Filmed entertainment in 2011

MSB5 has been out for less than a year and already things have moved on in the filmed entertainment sector of the media industries. We can identify several trends, most of which are signalled in the book, but in some cases things are moving faster than we expected – and, of course, there have been developments we haven’t foreseen or we have misjudged.

Digital cinema

We may now be at the moment when new forms of distribution and cinema projection have reached the tipping point, i.e. the move to digital is now confirmed. (Nobody really doubted that it would happen eventually, but until there was evidence that somebody, somewhere, would pay for the new technologies to be installed it wasn’t a ‘done deal’.) Several different developments have come together over the last few months.

  1. New distribution management systems now operate in many territories for digital ‘prints’ including a system which spreads the cost of installing digital projectors. We’ve offered an introduction to these on the MSB5 blog.
  2. Several of the smaller, but high value, territories in Europe have now announced that they will be completely digital by a set date. Norway is expected to see its 420 screens all capable of digital projection before the end of 2011 (the majority of Norwegian cinemas are still publicly-owned). In the Netherlands another public-private partnership aims to digitise nearly all the 750+ screens in the country by mid 2012.
  3. In the bigger markets like the UK, the lead is being taken by some of the larger cinema chains. What began as an initiative by the public funding agency, the UK Film Council, to offer grants to persuade exhibitors to go digital has now become a privately-funded initiative (paid for like the other European schemes via the VPF or Virtual Print Fee system – see the blog link). Cineworld, the second largest UK chain, aims to have all of its 791 screens available for digital projection by 2013 (see the company's June 2010 press release). Odeon similarly announced it expects to be at 100% digital projection on all its 800 screens by 2012, in a move costing more than £70m (Screendaily 4/5/2010) .
  4. Part of the incentive for the cinema chains to install new technologies is the much higher returns for Digital 3D. Box office figures around the world in 2010 show the highest per screen figures (with premium seat prices) for Digital IMAX and Digital 3D releases. Half of the Top 20 films at the North American box office in 2010 were released in 3D, including the two biggest films of the year, Toy Story 3 and Alice in Wonderland.
  5. During a period of recession in Europe and North America, the international advance of digital cinema is being driven by the extraordinary expansion of cinema screens in China – nearly all of which have digital projection. Screen International (February 2011) reports that China’s box office grew by 60% in 2010. This was on the back of 313 new cinemas with 1,533 screens (90% digital) built in one year. There are now 6,200 screens in China. One exhibitor predicts that this will rise to 40,000 within the next five years. The situation is similarly dramatic in India, but here there are two kinds of ‘digital screen’ – one of which is ‘compliant’ with Hollywood releasing standards (DCI 2k) and the other is a lower cost system using satellite broadcasts, known as ‘e-cinema’. This latter may be attractive to cinemas in less affluent markets in West Asia and Africa.
  6. In Europe and North America, digital cinema is now pushing harder to introduce non-film content into multiplexes with contracts to deliver satellite transmissions of live theatre, opera and ballet as well as sports events. What was previously a ‘one-off’, occasional offering is now becoming an integral part of cinema programming. The initiative has brought new ‘high art’ audiences into cinemas but some theatre productions such as Danny Boyle’s Frankenstein with Johnny Miller and Benedict Cumberbatch promise to unite film and theatre audiences.

The cinema business model

What are the ramifications of these developments for the cinema business model?

Two related points stand out:

  1. The success of 3D Digital and IMAX-adapted films means that more screens capable of showing such films are opening globally. Producers and distributors now see the market opportunities for more big budget 3D films. Chinese and Japanese 3D films are beginning to get distribution across Asian markets.
  2. At the other end of the market, the traditional ‘specialised’/art cinema audience is being affected by live theatre/opera etc. These screenings are sometimes replacing programming slots for specialised films – though they might be bringing in new audiences.

These developments are helping to confirm what many film industry commentators have been saying for the last couple of years – film budgets are now being pushed towards the extremes. We might expect to see a smaller number of increasingly expensive blockbuster 3D films and a rise in the number of low budget films. The mid-range film in budget terms will become a very hard sell. There will still be some titles like The King’s Speech, but ‘international films’ costing $20-30 million (i.e. films from outside Hollywood seeking international distribution) will be squeezed – especially as the DVD market declines.

One word of caution – 3D has been hailed as a saviour before (in the early 1950s). Like all technological innovations it depends on the quality of the film’s story as well as the ‘spectacle’ of its attractions. The first big flop for a 3D film was Mars Needs Moms in March 2011. One flop can be dismissed but not a stream of them, so keep a lookout for more.

Of course, most people around the world still watch films on television, computers or now even handheld screens. Because of the increase in outlets/channels (and the effective piracy of online sharing) the revenue from television for the rightsholders of films is falling. This in turn has an impact on the budgets for films to be shown on TV. Subscription TV channels like HBO (see the case study in MSB5) are one possible solution, guaranteeing enough revenue to finance high quality shows (which in turn attract subscribers). The attempt by BSkyB to harness the ‘HBO effect’ with its exclusive deal to show HBO programmes on its new Sky Atlantic channel is a significant development in UK broadcasting. (But ironically Sky Atlantic’s first offerings in the UK were ‘defeated’ in the TV ratings by BBC4’s import of Danish crime series The Killing, arguably the biggest subtitled TV success in the UK.)

Research and Explore

What kinds of changes to access to ‘filmed entertainment’ do you see in your local media landscape? Look across a month’s programming offer in your town/city/rural area.

  1. Does your nearest multiplex cinema advertise its ‘digital’ screens? In any one week how many 3D digital films are showing?
  2. Find your nearest ‘specialised cinema’ (i.e. a cinema showing foreign language or non mainstream films). Does this cinema and/or the multiplex have any other forms of ‘digital entertainment’ on offer via satellite links? (Sports or music events, theatre, opera or ballet, celebrity Q&A sessions etc.)
  3. Are there any clubs, pubs, village halls, film societies etc. showing any kind of films from DVD or Blu-Ray?

Now ask yourself and friends and family these simple questions:

  1. Leaving aside the actual content of the film, what would determine your choice of a venue from those listed above or watching the same film on your computer or TV set at home? (Cost, quality of sound and image, meeting friends, being part of a larger social gathering, eating popcorn etc.)
  2. Do you pay anything to watch TV? What would you be prepared to pay to see ‘exclusive programming’ such as the HBO material on Sky Atlantic?

If you do this research, you might be in a position to argue through what you think are some of the effects of the impact of digital cinema and subscription television. One of the most important questions (as it was for the original multiplex building boom) is whether you now have more choice of different kinds of ‘filmed entertainment’ on offer where you live.

This link explains the situation in North America very well:
http://www.latimes.com/business/la-fi-ct-small-theaters-digital-20110419,0,2294998.story

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