Moving beyond digital: Technology drives customer experience in cinemas
The transformation of cinema over the last decade is almost complete, with the global digitization of screens reaching the final ten percent. However, the changes are not just happening in the projection booth, but across the whole cinema value chain, from production right through to the screen. At a production level, the majority of films are now captured digitally, creating new issues with data storage, processing and transfer but also new workflows at the production, VFX and post-production stages.
Technology in cinemas can be split into two broad types: operational and experiential. On the operational side, the lines into a cinema are in the process of being digitized. The moves towards electronic distribution of files into cinemas are now moving ahead fast in the U.S. and Europe: in the former, satellite network DCDC is up and running and serving a fifth of sites, and growing all the time, while in Europe a process of consolidation is reducing the players in what was becoming a crowded market. French group Ymagis has been particularly active, effectively acquiring the digital-cinema side of Smartjog and the cinema assets of Arqiva, and now competing in the satellite space solely with DSAT; Deluxe is rolling out the Connect broadband backbone into cinemas, and Unique Digital has signed a carriage deal with Danish distributors association FAFID, as well as signing up all U.K./Ireland Odeon sites for broadband distribution via the Movie Transit system and a deal with BT for broadband delivery to all U.K. cinemas.
The experiential side is the relevant one for cinema customers and in bringing people back to cinemas. The loss of light in 3D screenings is one area where new technology has been driving a solution, one of which is new screen types. RealD launched the Precision White screens in partnership with Ballantyne Strong in 2013, claiming 40 percent more light than a standard silver screen, while Harkness began manufacture of Clarus 170 for small and mid-sized screens and Clarus 240 in 2014. Despite this, light remains an issue with 3D, where some screenings are being watched at 6fL and lower compared to a standard of 14fL for 2D screenings.
Laser Enters the Market
One solution for light, and one which has the potential to fundamentally alter the economics of the cinema exhibition sector, is laser-illuminated projectors (LIP). The cost of laser-illuminated projectors, at the high end, is significantly more expensive than the current installed base of digital projectors (by a factor of five times or higher), although the single laser model is equivalent to the current pricing of xenon or mercury-based projectors. LIPs are beginning to deploy in cinemas, with orders for Barco’s Laser3D (6P, meaning six primary heads) taken for cinemas in China, the U.S. and Belgium, while large-format company Imax is also investing in a wide deployment of LIPs in its highest footfall sites, mainly in the U.S. and China. Barco is the first to announce multiple sales, although Christie presold a 3P LIP to Seattle’s Cinerama last year. Barco’s models are available later this year, Christie in 2015 and NEC’s in May 2014.
There are two different strategies for laser projection in the market: first, the high-end, most powerful lasers (current models have six primary heads) for the largest screens, being followed by Barco and U.S. rival Christie. These projectors will require high upfront investment for a lower cost of operation over a lifetime due to no expenditure on consumables. We also note that lamp manufacturers are responding to this with high-lifetime, high-brightness and lower-cost lamps. The other approach, being taken by the third TI licensee NEC, is a low-cost LIP which is a single-laser and phosphor-hybrid model, aimed at screens of 11 meters and under and costing around $50,000 in the U.S.
We expect a relatively slow take-up of LIPs in the cinema market, especially for the high-end models. The very high current cost puts them out of reach of most exhibitors, and the market for very large screens is limited in itself. The economics work better when dual projection is used, saving the high outlay on lamps. Prices will come down over the next four years to a point where this can be considered by more exhibitors, for mid to larger screens, as the ROI improves. For the NEC model, the market is more immediate, such as the remaining screens to be digitized (again, the last ten percent of the world’s screens) and new-build screens which may wish to incorporate such new technology. The uptake of LIPs is also governed by the timing of the replacement of the current generation of digital projectors, which is still an inexact science.
Immersive Audio Grows
The other principal technological element currently driving the customer experience in cinemas is immersive/3D sound. This area has become competitive again, after a period of Dolby dominance. The two main players in this space are Dolby, with the Atmos object-based sound system, and Barco/Auro, with a channel-based system. There are around 1,000 such systems already in the market, and they are relatively expensive. Many of the target screens are premium large-format, where an extra premium on the ticket price is charged. Dolby is slightly ahead in numbers deployed, but there seems to be a momentum behind the concept of immersive/3D sound and content providers are also on board, mixing film soundtracks in the relevant format for cinema release.
Both Dolby and Auro have also lined up product deals outside the cinema space, with Auro signing a technology partnership with Datasat (a spinoff of DTS) to create a range of processors for Auro 3D sound for home cinema, from entry-level products to high-end. In contrast with the past for cinema sound, there are markets outside of physical home entertainment for sound to exploit. For its part, Dolby has launched an Atmos conference phone, and has also launched its mobile audio technology, for use with headphones, which will put Atmos into smartphones and tablets in conjunction with a range of hardware providers. In-car entertainment systems have become more sophisticated (sat nav, TV, media, digital media) as cars have, and the automotive market is one that is ripe for high-end audio, given the immersive nature of the car itself and the captive audience within.
Premium Brands Expand
These elements are coalescing into a new offer for cinemagoers: premium cinema and a premium large-format (PLF) cinema. Started by Imax and other early large-format companies, technology is now driving that sector to new heights of experience and customer offer. A major attraction behind PLF is the extra ticket premium that can be justified, and this could well be a growth driver for cinemas for the next few years. So much so, in fact, that cinema exhibitors are launching their own brands of premium and premium large-format cinema, as a rival to the established brands. Our research has picked up over 40 exhibitors experimenting with their own premium cinema offer around the world.
A possible downside of multiple premium brands is confusion for the customer, and that is where RealD is pitching its Luxe concept: an umbrella brand for PLF cinemas (2D and 3D) which aims to harmonize the main components, such as minimum screen size, light levels, audio systems and seating, providing a guarantee of quality for the customer. The first Luxe cinema has just opened in St Petersburg, in a Cinema Park site.
4D Makes Its Move
Sitting outside of premium cinema but definitely in the experiential camp is 4D, or motion seating. Once the preserve of theme parks, 4D is now making its way into cinemas. The offer encompasses motion-seating providers, such as D-Box and MediaMation, and the Korean company CJ 4DPlex which offers motion seating plus smell and water vapor. There are some challenges for 4D, not least that the seat upcharge is not shared by the content provider/distributor, but they are required to provide a 4D version on the DCP; 3D worked because everyone shared in the extra revenues. However, the experience does provide a clear differentiator to the home, and exhibitors around the world are testing it as a concept.
There will be many more technology tests in the future, seeing what people respond to and seeing which new things enhance the experience and improve the bottom line for cinema owners. Excitingly, the appearance of technology in cinemas is fundamentally altering the nature of the cinema and of the customer experience on offer, regenerating one of the oldest forms of mass entertainment and making it viable in a digital age.
David Hancock is Research Director, Film and Cinema, at IHS, a global research and analysis group. This is a summary of his presentation at CinemaCon 2014.