Digital cinema isn’t coming.  It’s right here, right now.  And when I say digital cinema I’m not just talking about the projection equipment, I’m referring to the real benefits that get consumers excited. 

Specifically, the ability to improve the programming schedule, deliver live events to cinemas via satellite and the chance to play 3D films.  But before we get to that, let’s just consider some of the stats of where we are at.

Here in Western Europe, there are approximately 2,300 screens out of 28,000 or 8% that are digital.  The US is leading us with nearly 7,000 screens or over 16% being digital which clearly indicates which way this is going. 

However, coming up with an accurate figure right now is nearly impossible with new screens being added weekly if not daily.   There are numerous reasons why this is moving so fast.

The operational improvements that come from digital allow the operator to have greater flexibility with their schedule and increased movement between screens resulting in higher revenue and better margins. The main advantage over 35mm from a consumer and film maker perspective is that a digital copy never degrades so the 5,000th showing looks as good as the first.  

Also, through watermarking and encryption, there are more tools available to fight piracy, benefiting the industry on the whole as we attempt to combat one of the biggest issues we currently face. Though these are all good reasons to go digital, the two most tangible benefits are the reduction in cost and 3D. 

With digital, the speed of distribution and duplication of prints (files really in this case) is much faster which improves responsiveness to demand and increases the efficiency of the supply chain. 

But it’s the difference in cost between a celluloid print vs. a digital copy that brings the largest savings, estimated to be in excess of $1billion a year for distributors in a post digital world.

The excitement around 3D is very clear from both an industry and a consumer perspective.  3D films play longer, have better attendance and garner a higher ticket price.  Experience to date shows that box office from a 3D version of a film is 2 to 3 times larger than the 2D version.  Thus it is no surprise that we see new 3D films coming out every month (sometimes two or three a month) with a long list of upcoming titles currently in production filling the pipeline for years to come.

In terms of the financing mechanism for converting these cinemas and making this all happen; the solution is what is known as the Virtual Print Fee (VPF) deal.  

There has been a roadblock for a number of years due to the significant investment required to convert a cinema to digital.  Though this cost would traditionally be borne by the cinema operators (they buy equipment), the bulk of the savings (as mentioned previously) would actually accrue to the distributors. 

To solve this situation, the VPF deal has emerged where distributors pay a portion of the savings they make on distributing digital vs. celluloid prints to help offset the cost of the equipment. 

Companies like AAM and in some cases cinemas themselves are signing deals with the studios and local distributors under which they commit to pay these VPF fees allowing the model to work.

Though there have been a lot of questions and concerns with this model over the years, I think most of this was due to misinformation which has now gone by the wayside.  The VPF model has no impact on the way films are booked or how long they play. 

Distribution and exhibition operate as they always have done. The model works for large cinema chains as well as small independents and is suitable for every distributor. 

The only obligation of the VPF model is that whoever uses the equipment has to contribute to the cost.

Whoever plays, pays.

But all this VPF model stuff is a means to an end. It’s a temporary, transitional phase that enables the future where the digital platform is in place and the industry then has a chance to really reap the true benefits. I’ve already talked about the increased revenue opportunities from 3D but digital technology also opens up the cinema to a whole new range of content.  

Some indications of what is possible have already been demonstrated and I’d like to share a few examples:

In April, AAM distributed a film about the rock band, Iron Maiden for EMI and Universal Music.This was done via a worldwide theatrical release where we went out to over 500 screens in 42 countries all on a single night. 

Other than the big Hollywood Studios, no company has previously been able to pull something like this off.  The end result was tremendous with admissions topping 100,000 and leaving satisfied fans around the globe.  Not to mention the resulting boost this gave to the DVD sales of the film when it was later released.

Another recent example was demonstrated with the climate change film, Age of Stupid.  In this case we also did a global release however it included a mix of live and pre-recorded material. 

From the premiere in NY, we broadcast into cinemas the “green carpet” event followed by interviews with the cast and crew including a speech by Kofi Annan. Due to time zone issues, this was handled on a time delay in various territories. 

During the show, the broadcast also jumped via satellite to show director Shekhar Kapur based on a mountain in the Himalayas where he demonstrated the impact global warming is having on the region.  After showing the film itself, Thom Yorke from Radiohead played an acoustic song to close out the evening.

One last example involves the sports rights company, Kentaro, which found itself in a difficult situation when Setanta went bust and Kentaro was left with no distribution channel for the October England vs. Ukraine match.  Kentaro found on-line pay per view distribution but lacked any way of offering communal experiences for people who wanted to watch the game in a large group. 

We quickly jumped in and with our partners Odeon broadcast the match around the country including at the Odeon in Leicester Square. 

Though I’m not usually a football fan, watching the match on the big screen with 800 fans cheering, eating a big box of popcorn with my 11 year old daughter sitting comfortably by my side was a great experience. 

Though some film professionals might question using cinemas for anything other than film, I believe bringing new customers into the venues (who may next week become filmgoers) and preserving a healthy cinema business is good news all around.  Movies will always remain the primary driver.

All of these events would not have been possible without the capability afforded by digital cinema. This new medium is beginning to take a foothold in the cinemas around the world but the opportunity to explore what is truly possible is only just beginning.

As an industry we must continue to innovate.Everything in our daily lives is transitioning to digital (if it hasn’t already) and cinema will not be left behind. 

However, as concerned professionals, we need to get educated about the potentials of the new platform and experiment.  

If you as an organisation or an individual don’t get involved and steer the direction of this change, someone else will.  Then you run the risk of being left behind or winding up in a place you don’t want to be.  The industry is moving and you simply can’t afford to stand still.