Report Says 2D Driving European Digital Transition; Pressure Mounts on Small Cinemas

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Mon, 01/30/2012 - 19:00 -- Nick Dager

According to a new report from the European Audiovisual Observatory and Media Salles some 18 500 digital screens had been installed in Europe by the end of 2011. This means that more than 52 percent of European screens are now capable of digital projection up from just four percent three years ago. While the initial phase of large-scale digital conversion during 2009 and 2010 had been more or less entirely driven by 3D installations for the first time 2D screens drove the 2011 roll out the report says. This suggests that roll-out has entered its second major phase and is now driven primarily by full conversions of larger circuits under virtual print fee schemes and by public initiatives ranging from legislation (France) publicly funded industry-wide conversion schemes (Norway and the Netherlands) to direct public funding schemes 60 of which have been identified at national sub-national and pan-European level including the new Media 2007 program.   Analysis based on a comprehensive site-by-site listing of analogue and digital cinemas as of 2010 clearly shows that small cinemas and exhibitors have significant problems converting to digital. By the end of 2010 only 11 percent of single-screen cinemas had installed a digital screen compared to 89 percent of multiplexes. These small cinemas however form a characteristic part of the European cinema landscape with single-screen cinemas alone accounting for almost 60 percent of all European cinemas. Though presumably not vital for overall box office results these smaller cinemas play an important social and cultural role in many communities. The fact that these screens have not yet converted highlights the fact that commercial financing models cannot cover all European cinemas causing a funding gap for between 15 percent and 20 percent of European screens.   At the same time given the high penetration rates in various European markets the end of 35mm distribution seems to be approaching rapidly. Distributors in Belgium Luxembourg and Norway which was the first country worldwide to become fully digital in mid-2011 were expected to end 35mm distribution as early as 2011/2012 and a total of 11 territories had converted at least 50 percent of their screens by mid-2011 including the two leading markets France and the UK. Once large distributors switch to digital distribution in such major markets demand for film stock will drop significantly putting pressure on 35mm economics on a pan-European level. This could cause financial strain for those distributors and exhibitors still depending on it. Many of these are presumably small companies now faced with a growing competitive disadvantage: digital cinema increases the economies of scale related to both film exhibition as well as distribution so bigger companies stand to benefit more than smaller players from the transition to digital both in terms of cost savings as well as in increased revenue potential. This economic reality will ultimately lead to fundamental change in the fragmented European theatrical landscape and poses a challenge to the European independent sector characterized as it is by a large number of small exhibitors and distributors. The European Digital Cinema Report is published jointly by the European Audiovisual Observatory and Media Salles and provides the latest figures on digital screens and penetration rates across 35 European markets analyzes the development of digital roll-out and provides in-depth structural analysis with regard to concentration levels by exhibitors and cinemas of different sizes. It also features a list of the top 50 digital exhibitors in Europe as well as estimated market shares for 3D technology projector and server manufacturers on a country-by-country basis. A special chapter deals with the specific challenges faced by the European independent sector. The report lists 60 dedicated public funding programs supporting the digitization process at national sub-national and pan-European level including the new Media 2007 program. It also provides a comprehensive set of key indicators for each of the 35 European markets covered in the report. European Digital Cinema Report