Change on Many Fronts: Technology innovations are driving a consolidating market

Features
Technology

The last year has been a fascinating one for cinema exhibition, with box office exceeding $40 billion globally and innovation seen in all areas. Every aspect of the cinema offer is now open to change, which is proving a boon for customers.

Our industry is also now set on a path of structural change that will affect it profoundly: the consolidation of cinema circuits. The leading ten circuits now account for 30% of all screens, up from 26% a year ago and that is set to change further if the European company Cineworld succeeds in acquiring the major U.S. circuit Regal Entertainment. That would put 15% of the world’s screens in the hands of two groups, an unprecedented number in a traditionally fragmented industry.

3D is the favored format for cinema screens globally, with over 99,000 in place at the end of 2017 (equivalent to 58.9% of screens), of which half are in China. Despite this, the format accounted for only 17% of revenues globally in 2016 (the last full year of data). In some markets, the format has almost been abandoned. In Italy, event cinema generated more revenues than 3D in 2017. The position of 3D, although eminently salvageable, is a salutary warning of how the industry needs to maintain the quality levels of a new technology if it wants it to endure.

Possibly of more interest to exhibitors now is 4D and immersive motion seating (IMS), although not in absolute terms. At 1H 2017, there were 1,220 screens equipped with either immersive motion seating (from D-BOX) or 4D cinema (motion seating plus effects) from mainly 4DX (CGV) or MX4D (MediaMation). Following the steep growth of the last two years, the combined market is now 2.8 times larger than it was in 2014.

Immersive sound is still growing fast, with over 4,400 screens equipped with one of the three systems being commercialized at the end of 2017. The numbers exceed the installed base of premium-large-format screens globally, and this underlines how immersive sound systems are being installed in all sorts of screens, not just the flagship auditoriums. The issue of standards (or lack of them) has held up progress to some extent.

RGB laser continues to grow its installed base of screens, with nearly 700 in place at the end of 2017. The prices for high-end laser are coming down and all DLP projector manufacturers are offering RGB machines (Barco, NEC and Christie). There are also over 10,000 laser phosphor machines installed in cinemas globally now, many in China.

High Dynamic Range as a branded concept in cinemas is progressing, with Dolby Cinema and the more recent option of EclairColor also gaining traction, the latter especially in Europe (mainly Germany and France). Dolby Cinema was installed in 133 cinemas as of the beginning of 2018, with over 350 now signed up, many in the USA and China. As for EclairColor, a newer market entrant for HDR, the number of screens now exceeds 100 in Europe and the USA, with 50+ movies mixed in the format during 2017.

A new technology also entered the market during 2017: LED, which is the only genuine disruptor for the business in that it could remove projection from the auditorium. Samsung’s Cinema LED screen is now established in five sites worldwide, with the prospect of a further U.S. site soon to open.

The proliferation of technology has now had its first major casualty in Escape, and this will probably not be the last to falter. The pace of innovation is gaining speed and this has introduced a level of complexity into distribution and exhibition. In consequence, there is an industry debate going on as to the need for further innovation, while we probably haven’t yet got the maximum out of the DCI 1.0 equipment. The cinema industry is used to standards and feels comfortable having a brake on unfettered innovation, but at the same time is fighting a battle to regain its position as the highest-quality space for film-watching now that streaming services and TVs in general can offer 4K UHD as standard watching content. Watch this space.

David Hancock is Research Director, Film and Cinema, at IHS Markit and the President of European Digital Cinema Forum (EDCF). David will discuss the global trends of technology and consolidation during CinemaCon’s international seminars, Monday morning, April 23.