Digital Cinema Business Models: The Global Outlook
Patrick von Sychowski
www.screendigest.com
global media intelligence
Digital Cinema Reports in 2003 • ‘Digital Cinema: Audience & User Preference Study’ March ’03 – Larry Cervantes (FWP) • ‘Digital Cinema Business Models: Global Outlook’ June ’03 – Patrick von Sychowski (SD) • ‘Broadening the Perspective on Cinema Entertainment: New revenue through alt. content and use of cinemas’ Sept ’03 – Daniel Schmitt (SD) • E-Cinema Alert: weekly, free, 116 issues, >1,500 subscribers
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global media intelligence
Fields of Coverage Community centres Town Halls Churches Schools Malls
Alt. Cont.
HDTV
www.screendigest.com
Alt. Venue
SDTV
Alt. Use
Business Education Gaming
./ a .S m .D e O C in E-
Adverts Music Sports Stage Live
D -C 1st in Run Features em a D-35mm
PC
global media intelligence
Audience and User Preference FINDINGS Screening of “Harry Potter 2” at UltraStar Cinema in San Diego, California AUDIENCES: • 85 % rate it ‘much better’ or ‘better’ than 35mm film • 70 % were aware that film shown was digital • 72 % would travel further to see digital movie PROJECTIONISTS: • 82 % found DLP Cinema ‘much easier’ to use than 35mm • 67 % found DLP Cinema ‘much more relaible’ than 35mm ABOVE ALL: • Revenues were 20 % higher than screens showing 35mm copy www.screendigest.com
global media intelligence
Digital Cinema Business Models: situation today • One projector technology (TI’s DLP Cinema), many servers • 162 digital screens / 149 sites world wide (8/’03) • 82 films released in DLP Cinema network • Search for standards (SMPTE DC28, ITU, EDCF) • 2003: – Digital Cinema Initiative (DCI) + NATO talk biz “Roll-out can begin in 2004.” John Fithian, NATO • But rest of the world is not waiting: FHP, T-Joy, TeleImage, CFB, UK Film Council, others
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global media intelligence
Digital Screen Growth 300
112
250 200 150 100 50
19 12
0 1999
19
31
50
2000
2001 Total
www.screendigest.com
162
162
2002
2003
New
global media intelligence
Digital Screens World-Wide 90 80 70 60 50 40 30 20 10 0
80
70 51
54
17
17
10
10
1 N. America
Asia
Europe Sites
www.screendigest.com
L. America
1
Australia
Screens
global media intelligence
Digital Cinema Driving Forces •
Prints savings ($1,360m/year WW) not in itself driver – Neg cost: $58.8m, Adv: $27.3, Print: $3.3m (3.7% of total cost of MPA film)
60 50 40 30 20 10 0
1990
1992
1994
Advertising www.screendigest.com
1996 Print
1998
2000
Negative cost global media intelligence
Digital Cinema Driving Forces • Prints savings ($1,360m/year WW) not in itself driver – Neg cost: $58.8m, Adv: $27.3, Print: $3.3m (3.7% of total cost of MPA film)
• Changing release patterns
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global media intelligence
US 2003 ‘Blockbuster’ summer 100
2
Bruce Almighty
2
80 60
53
40
50
2 FastHulk 2 Furious 70
63
56
63
56
34
X2
Finding Matrix 2 Nemo Week 1
www.screendigest.com
53
42
54 50.2
27
20 0
American Pie 3
Pirates of Caribbean
Charlie's T3 Angels 2 Week 2
Bad Boys Spy SWAT Kids 2 3-D
-% Change global media intelligence
US 2002 ‘Blockbuster’ summer Spider-Man
Austin Powers 3
120 100 2 2 2 1 1 1 1 2 1 1 2 2 80 Sum of xXx MIB 2 Minority 60 57 51 all Fears 55 Report 50 53 50 50 39 40 38 38 30 25 20 0 Scorpion Star ScoobyMr. Road to Signs King Wars: Doo Deeds Perdition Episode II Week 1 www.screendigest.com
Week 2
-% Change global media intelligence
US 2001 ‘Blockbuster’ summer 80 70 60 50 40 30 20 10 0
2
1
1
1
1
59 50.5
Mummy Returns
50
50
1 58
1 55
1 59
55
2 54
A.I. Jurassic Planet of Rush American Fast & Park III the Apes Hour Pie 2 Pearl Furious Harbour Week 1 Week 2 -% Change
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Tomb Raider
global media intelligence
Digital Cinema Driving Forces • Prints savings ($1,360m/year WW) not in itself driver – Neg cost: $58.8m, Adv: $27.3, Print: $3.3m (3.7% of total cost of MPA film)
• Changing release patterns from: – Growth of Ultra-wide releases* • 32 UWRs in 2002 vs. 22 UWRs in ’01 = +45%)
– Take-opening-WE-box-office-and-run release strategy • Drop off 1st to 2nd WE BO grew 41% ~> 43% (Hulk 70% drop 2nd w/e)
– Shorter International window – Pressure from home theatrical (parallel import)
• Problem of int’l digital piracy (P2P & disk-based) • Digital Source Mastering (DSM) and Digital Intermediate (DI) * +3,000 screens opening weekend www.screendigest.com
global media intelligence
Who Deploys Digital Cinema?
34
46
35
11 7 29 www.screendigest.com
China FB TDC U CI Boeing Teleimage T-JOY others
6
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Role for any Third-Party Operator in DC • Early 3rd Party D-Cinema Proponents lack success – AndAction (gone), Technicolor DC (sacked), Boeing DC (for sale?), Kodak DC (focus on advertising)
• Emergence of new third party service players: – Dolby (US)
• Integrated operators in non-US territories: – T-Joy (Japan), TeleImage (Brazil), FHP (Sweden), CFB (China)
• Still need for 3rd party player for: • Installation • Training/re-training • Certification & QC • Monitoring
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• Transport & network play-out • Data handling (film, adv, trail, alt.cont • Contract ‘policing’/neutral auditor • 24/7 service support
global media intelligence
Digital Cinema Hurdles to Roll-out TECHNOLOGY TI’s DLP Cinema 2K (m25) projector: this fall STANDARDS SMPTE DC28 and DCI coming to fruition: end ‘03 BUSINESS MODEL DCI and NATO+others in discussion: late ’03/early ‘04 CONTENT (FILMS) No signs of studios increasing output: latent potential?
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global media intelligence
Digital Cinema Releases
35 30 25
14
20 15 10 5
5
10 3
8 1
0 1999
8
4 2000
2001 1st half
www.screendigest.com
16 2002
12 2003
2nd half global media intelligence
Digital Cinema Time-line 1989-1999
Proof of concept (projector + compression)
1999-2001
Technical field trials
2001-now
Business propositions (third-party players)
2000-2004
Standards (SMPTE, EDCF, NewCo)
2002-2005
Real hardware competition
2003/2004
Meaningful business agreement
2004/2005
Start of large scale deployment
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global media intelligence
Notable “digital cinema” trials and deployments ‘03 • DCS (Microsoft) & Landmark – 177 screens, 53 sites (25 previous) • Folkets Hus & Parket (Swe) – 7 screens/sites, set for growth • Digital Test Bed @ BFI’s National Film Theatre – 17 June 2003 • Planed Euro1080 launch – 1 January 2004 • UK Film Council - £12m-£20m for 200-250 digital screens - Promoting ‘specialised film’ through digital www.screendigest.com
global media intelligence
Advertising is cinemas’ digital Trojan Horse! Dsd
Dsites
Name
Territory
Dsld
DRS
Deliv. Deliv.
CAPA
Norway
Y
Y
Satellite
72
0
255
255
2000
Cinemark
South Africa
No
Y
Satellite
20
0
52
56
midmid-2001
CSA
UK/Europe/USA
No
No
n/a
9
0
110
110
2002
NCN Inc.
USA
Y
No
Satellite
7
160
0
160
1999
Ovation Interactive
USA
Y
No
CDCD-Rom
14
78
0
78
OctOct-01
Pearl & Dean
UK & Ireland
No
No
n/a
1
0
8
8
JanJan-03
Regal CineMedia
USA
No
Y
Satellite
158
0
2,100
2,100
2002
Screenvision Europe (formerly RMB Int'l)
Belgium/Europe
No
No
n/a
0
0
0
0
1010-OctOct01
Screenvision USA
USA
Y
Y
T1
9
0
117
117
MarMar-02
Val Morgan
Australia, USA, South America, UAE
Y
no
CDCD-Rom
6
64
0
64
0505-JulJul-00
302
2,646
2,948
TOTAL
www.screendigest.com
D-RS
D-screens
Trial
global media intelligence
‘Alternative Content’ report - definition • Any form of large-screen content other than a feature film – – – – – –
Soccer Extreme sports Pop/classical music Stage events, e.g. musicals Television content Gaming…
• Increasingly enabled by use of (low-end) digital projectors
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global media intelligence
Alternative Content: History and Current Status • Long tradition of alternative content on 35mm film – Horse racing originally shown in 1932
• First serious ventures using electronic cinema technology in the mid-90s Today • We came across 40 exhibitors worldwide that have screened alternative content yet… • …only 7 have screened more than 5 different events
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global media intelligence
Europe: Alternative Content Screenings to Date
Soccer Other Sports Extreme Sports Pop Music Television Gaming Stage Classical Music
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global media intelligence
USA/Canada: Alternative Content Screenings to Date
Other Sports Extreme Sports Pop Music Television Gaming Stage Soccer
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global media intelligence
Charging Audiences: Most Popular Content •
Europe: Soccer – 2002 World Cup final matches: Average of 600 patrons per screening in UCI Kinowelt’s Hamburg multiplex
•
USA/Canada: Wrestling – Very good audience figures for monthly screenings since 1999
•
Worldwide: Pop music – Exclusively screened live concerts – Pre-release screenings of concert/music DVDs
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Generating Revenues: Different Business Models • Direct ticketing • Indirect charging – e.g. minimum spending on concessions
• • • •
Sponsorship and promotion Auditorium/theatre rental Members/passes Micro-payments – using mobile phones
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global media intelligence
Promotional Screenings: Suitable Content • Pop music – Promotion of new albums/concert DVDs – 10,000 fans in 25 theatres across Europe attended live-relay of Bon Jovi concert in UCI cinemas in September 2002 – David Bowie ‘global’ e-cinema concert 8 September/15 September
• Gaming – Big-screen experience perfect to launch and promote new PC and console games – Ultimate Gamer competition in UCI UK cinemas to promote new Hulk game from May - July 2003
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Alternative Use: Corporate Events & Education • Auditorium rental • Various events – Conferences and meetings, product launches, AGMs, employee training
• Very attractive to exhibitors – Use of theatres during ‘dark hours’ (Kinepolis: 600 events per year)
• More corporate clients through digital distribution networks • Education – Enabled by digital distribution networks: ‘Virtual lecture hall’ – No viable business model yet
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global media intelligence
Critical Factors: (I): Rights Issues Difficulties for exhibitors to secure screening rights No substantial market for rights holders Low-end projectors & digi dist networks will create a market (II): Marketing and Advertising Irregularity and one-off nature of screenings Shift of competence: Exhibitors have to advertise events (III): Providing ‘added value’ Correlation between screenings’ level of exclusivity and added value that has to be provided www.screendigest.com
global media intelligence
Perspectives • Alternative content alone will not fund the large-scale conversion to digital • Alternative content will piggyback on digital cinema advertising • Proliferation of digital networks will create market for rights holders and solve current rights problems • Promotional events and auditorium rental for corporate events will be the most important sources of revenue • Sports events and live-concerts are most likely to attract paying audiences • Gradual transformation of traditional movie houses to entertainment complexes www.screendigest.com
global media intelligence
Thank You www.screendigest.com Patrick von Sychowski
www.screendigest.com
global media intelligence
