Lord Puttnam, President of Film Distributors’ Association (FDA) in the UK, looks at the big changes happening in the film value chain.
The film value chain remains in a tricky state of flux, and the always precarious task of forecasting revenues for titles coming to market two or three years ahead has become riskier than ever. While the UK home video market, if I may still call it that, declined slightly in value in 2013, the ways in which people are watching are changing radically.
While a majority of films are still viewed on physical formats, in 2013 downloading and streaming generated more than a quarter of the market – and rising. At least 40 digital services are now available, many of them embryonic, but between them they are transforming the range and quality of choice.
While the home entertainment sector is busy re-modelling itself, UK cinema-going is stubbornly flat-lining. Almost exactly the same number of tickets was purchased in 2013 – 165 million – as a decade earlier. And this despite significant investment in new multiplexes, and a vast increase in the number of films acquired and launched into distribution. Almost 700 features were released last year, nearly double the total of a decade ago.
It’s easy to blame the cinema-going plateau on piracy, higher ticket prices, ferocious competition, the whirlwind ‘churn’ of product, the weather, or is it too many phones ringing or too much popcorn being crunched during the movie? Most likely it’s a combination of all of them.
Let me offer a few broader thoughts, through the prism of developments in the media generally, and their impact on audiences.
30 years ago, in January 1984, Apple launched its Macintosh computer. These little electronic devices put the creative power of data-processing technology into people’s hands, and all our lives were irrevocably changed.
10 years ago, in February 2004, Facebook was founded. Twitter sprang up a couple of years later. ‘What’s App’ and Instagram, both now owned by Facebook, weren’t born until 2009 and 2010 respectively.
All these social networks have recast the media landscape, not least by massively extending our capacity to share our experiences. This, in turn, has increased people’s power to influence choice – via trusted voices and conversations which the social web enables.
It has challenged us to think harder about the boundaries between ‘public’and ‘private’. But in doing so, it’s become inextricably linked with the democratisation of opinion. I think it’s fair to say that we’ve only just scratched the surface of the commercial power of the social web, not least as a recommendation engine adding new layers of value.
At the same time, the world’s population is undergoing a remarkable transformation. As a consequence of increases in the middle-aged demographic, and welcome improvements in life expectancy, the global population of senior citizens is projected to treble to 1.5 billion by 2050. We’re heading towards a much older world in which 1 in 6 people are 65 and over.
These inexorable social, attitudinal and demographic trends are giving the entertainment world plenty to think about. Meanwhile, it’s imperative that the cinema-going habit among teenagers is not lost.
Connected audiences expect flexible access to great content – most of which they are watching on ever larger, better quality screens – at home.
Television continues to harness theatrical assets. At this year’s Consumer Electronics Show in Las Vegas, the incoming generation of TV sets embraced 4K picture quality, and 100-inch super-slim curved screens.
As soon as broadband speeds in the UK can manage it, you can be sure that 4K-quality streamed video will become hugely popular.Video is already driving the vast majority of growth in UK broadband traffic – reportedly up 50% this year for at least one major operator.
Creatively, as well as technologically, TV screens of whatever size feel like they are where the action is.
The leading games are brought to market as though they were new movies. When Microsoft launched its X-Box One console last November, it annexed the whole of Leicester Square – the beating heart of cinema – for a two-hour live show.
Amazon, a giant in the home entertainment realm, made the welcome announcement that it too is developing a slate of original content. It’s a sure-fire way to distinguish its offer from other digital services, whilst all the time adding subscriber value.
Only last month, the entire second season of the Emmy-winning House of Cards was unveiled on Netflix on the same day, Valentine’s Day, offering a new ‘box-set’ experience to relish. Netflix has announced its intention to invest $5.5 billion over the next 3 years in original programming, a remarkably ambitious sum.
Requests to the BBC iPlayer soared to 3 billion last year, a third more than in 2012. Interestingly, one of the top 10 most popular iPlayer requests in 2013 was the animated movie, Madagascar. Like it or not, these can no longer be regarded as separate businesses.
I’m well aware that the vast majority of all TV viewing is still live. But underlying attitudes towards ‘freedom of choice’ are changed forever, as a result of which our own thinking has to embrace a far longer-term horizon. Everywhere we look there’s more flexibility, more quality and more choice.
Despite a family trip to the cinema having become a £100 undertaking, London accounted for almost 30% of UK cinemagoing last year. All of us welcome the fact that the UK economy is growing again. But our biggest export market, the Eurozone, remains relatively depressed. And general living standards – especially, perhaps, outside central London – feel as though they are yet to match the pre-credit crunch levels of a few years ago.
Taken together, all these factors only make it tougher to entice people into a pricey night out at the cinema. Yet that remains the perpetual distribution challenge.
Some 18 months after digital TV switchover, the UK cinema estate is completing its own digital installation, a process largely financed by contributions from film distributors.
The new systems have already enabled exhibitors to raise aspects of their game. All sorts of ‘event cinema’ alternatives are being programmed with fewer technicians or projectionists on site.
Digital has set a new gold standard for filmmakers, too. I’ve been struck by the fact that practically every recent Academy Award for Cinematography has been won by a digital CGI production such as Gravity, Life of Pi, Hugo, Inception and Avatar. Film companies are cutting-edge technology operations as well as creative enterprises, these being simply two sides of the same coin.
The advent of digital has not made theatrical releasing any less expensive or risky. Today’s releases are skillfully serviced in a legion of digital formats including standard 2D, IMAX and HFR – with 3D options across the range. All in all last year, distributors invested £350 million in launching and sustaining their theatrical releases, deepening audiences’ relationships with film, and keeping the cinema vibrant.
‘Supply’ has reached such vast proportions, with 700 films jostling for screen slots and attention, that there’s a real risk of devaluation. It’s now dispiritingly easy for films to be discarded from screens precisely ‘because they can be – and there’s plenty more where that came from’.
The UK’s big three cinema operators command a market share of 75%. The big three supermarkets that we hear so much about – Tesco, Sainsbury’s and Asda – have a combined share of appreciably less – below 65%.
Time-poor audiences – whatever their financial circumstances – cannot possibly catch all the titles that might have interested them before they vanish.
Yet despite everything I’ve said about the ways in which social attitudes and consumer behaviour are evolving in the digital age, the rather polarised cinema business clings to some resolutely analogue practices.
There’s been a lot of comment about why greater flexibility regarding release patterns and windows of exclusivity is much needed. Let me be quite clear. It is self-evidently in no one’s interest to diminish the initial shop window that the ‘the big screen’ represents; quite the reverse. And I trust that, from all I’ve said, distributors’ on-going commitment to cinema releasing is beyond doubt.
Importantly, there’s not a shred of evidence from the US, where a little more flexibility over premium release modelling applies, that it does anything to dilute the box-office. In 2013, US ticket sales hit an all-time high of $10.9 billion.
Yet all the talk has not yet led to any action in the UK – for Nymphomaniacor Stranger by the Lake, perhaps; but no mainstream title. Screen International reported that last year’s UK release of Hitchcock, starring Anthony Hopkins and Helen Mirren, was unavailable for viewing for 80% of its theatrical window. To retain such a rigid framework is, to my mind, not just counter-intuitive but increasingly, and transparently, ludicrous.
Today’s digital citizens have such choice that they may neither notice nor care about theatrical windows. But anyone in Britain interested in watching Hitchcock, or any other similarly affected movie, one or two months after it was first released, would be faced with a stark binary choice – find a pirate copy, or don’t watch it at all. How on earth is that good business sense?
I remain utterly convinced that cinema will thrive in the future on its own merits – competing against contemporary ‘going out’attractions as a uniquely immersive, magical, shared experience. So long as it delivers, it will be fine. Enhancements such as Dolby Atmos are already spearheading one way forward.
Media companies of all sorts are presently contemplating how to acquire, understand and relate to audiences in this wholly new world. Any attempt to restrict their viewing choices is unsustainable, and feels entirely out of step with how citizens expect, or wish, to lead their lives.
Let me paint a short scenario. This has always been an unpredictable business; every year brings its own crop of surprises. How about this – maybe just a few months from now. A made-for-tablets, low-budget, feature-length movie is released direct to portable devices, and swiftly becomes a global hit, demonstrably amassing millions of views. Call it today’s Blair Witch.
Policy-makers the world over take notice and are impressed. From that moment, the theatrical sector’s argument that movies are made for the cinema is fatally weakened. I suggest that, if and when it happens – and it will – we welcome it and its filmmakers with open arms.
The UK excels at the creative industries. They now generate more than £36 billion a year, and employ 1.5 million people. We’re not just prodigious makers of content, we also enjoy what we make. Across all platforms, there’s an estimated 5 billion viewings of films each year. But the boundaries between digital media and technology, film and broadcasting, are becoming blurred to the point of being indistinct.
So I was delighted that Lord Smith’s cogent report on UK film policy progress, published in January, suggested that films released on fewer than 100 prints should have greater flexibility as far as their release windows are concerned. Of course they should!
I sincerely hope that the BFI, as lead agency for film in the UK, will pick up the baton, and help loosen the current stultifying grip of the status quo. I also support the BFI’s efforts as it works with the third-party ‘integrators’and industry colleagues to deliver a fairer settlement concerning the fees charged to distributors of specialised films to fund the exhibitors’digital systems.
Meanwhile, as time passes, a related matter is growing even more important – namely to ensure transparency over the time-periods in which the digital fees are payable, and the points at which the financing of the new systems is recouped. This may well be subject to various contractual arrangements. Let me simply say that no UK film distributor should have to go on paying for digital cinema systems whose costs are already fully recovered. In a business based largely on trust, here’s an area where an appropriate level of candour is sorely required.
Ultimately, let’s never forget that stories motivate consumption, rather than any particular means of production, delivery channel or corporate ownership. All the more reason to concentrate our plans for growth on audience connection.