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David HancockDavid Hancock

Senior Analyst, Film and CinemaSenior Analyst, Film and Cinema

Screen DigestScreen Digest2323rdrd June 2006June 2006

Independent DistributorsIndependent Distributorsand the Digital Revolutionand the Digital Revolution

Europa Distribution ConferenceEuropa Distribution Conference

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OverviewOverview

• Introduction• Digital cinema: what is it?• Digital cinema: where are we now?• Digital cinema: who is doing it?

• Digital cinema: potential for the distributor• Conclusion

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Screen DigestScreen Digest –– who are we?who are we?

• Media market research and consultancy since 1971• Core of our activity is a series of continuously

updated databases• Cover all aspects of film and cinema, and all screen-

based media• Flagship product: Screen Digest monthly magazine –

research based• Also Cinema Intelligence – online database and

analysis

• Consultancy, Reports, briefings and more…

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Digital cinemaDigital cinema

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What is digital cinema?What is digital cinema?

• Digitisation of the distribution and exhibition of movies and other content

• Two broad types

– D-cinema– E-cinema

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E-cinemaE-cinema

• Lower-end systems• Key driver territories

– India– Brazil

– Parts of Europe (Cinema Net)– South Africa

• Indie/European/niche titles• Alternative content

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Choice of e-cinemaChoice of e-cinema

• Folkets Hus: Sweden (first-run local films)• Docuzone: Europe (documentaries)• Portugal: Ministry of Culture/RIMT (cultural network)• South Africa: Shout Africa (rural network)

• India: DPI/Valuable, Adlabs, Pyramid Saimera, RIMT.E-city Digital Cinema (mainstream)

• China: China Film Group (rural)• Brazil: Rain Networks (ads and local movies)

• USA: Screening Room Entertainment (niche andbistro)

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Digital cinemaDigital cinema

• Where are we now?

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Global d-screen growthGlobal d-screen growth

D-screen development

0

100

200

300

400

500600

700

800

900

1999 2000 2001 2002 2003 2004 2005

EUROPE

35%

19%

11%

14%

15%

27%

June 05- DCI

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D-screen development by region

0

500

1000

15002000

2500

3000

1999 2000 2001 2002 2003 2004 2005 2006

Western Europe Central and Eastern Europe North America

Central and South America Africa Middle East Asia-Pacific

D-screens by regionD-screens by region

335

849

2,467

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D-screens in Europe in 2005D-screens in Europe in 2005

D-screens in Europe

0

5

10

15

20

25

30

35

40

UK

Germ

any

Italy

Ire

land

Belg ium

Fran

ce

Netherl

ands

Au

stria

Switze

rland

S

pain

Swed

en

Denmark

Luxemb

ourg 

Norw

ay

Portug a

l

Czec

h Rep

ublic

Hun

g ary

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Digital releasesDigital releases

• Jumped in 2005 to 97 films, 47 in 2004• 2006 set to grow even higher (46 by April)• Digital screening of European films growing in

importance

– In 2004, nearly all releases studio and other– In 2005, Europe came firmly on stream

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Digital film releasesDigital film releases

Digital film releases by region

0

20

40

60

80

100

120

1999 2000 2001 2002 2003 2004 2005

US studio films European films Other 

35

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Digital releases in EuropeDigital releases in Europe

First-run d-releases

0

5

10

15

20

25

30

USA

Italy

Franc

e

Luxembour

g 

Netherland

sUK

Belg iu

m

German

y

Austr

ia

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Widest digital releases in 2005Widest digital releases in 2005

11Buena VistaChronicles of Narnia5

11Buena VistaChicken Little4

14Warner BrosThe Island3

18Warner BrosHarry Potter and theGoblet of Fire2

2520th CenturyFoxStar Wars: Episode 31

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Digital cinemaDigital cinema

• Which European companies are doing it?– Exhibitors

• Kinepolis, Utopolis, Cinecitta, Nordisk Film, City Screen, Odeon,Vue, Cineplexx, UCI, Giometti, Cinecity, Jogchem

– Third party facilitators

• XDC, Arts Alliance, DCL, Unique, Éclair, FHP, (Technicolor-Thomson)

– Projectors• Barco (OEM: Cinemeccanica, Kinoton)

– Servers• EVS, Doremi

– 3D• Xpand

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D-cinema: why do it?D-cinema: why do it?

• Distributor- Flexible and cheaper distribution- Less rigid planning structures- Increased slates

• Studio– Stem Piracy (estimated at $6.1bn, 80% abroad)– lower costs

• Exhibitor- More control and wider diversity- Offer variety of screenings– New revenue streams

• Audience- Superior viewing quality- Variety of content- Wider diversity of programming

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Lower costs for distributionLower costs for distribution

• Digital distribution costs include:EncodingEncryptionSound encodingCost of print

• Discounts available under certain models for volume

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Lower costs for distributionLower costs for distribution

• Digital distribution costs less than 35mm equivalent

• Folkets Hus, Sweden– Cut release costs from Euro2,700 per print to Euro162

• Tartan Films, UK

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Tartan films  - example of costsTartan films  - example of costs

85,100(£58,354)102,090(£70,000)16,722(£11,466)100English-languagefilm

1,910(£1,310)

8,166(£5,600)

6,256(£4,290)

8English-languagefilm

11,243(£7,710)

17,500(£12,000)

6,256(£4,290)

8Foreign-language

film

DigitalsavingEuro

35mmreleaseEuro

DigitalreleaseEuro

No of prints

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Digital for distributorsDigital for distributors

• Bigger slates – greater screening flexibility forexhibitors should encourage them to demand morefilms

• Cheaper to distribute, so less risk for niche titles– Saraband in UK– Broke even at £40,000 BO, due to digital

• Therefore, offers smaller films chance to achieve awider and more profitable release than under 35mm

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Conclusion - Implications of digital cinemaConclusion - Implications of digital cinema

- New breed of content and more content  -local andregional

- Versions of same content – 3D- Lower entry costs to market – new players

- Possible change to window release patterns- Dual formats during transition period- Change in distribution patterns – VOD …- Live transmissions

- Alternative Content- Cross-border content and distribution patterns

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david.hancock@screendigest.comdavid.hancock@screendigest.com

Thank youThank you