2008 macro technological trends - thierry perronnet ok

Motion Picture Industry

Main Market Trends &

Main macro trends

Thierry Perronnet, MKG Director EAMER, Kodak Entertainment Imaging

- Still a very solid industry so far….

Main Market Trends

# of Films Produced WW

Production : major trends

Nb of films produced, 20 most prolific countries

2004 2005 2006 2007 2008% change 08 vs 07

North America 744 821 770 767 601 -21.6%All Europe 1203 1302 1380 1490 1508 1.2%Asia 1641 2179 2406 2585 2583 -0.1%Latin America 231 263 331 308 312 1.3%World 4237 4665 5011 5298 5134 -3.1%

2005 2006 2007 2008 % change 08 vs 07

2005 2006 2007 2008 % change 08 vs 07

India 1041 1016 1164 1325 13.8% Korea 82 110 124 113 -8.9%EU (27) 1045 1067 1150 1190 3.5% UK 124 134 117 111 -5.1%USA 699 673 656 520 -20.7% Iran 26 77 105 100 -4.8%Japan 356 417 407 418 2.7% Argent. 60 60 80 90 12.5%China 260 330 402 406 1.0% Brazil 90 142 117 90 -23.1%France 240 203 228 240 5.3% Indones. 50 60 77 85 10.4%Rus. Fed. 160 200 200 220 10.0% Canada 122 97 111 81 -27.0%Spain 142 150 172 173 0.6% Mexico 53 65 70 70 0.0%Italy 98 116 121 154 27.3% Switzerl. 47 50 76 58 -23.7%

# of Features Films Produced WW

… But trees don’t go up to the sky !!!

2008

A challenging year for Motion Picture Industry ….

•  All the industry suffers from increase of raw material.

•  Weak $ reduces significantly the # US FF shot in EU.

•  US Writers strike, de facto Screen actors strike.

•  TV - EU : S16mm format under threat after BBC edict.

•  WW trend : overstock of FF produced -> will take a while before all these movies are bought & released.

and get prepared … 2009 will probably shake as well.

•  Wall street has invested more than 18 billions $ in the cinematographic production over the last 4 years !!!

-> Generating over production situation. -> Won’t be able to carry on at the same rhythm.

•  Producers will be probably get more difficulties to finance their FF projects.

-> More Co-Productions

•  Commercials : still a growth but slow down due to soft economy.

•  Motion Picture Business doesn’t differ so much from others business. -> Subprime Crisis

D-Cinema - State of the Industry (US)

•  The Industry is stalled - Tough economic proposition (8-10 year payback) coupled with

a credit crisis

But there are also positive signals and solid fundamental ….

Global Box Office through July 08

•  Year to date, global box office through July is 6% ahead of 2007 (which was a record-setting year)

•  In the US, 2008 box office is closed to 2007 record. –  Through July, 6 releases have hit the $200M plateau and 3 releases have passed $300M

•  Internationally, there has been year to date box office growth in all regions:

–  Double digit growth in Europe, despite competition from European Soccer Championships

–  Double digit growth in Latin America

–  Single digit growth in Asia

Segment News •  FEATURES

•  Number of features produced WW jumped 5% in 2007, to 5039 - An all-time record, with India in the lead, producing 1164 features

(more than 2X the 453 produced in US) - Japan and China produced more than 400 features each

• COMMERCIALS •  Ad spend expected to grow in US&C, Western Europe by ~3%, lower than originally forecasted.

- Fastest growing markets for ad spend between 2007-2010 = Russia and China

Segment News •  TV

-  US : This year, networks have ordered about 30 pilots for September, less than half of last year’s order (~70).

-  EU : Technological pressure from European Broadcasters (BBC) mixing HD capture with HD broadcasting.

•  Trad. Distribution & Digital Cinema. •  Trad print still growing . •  Digital screen count continues to increase, but more slowly than

projected: –  Industry eager to increase number of 3D-ready screens, but credit crunch

limited 1st half digital cinema implementations (digital screens increased less than 1% in the 1st half of 2008, from 7.3% to 8.0%)

•  Cinema advertising in US jumped 18.5% to $539.9M last year.

Footer area

2008 and beyond : How Technology could affect the Motion

Picture Business Subsequently : On Which Area Kodak is working on ?

Technology Evolution/Revolution impact on Motion Picture:

•  Macro Trends •  Capture •  Post Production •  Archiving

Macro Trends

Semiconductor Technology

Feature size (µm) Transistors/Chip

Microprocessor – Computing Power

CMOS Imagers

Capture Technologies

Capture Technologies – Key Concept #1

•  Signal/Noise (S/N) ratio

– It is important to compare systems at the same absolute exposure (speed)

– S/N ratio – Used in many systems to measure reproduction fidelity (audio, video, film)

– For imaging systems; it is precisely measured as a function of spatial frequency, weighted by the sensitivity of the eye. A good approximation is: S/N = (contrast x MTF) / grain

S/N Ratio Demonstration

Original Image Raise Contrast

S/N Ratio Demonstration

Original Image Sharpen

Historical Improvements in Film S/N ratio (500 speed)

EXR

Vision

Vision 2

Vision 3

Capture Technologies – Key Concept #2

• Dynamic Range

– Dynamic range is best represented by the range of exposures over which signal to noise ratio is maintained –  A grey-scale chart is often used to demonstrate how many grey scale steps can be discriminated. This can be misleading if there is no information on absolute exposure, sharpness or noise.

Film capture improvements

Kodak VISION3 500T Color Negative Film 5219 (Solid Lines) Kodak VISION2 500T Color Negative Film 5218 (Dash Lines)

Kodak EXR 500T (dotted lines) Kodak Vision 500T (solid lines) Kodak VISION2 500T (dash Lines)

EXR ⇒ Vision ⇒Vision 2

§  Mostly grain reduction

§ Vision 2 ⇒Vision 3 §  Grain reduction and

latitude extension

EXR

Vision

Vision 2

Vision 3

Vision 3 500T extended dynamic range

•  Extended dynamic range in both the shadows and highlights

– Approximately 3 stop increase in dynamic range as measured by signal to noise ratio

½ stop 2½ stops

Log exposure

Log S/N

§ V2 500T

§ V3 500T

Why more dynamic range is important

•  Exposure latitude for the cinematographer •  Expand creative possibilities •  Help to simplify lighting on set

•  Digital tools allow now to go further & to extract more from the texture of the film.

•  And also future display systems will handle higher dynamic range

How do Digital Capture Devices do relative to S/N and Dynamic range?

•  While some cameras have demonstrated high signal to noise ratios they still face some challenges:

– Dynamic range – Sampling artifacts – Ease of use

Is it only a matter of time for Digital Capture? •  Maybe

– The number of pixels is increasing for a given sensor size and the noise levels are dropping

– However, for a fixed sensor size there is a fundamental trade-off between resolution, speed and dynamic range. Small pixels are good for resolution but bad for speed and dynamic range

Digital Intermediate

•  Computing, storage and bandwidth trends all support the movement to higher resolution DI workflows

-  4K workflows will ultimately become practical and cost effective

Thank You Thierry Perronnet Eamer marketing director