According to a new Screen Digest report, Digital Cinema: Rollout, Business Models and Forecasts, after seven years of slow progress the area is now ‘poised for explosive growth’.
Screen Digest says that the second half of last year saw huge growth in the number of digital cinema screens globally. This growth has continued into 2006. The report says that there were 849 digital cinema screens worldwide by the end of the last year, representing 150% growth over the year. By 2010, it is forecast that there will be 17,000 d-cinema screens worldwide, the majority in the USA.
After 100 years of stability for the cinema industry, however, what are the drivers? SD suggests that the prospect of reduced distribution costs, the threat of rampant piracy and competition to the cinema industry from new home entertainment technologies is driving the theatrical exhibition and distribution sectors towards digital cinema. Currently, a major Hollywood release in the USA such as Mission: Impossible 3 will require more than 4000 prints to be made at a cost of around $5 million. This massive investment is essentially worthless after a few weeks, as films recoup most of their box office in an increasingly short period of time (an average 44% in the first week). In this sense, film distributors have a lot to gain from the conversion to digital – films can be sent directly to cinemas without the need for physical prints.
The Hollywood studios are currently retaining control over the conversion of cinemas to digital, especially in the USA. As a result, they have maximised their chances of retaining market dominance, even though the introduction of digital cinema has the potential to help the independent sector and increase box office overall.
Digital technology will also enable cinema operators to create new revenue streams as theatres move towards becoming multi-purpose public venues, rooted in their communities – potentially showing sports events and concerts, as well as more educational and local community content. It also allows for greater options in the way that films are released, opening up a previously unheard flexibility for the distributor in so-called ‘day and date’ releases. These simultaneous theatrical releases in several territories become a much less daunting task for distributors, reducing the spectre of piracy that hangs over all major releases.
David Hancock, co-author of the report and Screen Digest’s Senior Cinema Analyst, stated: “While there are still challenges facing the wide scale rollout of high-end digital cinema, the pace of growth experienced in 2005 shows that d-cinema has finally become a commercial reality. The acceptance by major distributors, notably the US studios, and the conversion of this acceptance into a business model based on distributor savings, has been a key catalyst for the conversion process.”