Australian cinema operators score digital deduction

The year has started well for Australia’s independent cinema owners because it appears that distributors will refund some of the costs associated with moving from 35mm to digital.

Australian cinema operators, like those in the rest of the world, have no choice but to move to digital projection because, eventually, 35mm prints will no longer be available. As of the end of 2011, 704 of the 1,991 auditoriums that are used for commercial exhibition had made the transition to digital.

Digital prints are much cheaper to produce than 35mm prints and much less costly to move around, which benefits the distributor, however, it is exhibitors that must meet the cinema conversion cost, which is sometimes as high as $100,000. Because of this, distributors worldwide are redirecting some of their savings towards cinemas via a virtual print fee (VPF).

The six major Hollywood studios last year reached agreement on a VPF with the major Australian exhibitors, being Hoyts, Event Cinemas and Village. For the many disparate independent cinemas – Palace, Dendy, Wallis, Ace, Grand, Cineplex and also many small family-owned businesses – it has been more difficult to unite and execute a comparable deal. But the body representing them, the Independent Cinemas Association of Australia (ICAA), this month took a big step closer by teaming up with US-based Cinedigm Digital Cinema Corp.

Cinedigm has overseen the installation of new equipment in more than 10,000 North America screens and is administering a VPF for those screens. It will now perform a similar role, in conjunction with digital company Christie, in Australia.

“Without a VPF scheme, many indies can’t afford to transition, meaning the transition to digital will be sporadic and slow, if not impossible,” said ICAA vice president and executive director at Palace, Benjamin Zeccola. “It is better for indie cinemas to have state of the art systems with which to compete with the majors ... It will also keep some borderline cinemas open, meaning more venues to screen films.

ICAA represents about 650 screens, which account for about 30 per cent of box office revenue. It originally partnered with local player Omnilab, which withdrew after getting caught up in court action. Zeccola said no other Australian company presents itself as capable.

According to the Motion Picture Distributors Association of Australian (MPDAA), there were three less screens at the end of 2011 than 12 months earlier, but the number of theatres operating in Australia had dropped by seven to 475 theatres. Even with a VPF, more could disappear in the next 12 months.

For audiences, digital cinema is touted as high quality because there will be no longer any substandard projection and, as occurs with 35mm prints, no degradation of the hard drives. Having a digital set-up is also necessary for cinemas wanting to show 3D; of the 704 digital screens, 687 are 3D capable.

MPDAA chair and head of Paramount in Australia, Michael Selwyn, said the impact of 3D on box office revenue is still uncertain. The 3D versions of some films, including Hugo (pictured), are proving extremely popular but the technology is not as popular with young families as it was when first launched.