Thanks for the memories: It's the end of an era as 35mm film declines
Almost since it was patented in 1889 by George Eastman, when Queen Victoria was on the English throne, the Eiffel Tower was inaugurated in Paris, and The Coca-Cola Company was incorporated in Atlanta, celluloid 35mm has been the format of choice for the film industry. It has fought off all comers to its pre-eminence until now, as the digital revolution that has affected all aspects of our lives finally turns its attention to the cinema. In January 2012, there will be more digital-cinema screens in the world than 35mm ones for the first time since the technology conversion began in 1999.
2011 was a key year for the switch, as the 3D-led growth spurt for digital screens was supplemented by cinema circuits choosing to convert all their screens. In 2011, there will be a net installation of around 25,000 d-screens, building on the 18,600 new d-screens installed in 2010, highlighting the industrial level of the digital rollout. However, and obviously, the strong demand for digital-cinema equipment has meant that the demand for 35mm prints is now falling fast. At its peak, film distribution used around 13 billion feet of film a year (3,962,400 km, equivalent to stretching to the Moon and back five times), but this figure began to decline sharply in 2010 and next year the industry will use closer to four to five billion feet (1,524,000 km) for distribution purposes.
At a time when the price of silver, a key raw material for film processing, has risen from its habitual $5 an ounce (stable for almost two decades) to around $25 an ounce (peaked at $50), the demand for film prints is plummeting. This industry shift is having an impact across the entire value chain for film stock, film processing and film distribution. At the film stock level, the leading providers are Kodak, Fuji and Agfa. To underline the effects of raw-material prices on their business, Kodak’s CEO estimates that for every one-dollar rise in the price of silver, it hits the company’s bottom line to the tune of $10 to 15 million.
The second link in the chain is the film-processing labs, of which the two leading ones are Deluxe and Technicolor. The main volumes are taken up with bulk release printing, but as digital content finds its way into cinemas, the amount processed is dropping and the two major labs are now engaged in the business of managing decline. This has led to a situation which would have been unheard of even three years ago: Deluxe and Technicolor essentially joining forces for 35mm bulk release printing and delivery. The aim is to bring down the cost of operations in line with the market demand. Operations are still separate in Europe and Asia, as digitization of cinemas lagged to a certain extent, but in the short to medium term, it is likely that similar cooperation will be necessary in a declining volume-driven business, which could lead to one supplier by region or even globally. This explains why both companies are building up their resources and expertise in the field of digital-cinema content services. This is where future competition between the two will lie.
The third link in the 35mm chain is film distributors, who need to provide films in the format of their exhibitor partners. As a country approaches full digitization of its screen base, say 80 to 90 percent, there is little clear reason to provide 35mm and maintain a dual-format theatrical sector (which is logistically complex) and distributors need to look carefully at the economics of providing 35mm. Virtual-print-fee arrangements are also hastening the transition to digital only. This has already happened in two fully digital countries, Norway and Luxembourg, and Fox has announced the end of 35mm in Hong Kong/Macau from 2012.
Once enough territories in a region switch off 35mm as a format, the studios especially will be looking to end 35mm on a regional basis. For example, the big five countries in Western Europe account for 81 percent of total prints in the market, and once each of those countries has converted over 80 percent of their screens to digital, the pressure will be on to end 35mm as a format across the entire region. In the U.S., there will be no 35mm in mainstream use from the end of 2013. For Western Europe, this may extend out to the end of 2014, given the large number of countries and the possibility of public support. The rest of the world will then be under some pressure to follow suit. I see the last of 35mm in mainstream usage by the end of 2015—that is, around four years from now.
In conclusion, I would simply say that 35mm film printing has served this business very well for over 100 years, fending off various challenges along the way. As we approach a digital-cinema majority, it is a fitting time to say goodbye and thanks for all the memories.
David Hancock is a senior expert on the global film and cinema sectors. He is the head of film and cinema at Screen Digest (www.screendigest.com) and has overseen its development in this area since 1997, including the set-up of the online data and analysis service Cinema Intelligence. He is also actively developing the company's digital-cinema activities. He has been involved in numerous consultancy projects for international organizations and companies, specializing in new business models and in-depth market analyses.