The digital divide: Major European markets approach full conversion while single screens lag

This summer, the European 35mm-to-digital conversion is quickly maturing in the major markets while simultaneously there is growing concern over the conversion rate of smaller and independent cinemas. The major countries are nearing full completion, with changeover rates near or over 70% in markets like France, the U.K., the Netherlands, Belgium and Norway.
Interestingly, essentially the same markets accounted for nearly 75% of European admissions in 2011, according to a recent report issued by the European Audiovisual Observatory and MEDIA Salles. Countries experiencing growth in attendance were the Netherlands (up 8% from 2010), Norway (up 5.8%), Luxembourg (up 5.4%), France (up 4.2%), Sweden (up 3.7%), Germany (up 2.3%), Belgium (up 2%), and the U.K. (up 1.4%).

Across Europe, attendance figures track with the trend for digitization. While there are many additional factors driving attendance, the apparent correlation between countries with high digitization and increased attendance suggests that the success of technologies like 3D, new alternative content and improved presentations are drawing audiences into the cinemas. France has the largest installed base with an estimated 4,000 screens. The U.K. has over 3,000 screens equipped, followed by Germany, Italy and Spain.

Tony Adamson, manager, worldwide marketing, DLP Cinema, reports that the total number of DLP Cinema-powered screens in Europe as of April 30, 2012 (not including the Middle East and Africa) is 18,960, with DLP Cinema having approximately 95% market share. Since May 1 of last year, the number of DLP Cinema screens in Europe has grown just about 60%.
The European cinema market, because of its smaller size relative to the U.S., its diversity and competitiveness between exhibitors, has a strong history of being the first to introduce new innovations to keep audiences coming. This year, Europe has taken the global lead in adopting new forms of alternative content, using digital distribution for DCPs, and is on track to be the first market to deploy technologies such as higher frame rates and the new audio formats.
Adamson also notes, “The vast majority—more than 16,000—of the DLP Cinema screens in Europe have the capability of playing The Hobbit at the high frame rate of 48fps, and all Series 2 DLP Cinema projectors from Barco, Christie and NEC are capable of playing content at even higher frame rates.”

Europe has also been the recent focus of audio development with new extended soundtrack formats coming from European manufacturers for use in European cinemas. New developments such as Barcelona-based imm sound, Barco’s new Auro 11.1 3D sound format, Germany’s IOSONO, as well as much of Dolby’s newly announced Atmos format, originated in Europe.

Unlike a few years ago when 3D was driving conversions for key sites, recent upgrades were large-scale circuit-wide or even country-wide deployments. The conversions over the past 18 months have been largely the direct result of incentives provided by the content suppliers with occasional help from the governments of the countries involved. Much like elsewhere in the world, a critical concern in Europe is the path to converting the smaller and independent screens who in the past have depended on a supply of film for their livelihood. With 35mm distribution ending in Norway and the Netherlands, and soon to end in Belgium, France and the U.K., smaller and independent exhibitors are now under pressure to convert.

The fact that a considerably smaller percentage (15 to 25%) of single-screen theatres as opposed to multiplexes have gone digital clearly shows that the smaller exhibitors are struggling with making the available virtual-print-fee incentives work within their operations. Fortunately for many European exhibitors, there is public concern about the fate of smaller theatres, and therefore there are quite a few local and country-wide governmental programs focused on helping independent cinemas with the changeover. However, there is still an expected “gap” where up to 15% of European screens will have exceptional difficulty in making the conversion.

Helping the situation with smaller exhibitors are the one-stop pan-European digital-cinema providers, such as dcinex™ (formerly XDC), Ymagis and Arts Alliance Media (AAM). All three are working to coordinate funding sources such as VPF payments, public programs and manufacturer incentives with exhibitors’ needs and all are offering programs to assist independents and the smaller circuits with the conversion.

This year at Cannes, Belgium-based XDC, with over 2,000 contracted screens in Europe, announced the merging and rebranding of their groups into a new brand: dcinex. Back in 2010, XDC acquired German-based Film Ton Technik GmbH (FTT), Europe's largest installation company, and later acquired Bewegte Bilder Medien AG, a well-regarded German-based content service provider.

The three groups are now collectively known as dcinex, operating under two main business lines: Exhibitor Services and Content Services. On the exhibitor side, dcinex focuses on full-service provision including equipment supply and installation, VPF financing, NOC support and maintenance services. On the Content side, dcinex focuses on offering the full range of post-production and mastering services for distributors and content owners, as well as pan-European physical and electronic delivery and digital rights management. The entire dcinex group now employs approximately 200 professionals in 14 countries throughout Europe.

Last December, dcinex reached an agreement to provide significant funding of the digital rollout in Ireland. The existing VPF agreements already in force with established Irish d-cinema provider Digital Finance Ltd. (DFL) will be transferred to dcinex. Already-deployed digital systems will be acquired and managed under their VPF agreement with the studios. DFL has 150 systems already deployed and this agreement will speed up the rollout of an additional 400 screens in the next 12 months. Installations will be coordinated through dcinex’s FTT group. This is dcinex’s first step into Ireland, which is targeting 100% conversion in 2013.

Arts Alliance Media
and projector manufacturer Barco agreed to jointly offer an innovative equipment leasing program to assist exhibitors with conversions. The fund has a provision for up to €100 million and will offer financing packages to cinemas looking to convert from 35mm to digital. The offer is supported by ING Lease Belgium. It will be available to interested exhibitors of any size and will utilize AAM’s existing VPF agreements with all six Hollywood majors and nearly 100 local European distributors.

The Barco/Arts Alliance Media program is targeting 2,000 screens for conversion. Equipment will be supplied by Barco, and maintenance and support will be provided by AAM, who currently support over 2,300 d-cinema systems from a dedicated Network Operations Centre in London. City Screen, the leading independent cinema operator in the U.K. and owner of Picturehouse Cinemas, has signed with AAM for 20 sites across the U.K. In Barcelona this April, AAM announced a deal for 75 screens from the group of independent exhibitors ACEC Cines (Area Catalana de Exhibición Cinematográfica). More screens from the group may be added to this agreement to accelerate the digital transition in Spain.

In February, Barco also announced that SF Bio, the leading cinema chain in Sweden, had selected Barco's digital-cinema projectors for its 244 screens in 35 cinemas. Under the terms of the agreement, SF Bio will exclusively install their projectors across the country.
In Italy, Arts Alliance Media recently announced that it signed a long-term VPF contract with Medusa Film, Italy’s leading film distributor. Last November, AAM also contracted with Germany’s CineStar to be their exclusive d-cinema provider covering the rollout to many of their sites across the country. The deal was financed in part by CineStar’s Australian parent Amalgamated Holdings and has the potential to convert up to 450 screens over a two-year period. Under AAM’s VPF agreements, CineStar will see the majority of their initial cost recouped by payments from participating distributors. AAM will administer the VPF agreements with distributors and also provide its theatre and library management systems to participating CineStar sites.

Paris-based Ymagis, the fastest-growing company specializing in digital-cinema deployment in Europe, has deployed more than 1,800 screens in Europe and over 1,000 in France. Ymagis has deals with more than 1,050 screens in France, close to 600 in Germany and close to 2,500 screens in Europe. The company has reached VPF agreements with the six major U.S. studios and a large number of local European film distributors. Ymagis is now expanding its activities to a large range of technical services for the cinema industry: DCP duplication and delivery, post-production, digital system installation and maintenance, and software development. These new activities now represent more than 50% of the company's total revenue, and contributed to making the company profitable for the first time in 2011. Ymagis is also preparing an expansion of its activities beyond the European territories.

In the U.K., NEC Display Solutions Europe announced a long-term arrangement with Odeon, the largest cinema chain across the U.K. and Ireland, to upgrade all of its theatres with their recent series of advanced projectors. The project provides for more than 2,100 theatres across Odeon-UCI's 231 cinemas in the U.K., Ireland, Germany, Austria, Spain, Italy and Portugal to be upgraded.

Earlier in the year, Doremi Cinema also celebrated the completion of its digital rollout with Odeon and UCI Cinemas Group. The program, over two years, involved all 113 Odeon cinemas in the U.K. and Ireland. A total of 890 Odeon screens are now operating with Doremi’s servers.

Sony’s digital growth in Europe over the last few months has been driven largely by the acceleration of European conversions, along with the rise of demand for 4K theatrical content and alternative content. Sony has seen its market share grow with existing partners choosing to install more projectors or new and mostly independent cinema owners turning to Sony. Sony has a partnership with alternative-content provider More2Screen. The recent distribution of the Stephen Sondheim musical Company will be followed this summer by the Wimbledon Men’s Finals live in 3D, distributed by SuperVision Media. In May, Sony broke new ground by showcasing the German premiere of Men in Black 3 at what is claimed to be the world’s largest 3D screening with 6,819 viewers, using four of its latest 4K projectors.

At the recent Cannes Film Festival, both server manufacturer Doremi and projector manufacturer Christie announced the renewal of their ongoing partnership with the organizers to supply equipment, technology and know-how for future events. Christie has been Cannes’ technical partner for six years and recently signed a new three-year contract to supply all digital-cinema projectors at the festival. This year, the festival introduced 4K digital-cinema projection and showed the film Holy Motors with 4K DLP Cinema. At the Cannes Classics event, Lawrence of Arabia and Once Upon a Time in America were also screened in 4K.
Barcelona-based imm sound, a developer of 3D immersive sound, has installed 14 new movie theatres with three-dimensional audio technology this year in the U.S., Korea, Italy, Ireland and Spain, with future installations underway in Tokyo. The Impossible, directed by Juan Antonio Bayona and starring Ewan McGregor and Naomi Watts, will be post-produced with imm 3D immersive sound, helping to accelerate the demand for theatres equipped with the system. Also related to audio, Barco announced that its Auro 11.1 3D sound format has been selected by German exhibitors Cinema City International and Blitz Cinestar. Barco also points out that content providers such as Lucasfilm Ltd., Bad Robot Productions and Jerry Bruckheimer are supporting Auro 11.1 in their upcoming releases.

Satellite delivery provider Arqiva recently announced it had transmitted its 100th feature film over the Arqiva Digital Cinema Satellite Distribution System. The DCP was delivered via the IS905 satellite to Arqiva’s network which connects cinemas across Europe. Arqiva’s network includes nearly 700 cinemas across 12 countries and includes many leading exhibitors including Vue, Empire, Cineworld, Odeon UCI, Apollo, Reel, Yelmo and Space. Confirming the increasing trend for satellite distribution, delivery provider SmartJog unveiled at CinemaCon that it plans to double its satellite capacity over Europe with a multi-year agreement with Intelsat S.A. to use IS905 to connect with customers across the continent.