Digital cinema gets a kick-start

The UK Film Council has announced it will be spearheading one of the world’s first all-digital cinema networks, when it awards a contract worth £11.5 million to Arts Alliance Digital Cinema (AADC). Brazil, had announced a similar programme for 100 cinema screens a year ago.

AADC will than create a competitive bidding process for 250 cinema screens to receive funding for high definition digital film servers and projectors. AADC is a division of Arts Alliance Ltd, which focuses on development and deployment of new technologies to improve services to film-viewing consumers. It demonstrated a trial digital cinema in 2003 at the Cambridge Film Festival.

Each of the 250 cinema screens will receive the digital film in the form of an encrypted portable hard drive, which will overcome the current anxiety regarding piracy and copyrights. The drives will store 100 Gbytes of compressed data from the original film, which runs into terabytes of data.

The UK pilot will use 2K projectors that show films at 2048 x 1080 resolution. Christie Digital Systems and NEC supported by Digital Projection Ltd will supply the 2K DLP cinema projectors based on Texas Instruments technology, while QuVIS, based out in Kansas, US, which specialises in high resolution digital imaging, will supply the digital servers and players based on 128 bit AES (advanced encryption standard).

The Chilli perspective
Digital cinema has been slow to take off due to many reasons, including security, ownership of digital films, servers, projectors, and initial capital investment. The benefits of digital cinema have been known for a few years, but arguments as to who gets the most benefit and who makes the initial investment has held the market back.

Cinema owners, baulk at the initial $100k investment required per screen, digital server and projector, when most of the benefit goes to the film studios and their distributors. From the cinema owner’s point of view, going digital has very little added benefit in terms of digital image, but may benefit in the long run from the ability to keep the films for longer periods.

Studio owners currently spend roughly $1.5 billion per year on making film copies for distribution to different cinema screens. There is pressure for cinema owners to return the films after a very short period, before all the potential viewers in the neighbourhood might have had a chance to see the films. This is because the number of film copies is limited by costs and are required to be sent back, so that they can be sent to other cinema screenings and regions. This is one of the reasons why films are released at different times across different parts of the world.

The digital film, on the other hand, is relatively easy and up to 90% cheaper to duplicate, while maintaining image quality and distribution in parallel, via digital transmission. The pressure to return the film is therefore lifted and cinema owners can show the films over a far longer period, as long as there is a demand for it. Cinema owners may also start feeling market pressures from digital home theatres and DVDs, when consumers start noticing better quality and experience from their home based system. Some consumers may forgo the cinema experience altogether and will wait until the DVDs are released for home use.

The lower entry cost of digital film creation, shooting, directing, production and distribution will also open up a wider market for foreign language, art house, niche films and documentaries by more independent and regional producers. The risk-reward ratio in the film industry will be changed dramatically, allowing more daring projects and provide a wider choice for consumers.

The digital film server market currently occupies a very tiny fraction of the potential worldwide server market, which is estimated to be $49 billion. There are currently over 100,000 cinema screens, of which a large portion are located in the US, Europe and India.

We believe that this pilot will have a big impact on the UK’s nascent digital film pre- and post-production industry cluster, based around Soho in London. The cluster consists of over 500 small companies and workshops, which supply special services and special effects to the film, TV and advertising industry. It is estimated that the combined companies generate over £1.5 billion in revenues per year. These niche companies can reduce film production costs on a massive scale, by using a method of transplanting actors, model figures on different backgrounds, sometimes even eliminating the need for expensive live actors.

As a result, a whole new plethora of companies will be formed that will feed the new digital film market food chain, with their highly networked Linux machines costing below $5,000. This replaces the old graphics machines that a few years ago needed $50,000 or more, and now allows mini home-based film studios.

The cluster will be in a good position to produce some very interesting hardware and software solutions that will create interesting opportunities for advanced semiconductor and optical components, signal processing, storage, compression, encryption, high speed networks, transmission, displays and tailored IT solutions.

The pilot network will provide some valuable feedback for cinema owners, film studios, distributors, independent producers, and will open up a new market for various film media, technology-based startups and players. We may even see new business models that will be enabled and monitored via the use of new technologies.

Instead of worrying about copying, just like the recoding industry tried and failed against the movement towards digital downloads, the movie industry should encompass the new digital age, rather than fearing piracy and copying, as new entrants will come in and take the necessary risks.

The most obvious next step would be to trial an automatic transmission of the film data from the source to the cinema, and who knows, even to home-based theatres. This will create more opportunities and interesting possibilities for startups and existing vendors. The UK Film Council should be applauded in instigating this programme. The benefits will be numerous and will impact a wide range of industries and services in the years to come. Now, if we can only get the other government sponsored programmes on a similar footing, we may have good chance of grossly improving our productivity ratios.

© Chilli Publishing Ltd 2005

02MAR2005