of some event or other, but the actual purchase is far more carefully thought over.
Cinemeccanica, has been operating since1920 and is one of the leading producers of projectors worldwide. Since 2005 it has also been supplying digital projectors fitted with DLP Cinema™ technology.The company’s headquarters are in Milan, Italy, with two branches, one in France and one in the United States, for a total of around 130 employees.
A graduate in electronic engineering from the University of Pavia, Lorenzo Branca has been with Cinemeccanica since 2004 and coordinates projects for the development and installation of digital projection systems in cinemas.
How do you view the development of digital cinema?
Following a slowdown towards the end of 2007, I have noticed a considerable recovery, both in actual installations and in contacts with new clients in the first few months of 2008.
What do you think this increased interest by exhibitors is due to?
Without doubt to the greater availability of product: on the market there are more films distributed in digital format and more alternative content. But it is the spread of 3D that has given such a boost.
Cinemeccanica operates internationally: from your privileged observation point, do differences emerge between the various markets in relation to the development of digital and the economic models that support it?
As regards financing, in Italy there are high expectations of public institutions, whilst the VPF model that has been adopted on a wide scale only in the United States is considered with some perplexity. This is mainly for “cultural” reasons: the exhibitor wishes to continue owning his equipment. The figure of the intermediary, the so-called “integrator”, foreseen by VPF, risks being considered an extra link in the supply chain and one whose usefulness is not acknowledged.As regards Europe, there is constant evolution in western countries, whilst the surprise comes from eastern countries, such as Russia, Romania, Croatia and Slovenia. Even though contacts do not always become contracts, the interest there is growing constantly and there is a stronger desire to follow agreements through.
Who are your “typical” customers? What do they demand?
There are various types of clients. The first to come along were our traditional clients who have always taken on the role of pioneers in the field. They immediately started experimenting with the new technology. Amongst our more recent customers there are also those who are not yet fully acquainted with the product. The initial idea is to purchase a digital projector to gain experience. However, very soon in the case of multiplexes, the customer realizes that at least 2 installations are needed to pass programming from one theatre to another as the film gradually starts to draw smaller audiences. Moreover, fitting a digital projector in a medium-sized theatre optimizes 3D screening, which is what exhibitors are trying to concentrate on because it attracts a great many spectators and makes it possibile to increase ticket prices. In Russia, for example, no digital equipment is sold unless it also supports 3D.In many cases, we can say that enquiries come on impulse, often in the wake of some event or other, but the actual purchase is far more carefully thought over.
Cinemeccanica, has been operating since1920 and is one of the leading producers of projectors worldwide. Since 2005 it has also been supplying digital projectors fitted with DLP Cinema™ technology.The company’s headquarters are in Milan, Italy, with two branches, one in France and one in the United States, for a total of around 130 employees.
WOMEN IN DIGITAL CINEMA
Eye balls and Euros - Digital Cinema is at the end of the beginning and primed for growthNancy Fares, Business Manager, Texas Instruments DLP® Cinema Products
I am the Business Manager for DLP Cinema® Products; my role includes product line responsibilities, Profit and Loss (P&L), product marketing and overall strategy for the DLP Cinema® Products group. This year marks the 10th Anniversary of DLP’s entrance into the cinema industry, with the first fully functional and Hollywood endorsed digital DLP Cinema movie projector. After years of prototypes, in 1998 DLP delivered Hollywood’s biggest image critics and cinematographers with a digital projector that met the world’s highest standards on colour, brightness and reliability and therefore pioneered the digital cinema concept. A year later, in 1999, the studios released the first movie in digital format on DLP Cinema, which was Star Wars: Episode I - The Phantom Menace. DLP Cinema honours the heritage of the ultimate viewing experience while incorporating the latest technology innovations, such as the 3D single projector solution and cutting costs for cinema exhibitors, distributors and ultimately the consumer.
As we celebrate our 10th year in the film industry, DLP Cinema projection technology is installed in over 6,000 theatres on every continent except Antarctica. Today there are more than 1,200 theatres that offer the digital 3D experience powered by DLP Cinema technology, and this number will continue to increase as more DLP projectors are deployed globally.
It was over ten years ago that Texas Instruments and other companies began working on digital cinema and today we’ve reached the point where we have a viable market. While a little less than five percent of the world’s cinema screens have been converted to digital projection, it is fair to say that we have now arrived at the end of the beginning. Of the early adopters, approximately 75 percent of digital cinemas are in North America, with the rest split between Europe and Asia. It’s been a decade in the making, but we are finally past the point of beta testing and committees deciding standards.
It could be argued that the slow take-up of digital projection technology has been due to the need to agree to standards, to test equipment, and so on. However, it’s more likely that the primary reason why the pace of product development in digital projection technology has been slow is because the true cost and benefits of digital cinema to the main interested parties – equipment manufacturers, film distributors and exhibitors – are not reliably known or properly understood. The lack of solid facts about the economics of digital cinema has led to a very long game of poker. Such games aside, the long term picture looks rosy for exhibition, distribution and equipment manufacturers. Ultimately, it will become more viable to show movies to much larger audiences since digital prints cost less, require less handling, and offer far more flexibility in programming.
For exhibitors as a whole, there is also the prospect of higher revenues from sources such as alternative content and the 3D revival. In addition, it has been suggested that potential gains exist from programming content by daypart and by demographics. Many would argue that targeting audiences throughout the day will also increase revenue thanks to the ability to deliver relevant advertising messages to the changing demographics.
Regardless of studio incentives and deployment plans, d-cinema installations will certainly heat up in 2008, as there are many more digital 3D titles in the production pipeline. In fact, there are expected to be 12 to 18 3D movies by 2010. Whether 3D exhibition is a novelty, or becomes part of mainstream cinema for the foreseeable future, the increased box office results make the exhibitor’s conversion a more local, immediate and understandable business decision. And some exhibitors are not waiting; the recent announcement of Odeon UCI regarding its intention to install 500 3D systems over two years is explicitly targeted at the high-profile slate of 3D movies in the pipeline.
The problem in the minds of some is whether 3D is just a gimmick or something that is actually an artistic aspect of cinema. At ShowEast 2007, Jeffrey Katzenberg, CEO of DreamWorks Animation, stated that moviegoing is going to become more exhilarating in a way never-before-seen thanks to digital 3D technology. The idea is that the audiences will be pulled into the film, instead of reached out to, which was the "gimmick" idea that 3D originally started with.
Although many predict the number of 3D screens around the world will reach nearly 5,000 by the end of 2009, Katzenberg is predicting that 6,000 3D-equipped screens will be installed by March of 2009. Katzenberg boldly stated at ShowEast, "[3D] is going to be the majority of your business" in the future. In addition, Katzenberg strongly believes that consumers will be "excited" to pay a premium for an exceptional quality product. Time will tell, but there is no debate that digital 3D is not a gimmick. And without a digital cinema system, you will miss the chance to see if he’s right.
The central problem in the adoption of digital cinema technology has been that the technology initially shifts costs from software (reels of film) to hardware (digital files). This immediate problem has tended to overshadow larger benefits of digital technology everywhere. Interestingly, the conversion is estimated to cost approximately $8 billion or only 32% of the worldwide box office last year. Nevertheless, an immediate problem demands a solution and one is the Virtual Print Fee (VPF) model widely adopted in the United States. Locally, CGR Cinemas (France) is the first European exhibitor to sign up to a VPF-based rollout with one of the three major integrators. However, there are other financing models in the market, including exhibitors who have spent their own money to reap the benefits of digital technology.
Regardless of the business model, there is a great appetite to accelerate digital cinema deployment in Europe. Compared to the US, the European market is more complex and consequently the ability to set up a deal has been made more difficult by multiple languages and more complicated relationships. In addition, the European market is more fragmented. It has one of the largest populations of smaller and remote cinemas. In October 2007, the European digital forum announced completion of a study that found the average cinema screen in Europe to be slightly more than 26 feet wide or less, with seating for 180. As a result, there is train of thought that the full Digital Cinema Initiatives (DCI) specifications are considered "excessive" and another standard for smaller theatres and specialty markets should be considered. Although this could solve specific problems such as antiquated cinemas in rural areas, it is not a viable solution in the light of the loss of revenue from piracy. Perhaps instead of playing poker, it might be time for all the parties to sit down and hammer out a solution.
Looking forward there are still some big uncertainties regarding the future impact digital cinema will have on the industry. Digital Cinema is a relatively small market in which a few deals can make a big difference. It is likely, within the next couple of years, that one or more large exhibitors will decide to go it wholly or partly alone.
Although it is possible that the forecasts will be exceeded, the peak adoption of the new technology will fall in the period just after that covered by the five year forecasts you see rather than within it. If this is correct then half the world’s cinema screens could be digital by 2013, compared to a third in 2011, and five percent today.
As members of the Entertainment industry we need to step back and realize that we are all facing hyper competition on patrons’ time and entertainment budget. Let me say it simply, we are at war against all other forms of entertainment for “eye balls” and Euros! We need to be diligent and serious about bringing and keeping our patrons in our movie theatres. Better content or product on screens, a better experience at the movie theatre, and the conversion to digital quality movies with the emerging 3D and alternative content, are some of the tools we have available to us to fight with. We need to get serious about enabling the transition to digital cinema. The cost of projectors, in the long run, will not be the limiting factor for our success, but rather our limited vision of the competitive threat we face. Digital projectors will get cheaper and are going to be very easy to use.
Reduced costs in delivering movies to cinemas means that more movies will be brought to cinemas, to improve the choice available to consumers, to take advantage of the dead spots created by current programming practices, and so on. These changes also mean that there will be more cinemas…thus more choices for consumers. Probably not more megaplexes showing blockbusters, but more small cinemas showing a greater variety of movies to smaller audiences.Probably these cinemas will be a little more expensive to attend, and have fancier concession products, because they will not have the same economies of scale as multiplexes and megaplexes, but they will be nice businesses to own. Both these types of development and the competitive threat we face, will create a need for more sophisticated customer relationship management techniques, as well as better marketing. Not too long ago, CRM in exhibition could have been satirized as largely consisting of a distributor herding customers in on the back of saturation marketing campaigns. In the cinema of tomorrow, alternative programs and special events mean exhibitors will have more control and more input into the success of the industry.
Ten years in and most of the fog and confusion around digital cinema has, at last, blown away allowing the path ahead to be viewed with relative clarity. Who would ever have thought it would be that “simple”!
I am the Business Manager for DLP Cinema® Products; my role includes product line responsibilities, Profit and Loss (P&L), product marketing and overall strategy for the DLP Cinema® Products group. This year marks the 10th Anniversary of DLP’s entrance into the cinema industry, with the first fully functional and Hollywood endorsed digital DLP Cinema movie projector. After years of prototypes, in 1998 DLP delivered Hollywood’s biggest image critics and cinematographers with a digital projector that met the world’s highest standards on colour, brightness and reliability and therefore pioneered the digital cinema concept. A year later, in 1999, the studios released the first movie in digital format on DLP Cinema, which was Star Wars: Episode I - The Phantom Menace. DLP Cinema honours the heritage of the ultimate viewing experience while incorporating the latest technology innovations, such as the 3D single projector solution and cutting costs for cinema exhibitors, distributors and ultimately the consumer.
As we celebrate our 10th year in the film industry, DLP Cinema projection technology is installed in over 6,000 theatres on every continent except Antarctica. Today there are more than 1,200 theatres that offer the digital 3D experience powered by DLP Cinema technology, and this number will continue to increase as more DLP projectors are deployed globally.
It was over ten years ago that Texas Instruments and other companies began working on digital cinema and today we’ve reached the point where we have a viable market. While a little less than five percent of the world’s cinema screens have been converted to digital projection, it is fair to say that we have now arrived at the end of the beginning. Of the early adopters, approximately 75 percent of digital cinemas are in North America, with the rest split between Europe and Asia. It’s been a decade in the making, but we are finally past the point of beta testing and committees deciding standards.
It could be argued that the slow take-up of digital projection technology has been due to the need to agree to standards, to test equipment, and so on. However, it’s more likely that the primary reason why the pace of product development in digital projection technology has been slow is because the true cost and benefits of digital cinema to the main interested parties – equipment manufacturers, film distributors and exhibitors – are not reliably known or properly understood. The lack of solid facts about the economics of digital cinema has led to a very long game of poker. Such games aside, the long term picture looks rosy for exhibition, distribution and equipment manufacturers. Ultimately, it will become more viable to show movies to much larger audiences since digital prints cost less, require less handling, and offer far more flexibility in programming.
For exhibitors as a whole, there is also the prospect of higher revenues from sources such as alternative content and the 3D revival. In addition, it has been suggested that potential gains exist from programming content by daypart and by demographics. Many would argue that targeting audiences throughout the day will also increase revenue thanks to the ability to deliver relevant advertising messages to the changing demographics.
Regardless of studio incentives and deployment plans, d-cinema installations will certainly heat up in 2008, as there are many more digital 3D titles in the production pipeline. In fact, there are expected to be 12 to 18 3D movies by 2010. Whether 3D exhibition is a novelty, or becomes part of mainstream cinema for the foreseeable future, the increased box office results make the exhibitor’s conversion a more local, immediate and understandable business decision. And some exhibitors are not waiting; the recent announcement of Odeon UCI regarding its intention to install 500 3D systems over two years is explicitly targeted at the high-profile slate of 3D movies in the pipeline.
The problem in the minds of some is whether 3D is just a gimmick or something that is actually an artistic aspect of cinema. At ShowEast 2007, Jeffrey Katzenberg, CEO of DreamWorks Animation, stated that moviegoing is going to become more exhilarating in a way never-before-seen thanks to digital 3D technology. The idea is that the audiences will be pulled into the film, instead of reached out to, which was the "gimmick" idea that 3D originally started with.
Although many predict the number of 3D screens around the world will reach nearly 5,000 by the end of 2009, Katzenberg is predicting that 6,000 3D-equipped screens will be installed by March of 2009. Katzenberg boldly stated at ShowEast, "[3D] is going to be the majority of your business" in the future. In addition, Katzenberg strongly believes that consumers will be "excited" to pay a premium for an exceptional quality product. Time will tell, but there is no debate that digital 3D is not a gimmick. And without a digital cinema system, you will miss the chance to see if he’s right.
The central problem in the adoption of digital cinema technology has been that the technology initially shifts costs from software (reels of film) to hardware (digital files). This immediate problem has tended to overshadow larger benefits of digital technology everywhere. Interestingly, the conversion is estimated to cost approximately $8 billion or only 32% of the worldwide box office last year. Nevertheless, an immediate problem demands a solution and one is the Virtual Print Fee (VPF) model widely adopted in the United States. Locally, CGR Cinemas (France) is the first European exhibitor to sign up to a VPF-based rollout with one of the three major integrators. However, there are other financing models in the market, including exhibitors who have spent their own money to reap the benefits of digital technology.
Regardless of the business model, there is a great appetite to accelerate digital cinema deployment in Europe. Compared to the US, the European market is more complex and consequently the ability to set up a deal has been made more difficult by multiple languages and more complicated relationships. In addition, the European market is more fragmented. It has one of the largest populations of smaller and remote cinemas. In October 2007, the European digital forum announced completion of a study that found the average cinema screen in Europe to be slightly more than 26 feet wide or less, with seating for 180. As a result, there is train of thought that the full Digital Cinema Initiatives (DCI) specifications are considered "excessive" and another standard for smaller theatres and specialty markets should be considered. Although this could solve specific problems such as antiquated cinemas in rural areas, it is not a viable solution in the light of the loss of revenue from piracy. Perhaps instead of playing poker, it might be time for all the parties to sit down and hammer out a solution.
Looking forward there are still some big uncertainties regarding the future impact digital cinema will have on the industry. Digital Cinema is a relatively small market in which a few deals can make a big difference. It is likely, within the next couple of years, that one or more large exhibitors will decide to go it wholly or partly alone.
Although it is possible that the forecasts will be exceeded, the peak adoption of the new technology will fall in the period just after that covered by the five year forecasts you see rather than within it. If this is correct then half the world’s cinema screens could be digital by 2013, compared to a third in 2011, and five percent today.
As members of the Entertainment industry we need to step back and realize that we are all facing hyper competition on patrons’ time and entertainment budget. Let me say it simply, we are at war against all other forms of entertainment for “eye balls” and Euros! We need to be diligent and serious about bringing and keeping our patrons in our movie theatres. Better content or product on screens, a better experience at the movie theatre, and the conversion to digital quality movies with the emerging 3D and alternative content, are some of the tools we have available to us to fight with. We need to get serious about enabling the transition to digital cinema. The cost of projectors, in the long run, will not be the limiting factor for our success, but rather our limited vision of the competitive threat we face. Digital projectors will get cheaper and are going to be very easy to use.
Reduced costs in delivering movies to cinemas means that more movies will be brought to cinemas, to improve the choice available to consumers, to take advantage of the dead spots created by current programming practices, and so on. These changes also mean that there will be more cinemas…thus more choices for consumers. Probably not more megaplexes showing blockbusters, but more small cinemas showing a greater variety of movies to smaller audiences.Probably these cinemas will be a little more expensive to attend, and have fancier concession products, because they will not have the same economies of scale as multiplexes and megaplexes, but they will be nice businesses to own. Both these types of development and the competitive threat we face, will create a need for more sophisticated customer relationship management techniques, as well as better marketing. Not too long ago, CRM in exhibition could have been satirized as largely consisting of a distributor herding customers in on the back of saturation marketing campaigns. In the cinema of tomorrow, alternative programs and special events mean exhibitors will have more control and more input into the success of the industry.
Ten years in and most of the fog and confusion around digital cinema has, at last, blown away allowing the path ahead to be viewed with relative clarity. Who would ever have thought it would be that “simple”!
Digitalization - challenge and threat
When the fifth edition of MEDIA Salles’ Course ”DigiTraining Plus 2008” in London wrapped up its five-day-long event, attended by 45 participants from 14 different countries, one item was very clear: the business plan for (especially) small and medium-sized cinemas in Europe (and probably also elsewhere) was still far off in a hazy horizon. Parallel to the expected roll-out in the US this year and 2009 basically nothing or very little happens in Europe apart from in the UK where public money (The UK Film Council) has equipped almost 300 screens of all sizes and locations with a 2K installation, with Arts Alliance Media as the technical partner. Apart from Norway no other country has so far initiated or even hinted at a similar solution. The situation is causing a lot of nervousness and bewilderment also because it is hard to see how the VPF system, now operating in the US, can be “applied” for European cinemas of smaller size. From the distributors’ point of view “the business is simply not there” to make it worthwhile. Arts Alliance Media foresees that 7,000 screens will be helped out by the VPF system in Europe. What about the rest of Europe’s 20,000 screens? Part of the problem is of course the 2K format implemented by the DCI criteria (the US majors). An excellent standard, absolutely, that by far exceeds the needs of an average-sized European screen with 180 seats and a screen width of 8 meters. An expressed expectation that the Majors would “go easy” on the 2K-demand in overseas territories like India and China was shot down by XDC, Belgium, represented by Fabrice Testa. The forecast for surviving is therefore darkish for cinemas that have to rely on American product.
But also the art-cinemas throughout Europe are feeling the cold. President of CICAE, Detlef Rossmann, expressed his worries and looked forward to having a German model (a mix of VPF and Federal Film Board money) discussed in June with ministers and players from the industry. “The 1,300 big-chain screens can cope themselves – the rest, 3,500, will be destroyed”, was Rossmann’s attitude, “small European distributors cannot pay the same VPF as the big companies wherefore their films will not be screened. A diversified VPF might be the answer or a fee per ticket.” No big chain has yet invested in digital equipment in Germany. During the course alternative content was presented and discussed galore. Opera seemed to be the big thing in many UK locations equipped with 2K projectors. Big and small. Direct transmissions from the Metropolitan or filmed opera versions from La Scala were extremely popular even at relatively high-priced tickets like 20 pounds. In a clearly small location, Hawkhurst in Kent, a small cinema (92 seats) has been installed in the former town meeting hall and does great business as a 100% digitalized cinema. Thanks to alternative content, first-run films, flexibility and diversity, the first cinema ever in this small town has prospered. The message is clear: solve the financial problem and the future looks bright. A representative from a major chain in Scandinavia expressed his vision like this: “the big ones can look after themselves, the small rural ones will be supported by local governments/state for cultural reasons – the ones in between that do not have a particular profile or financial solidity will be left out in the cold”.
Jens Rykær
President MEDIA Salles
But also the art-cinemas throughout Europe are feeling the cold. President of CICAE, Detlef Rossmann, expressed his worries and looked forward to having a German model (a mix of VPF and Federal Film Board money) discussed in June with ministers and players from the industry. “The 1,300 big-chain screens can cope themselves – the rest, 3,500, will be destroyed”, was Rossmann’s attitude, “small European distributors cannot pay the same VPF as the big companies wherefore their films will not be screened. A diversified VPF might be the answer or a fee per ticket.” No big chain has yet invested in digital equipment in Germany. During the course alternative content was presented and discussed galore. Opera seemed to be the big thing in many UK locations equipped with 2K projectors. Big and small. Direct transmissions from the Metropolitan or filmed opera versions from La Scala were extremely popular even at relatively high-priced tickets like 20 pounds. In a clearly small location, Hawkhurst in Kent, a small cinema (92 seats) has been installed in the former town meeting hall and does great business as a 100% digitalized cinema. Thanks to alternative content, first-run films, flexibility and diversity, the first cinema ever in this small town has prospered. The message is clear: solve the financial problem and the future looks bright. A representative from a major chain in Scandinavia expressed his vision like this: “the big ones can look after themselves, the small rural ones will be supported by local governments/state for cultural reasons – the ones in between that do not have a particular profile or financial solidity will be left out in the cold”.
Jens Rykær
President MEDIA Salles
26 May, 2008
DROP IN EUROPEAN AUDIENCES
THE SLOW GROWTH OF EUROPEAN MULTIPLEXES CONTINUES, ALMOST 6,000 DIGITAL SCREENS THROUGHOUT THE WORLD
A tendency to decline but not everywhere: this sums up the 2007 trend as regards cinema audiences. The exact opposite of 2006, where the plus sign was the general rule, although, there again, with some exceptions.
Less spectators in Europe
From the figures available to date, which in some cases are still provisional, it can be seen that ticket sales have declined on average by 1.3% in the 27 countries of the European Union, dropping from 929.9 to 918.3 million. In the 19 countries of Western Europe the drop is equal to -2.1% (from 885.1 to 867.0 million), whilst in the 15 territories of Central and Eastern part of the continent and on the Mediterranean Rim the decrease amounts to -1.3% (from 113.8 to 112.3 million).
The situation in Western Europe: contrasting results from the five leading markets
Analysing the figures country by country and starting with the five leading markets, the results that emerge differ widely, as in 2006. France, Spain and Germany close 2007 with considerable decreases, whilst the United Kingdom grows and Italy takes wing. The leading European market continues to be France which, whilst losing over 11 million spectators (from 188.7 to 177.5 million), obtains a better result than in 2005. Germany leaves behind 11 million tickets, dropping to 125.4 million and returning to its 1995 position. Over 6 million fewer spectators for Spain, too, which experiences its third consecutive drop and closes with 116.9 million spectators: for a similar result we have to look back to 1998. The United Kingdom, on the other hand, sees a happy ending to 2007 (+3.7%), recovering most of the spectators lost in 2006 and, with 162.4 million spectators (of which over 38 were counted in July and August alone), confirms itself as the second largest market in Europe. Italy grows to the extent of almost 12%, according to the MEDIA Salles elaboration on the Cinetel figures, which cover around 90% of the market, recording over 114 million spectators. This flattering result, which is the best since 1986, is due mostly to the success of films “made in Italy”, accounting for as much as 34% of the market. Remaining in Western Europe a positive trend can also be seen in a smaller country like Ireland, which grows by 2.9%, crossing the 18-million spectator threshold for the first time, and in Greece (+7.7%).
Portugal (-0.3%), The Netherlands (-1.4%), Sweden (-2.5%) and Finland (-2.8%) are characterised by basically stable results or with slight dips, whilst the other countries experience sometimes substantial decreases, ranging from Denmark’s –4.0% and Belgium’s -6.2% to Switzerland’s -15.8% and including Austria’s -9.5% and Norway’s -10.0%.
The situation in Central and Eastern Europe and the Mediterranean Rim: Turkey influences the drop
In Central-Eastern Europe and on the Mediterranean Rim one of the two leading markets, Poland, has a positive result (33.8 million spectators compared to the 32.4 of 2006). The same applies to smaller markets such as Romania (+1.8%), Estonia (+2.6%), Bulgaria (+4.6%) and, even more, to Latvia (+13%), and to the Czech Republic, where the very important increase (+11.4%) is also due to the positive result by domestic films. An exceptional increase rate (+33.8%) is recorded in Lithuania. The increase in spectators seen in most countries, however, fails to compensate for the drop recorded in Slovakia (-18.3%) and on the second largest market - Turkey - which decreases from almost 35 million tickets to 31 (-10.9%).
An initial observation emerging from this situation, which would not cause great concern if the average dip of a couple of percentage points alone were considered, is the repetition of negative trends on markets that had raised high hopes for constant and lasting growth during the ‘Nineties.
The slow growth of multiplexes continues
In terms of infrastructures, the number of screens in Western Europe remains stable, whilst signs of growth are recorded in Central-Eastern Europe and the Mediterranean Rim.
The typology of movie theatres continues to change, with an increase in screens located in complexes housing over 8 screens. At 31 October 2007 there were 11,910 screens in multiplexes all over Europe, compared to the 11,393 twelve months before. This represents a 4.3% increase, a little lower than that recorded between 2005 and 2006, but decidedly lower than that recorded between 2004 and 2005 (+7.5%). The geographical distribution of complexes opened during 2007 shows that most vitality is to be seen in areas where the multiplex phenomenon is most recent: these are mainly Poland (7 new sites), Italy and Turkey (4 new complexes each), but also smaller markets such as Croatia and Greece. Amongst the countries in the avantgarde of the phenomenon, France and Ireland are the most dynamic (respectively 6 and 3 new sites), followed by Spain (2 complexes). A new complex has been opened in Belgium and another on the large UK market. Closures, however, cannot be overlooked – two of which occurred in Italy and four in Spain, confirming the fact that competition is wide-ranging and regards the whole market.
Digital screens worldwide: double in 2007, touching on the 6,000 mark
During 2007 the number of digital screens worldwide practically doubled, rising from 2,864 to 5,830. The lion’s share went to North America – in particular the United States – where, at the end of 2006, 1,957 were installed, with the number rising to 4,576 in twelve months. This is 78.5% of the world’s total projectors fitted with DLP Cinema or 4K technology and over 10% of US screens. In the same period Europe advanced from 529 to 830 installations, with a 57% increase. The number of digital projectors in Asia remained basically stable, rising by only 7.8% to 374 units during the year.
Elisabetta Brunella
Secretary General of MEDIA Salles
MEDIA Salles - European Cinema Journal no. 1/2008
A tendency to decline but not everywhere: this sums up the 2007 trend as regards cinema audiences. The exact opposite of 2006, where the plus sign was the general rule, although, there again, with some exceptions.
Less spectators in Europe
From the figures available to date, which in some cases are still provisional, it can be seen that ticket sales have declined on average by 1.3% in the 27 countries of the European Union, dropping from 929.9 to 918.3 million. In the 19 countries of Western Europe the drop is equal to -2.1% (from 885.1 to 867.0 million), whilst in the 15 territories of Central and Eastern part of the continent and on the Mediterranean Rim the decrease amounts to -1.3% (from 113.8 to 112.3 million).
The situation in Western Europe: contrasting results from the five leading markets
Analysing the figures country by country and starting with the five leading markets, the results that emerge differ widely, as in 2006. France, Spain and Germany close 2007 with considerable decreases, whilst the United Kingdom grows and Italy takes wing. The leading European market continues to be France which, whilst losing over 11 million spectators (from 188.7 to 177.5 million), obtains a better result than in 2005. Germany leaves behind 11 million tickets, dropping to 125.4 million and returning to its 1995 position. Over 6 million fewer spectators for Spain, too, which experiences its third consecutive drop and closes with 116.9 million spectators: for a similar result we have to look back to 1998. The United Kingdom, on the other hand, sees a happy ending to 2007 (+3.7%), recovering most of the spectators lost in 2006 and, with 162.4 million spectators (of which over 38 were counted in July and August alone), confirms itself as the second largest market in Europe. Italy grows to the extent of almost 12%, according to the MEDIA Salles elaboration on the Cinetel figures, which cover around 90% of the market, recording over 114 million spectators. This flattering result, which is the best since 1986, is due mostly to the success of films “made in Italy”, accounting for as much as 34% of the market. Remaining in Western Europe a positive trend can also be seen in a smaller country like Ireland, which grows by 2.9%, crossing the 18-million spectator threshold for the first time, and in Greece (+7.7%).
Portugal (-0.3%), The Netherlands (-1.4%), Sweden (-2.5%) and Finland (-2.8%) are characterised by basically stable results or with slight dips, whilst the other countries experience sometimes substantial decreases, ranging from Denmark’s –4.0% and Belgium’s -6.2% to Switzerland’s -15.8% and including Austria’s -9.5% and Norway’s -10.0%.
The situation in Central and Eastern Europe and the Mediterranean Rim: Turkey influences the drop
In Central-Eastern Europe and on the Mediterranean Rim one of the two leading markets, Poland, has a positive result (33.8 million spectators compared to the 32.4 of 2006). The same applies to smaller markets such as Romania (+1.8%), Estonia (+2.6%), Bulgaria (+4.6%) and, even more, to Latvia (+13%), and to the Czech Republic, where the very important increase (+11.4%) is also due to the positive result by domestic films. An exceptional increase rate (+33.8%) is recorded in Lithuania. The increase in spectators seen in most countries, however, fails to compensate for the drop recorded in Slovakia (-18.3%) and on the second largest market - Turkey - which decreases from almost 35 million tickets to 31 (-10.9%).
An initial observation emerging from this situation, which would not cause great concern if the average dip of a couple of percentage points alone were considered, is the repetition of negative trends on markets that had raised high hopes for constant and lasting growth during the ‘Nineties.
The slow growth of multiplexes continues
In terms of infrastructures, the number of screens in Western Europe remains stable, whilst signs of growth are recorded in Central-Eastern Europe and the Mediterranean Rim.
The typology of movie theatres continues to change, with an increase in screens located in complexes housing over 8 screens. At 31 October 2007 there were 11,910 screens in multiplexes all over Europe, compared to the 11,393 twelve months before. This represents a 4.3% increase, a little lower than that recorded between 2005 and 2006, but decidedly lower than that recorded between 2004 and 2005 (+7.5%). The geographical distribution of complexes opened during 2007 shows that most vitality is to be seen in areas where the multiplex phenomenon is most recent: these are mainly Poland (7 new sites), Italy and Turkey (4 new complexes each), but also smaller markets such as Croatia and Greece. Amongst the countries in the avantgarde of the phenomenon, France and Ireland are the most dynamic (respectively 6 and 3 new sites), followed by Spain (2 complexes). A new complex has been opened in Belgium and another on the large UK market. Closures, however, cannot be overlooked – two of which occurred in Italy and four in Spain, confirming the fact that competition is wide-ranging and regards the whole market.
Digital screens worldwide: double in 2007, touching on the 6,000 mark
During 2007 the number of digital screens worldwide practically doubled, rising from 2,864 to 5,830. The lion’s share went to North America – in particular the United States – where, at the end of 2006, 1,957 were installed, with the number rising to 4,576 in twelve months. This is 78.5% of the world’s total projectors fitted with DLP Cinema or 4K technology and over 10% of US screens. In the same period Europe advanced from 529 to 830 installations, with a 57% increase. The number of digital projectors in Asia remained basically stable, rising by only 7.8% to 374 units during the year.
Elisabetta Brunella
Secretary General of MEDIA Salles
MEDIA Salles - European Cinema Journal no. 1/2008
Subscribe to:
Posts (Atom)