D-Cinema beyond the transition

Posted on January 13, 2014

4


cinemapicThe following article was written by Michael Gubbins for this month’s issue of MovieScope out now.

Around 84.1% of the world’s cinemas are now digitised, according to international research and analysis company IHS.

Given the complexity of the task of replacing the 35mm technology that has held sway for more than a century, and given film its name, the progress has been remarkable. Those old enough to remember the decimation of cinemas in the 1980s may feel that the number of casualties has been remarkably small.

For many, the ends have justified the means.

And yet there has been an insistent voice of dissent that has been getting a little louder of late. Grand global conversion rates don’t mean much if the cinema in your town is closing down.

There is, however, a bigger issue: the concern that the mechanisms established to support the transition to Digital Cinema are now holding back progress, particularly for independent cinema.

That debate is, predictably, only slowly coming to the fore. It has been the pattern of Digital Cinema so far that mainstream engagement with the issues has tended to come only after the period when there was the opportunity to make a real impact.

There are, however, legitimate concerns about the mechanism that underpinned the vast majority of digital conversions – the Virtual Print Free (VPF)

The VPF is one those unlovable, pragmatic bodges that arise when you try to find analogue solutions to digital problems.

It was based on the simple and fair principle that distributors, and particularly the Hollywood studios, would make the really big long-term savings and so should have to contribute to the cost of cinema conversion.

But that aim has been achieved by artificially recreating the economics as the old 35mm world and shackling exhibition and distribution to an old business model.

There were advantages: it was largely cost-neutral and, much more importantly, no viable alternative was offered.

There was a third driving force, and that was an atmosphere of urgency, whipped up by Hollywood and summed up by National Association of Theatre Owners (NATO) chief John Fithian in 2011 in his “convert to digital or die” speech. “Simply put, if you don’t make the decision to get on the digital train soon, you will be making the decision to get out of the business,” he said.

It might not have been the most diplomatic of language but the point was essentially true. A hybrid digital and 35mm system meant more costs and a longer wait for gains.

In much of Europe, there was an additional concern with belated recognition that the independent sector was actually in danger, unless a mechanism was found for smaller venues.

For the US, fears remain with some estimates that as many as 1,000 independent, small-town and arthouse theatres. There are also fears, shared elsewhere, about a VPF system, which was predicated on the quick ‘turn’ of new films.

Ira Deutchman, managing partner of Emerging Pictures suggested that:  “theatres are incentivised not to holdover films for very long. This is potentially the death knell for the types of films that require word-of-mouth to build into a hit. Now, we all know that the old fashioned word-of-mouth film has been on life support for a while now.”

The UK has had some of the same issues, with four integrators each collecting VPFs, expanding the run of a film has meant paying additional VPFs, restricting the potential increased reach of indie titles. The BFI has been trying to find a solution, including a system where a payment is made only for the “widest point of release.”

In many other countries the public sector calvary has ridden in with direct subsidies, some organisational support, and some financial seeding of business schemes and partnerships.

The attempt to adapt the VPF model to local conditions has worked in many places. In the Netherlands, for example, the government invested around 15% of the cost to a system called Cinemadigitaal, which effectively reduced the burden of the VPF on smaller operators; while Austria has introduced a “Free VPF” approach, where the fee is pegged to one euro per admission (up to 500 Euros).

The debate around VPF, however, is always in danger of missing the big picture. The VPF remains a short-term fix for a short-term issue – the need to install a global network – and it has a shelf life, generally somewhere between five and 10 years.

The big question should be what Digital Cinema can do when the equipment is in situ. Digital cinema needs to become not just self-sustaining – and the studios have made it pretty clear that they are not countenancing a VPF2 – but to find new ways to attract a changing audience and build new forms of revenue.

It is not the short-term pain but the long-term gain that ought to be the motivator for all parties.

David Hancock, Senior Principal Analyst for Cinema at IHS, and one of the most respected experts in the field borrows a phrase from Winston Churchill, in suggesting that we are “at the end of the beginning” of digital cinema.

The first phase was all about transition; the new world is all about implementation and exploration. For cinemas, there are three basic keys to sustainability, Hancock suggests:

  • Lower cost equipment, with cheaper projectors, satellite and broadband links, and some high-cost of acquisition, low cost of ownership, options, such as long-lasting laser light sources, rather than light bulbs.
  • New revenues: including event cinema, variable pricing and business services
  • New models: perhaps including more flexible programming, networking with other venues and possibly

But cinemas are only one part of the equation, if Digital Cinema is going to be the engine of a dynamic, diverse and sustainable future for film. It is possible to imagine that future as good for cinema but bad for independent film.

While distributors will make big savings in the post-VPF world, it may become ever harder to find space in theatres. The amazing £1.7m taken by UK theatres from a screening of an episode of Dr Who that was simultaneously showing on free television will have rung some alarm bells.

The irony that distributors may have contributed to a system, from which they end up excluded, is only just beginning to surface.

It does not necessarily need to be so. Flexibility of screening times, new forms of marketing and, most of all, great content might just open up a new world of opportunity. That is a discussion in which producers, rights holders and exhibitors ought to be engaged now.

“If we can make all the boats rise, we win,” says Todd Wagner, co-owner of 2929 Entertainment. “Let’s not try to make this a zero sum game.”