Australian Cinemas hindered by digital cost

August 22, 2007

Source: The Australian

AUSTRALIA'S cinema industry has some momentum but no clarity around the conversion of Australia's cinemas to digital, according to Reading Entertainment Australia managing director Wayne Smith.

"Digital reduces the supply cost of (film) prints but the distributors are the massive beneficiaries of that, not the exhibitors, and ... the cost model is very unrealistic," he said.

Mr Smith made the comments after Julian Levin, 20th Century Fox spokesman on digital exhibition, suggested Australian cinema owners could be saddled with the full cost of converting systems to digital if they didn't move soon.

Mr Levin is in Australia for the annual Australian International Movie Convention on Queensland's Gold Coast.

In North America about 3000 out of 36,000 screens have been converted to digital; Mr Levin expected this number to rise as high as 15,000 by the end of next year. In Australia only 17 of about 2000 screens are digital. That number will get a boost in March next year when Reading opens a new nine-screen complex in Sydney's Rouse Hill.

Mr Smith said installing digital projectors has added $100,000 per screen and extra components would be needed to make the screens 3D capable.

There was little discernible value to consumers unless Reading played the upcoming 3D movies: Beowulf from director Robert Zemeckis and, in 2009, James Cameron's much hyped Avatar.

Mr Levin said there would be 3000 digital screens in North America with 3D capability by the time Avatar is released.

"We are doing it for the learning curve and to add value for customers," said Mr Smith about Reading's first digital screens.

Many North American cinemas have been converted with the help of a virtual print fee, a discount given by the distributors every time they supplied a digital print.

This contractual arrangement might last as long as 10 years with distributors eventually paying up to 80 per cent of the cost of the hardware.

No such financial assistance has gone to Australia's exhibitors and cost is a significant sticking point here.

Mr Smith said there was "massive uncertainty" and few of the US studios were being proactive about assisting with the conversion: he has only had discussions with Warner Bros and 20th Century Fox.

Ross Entwistle, managing director of AHL Entertainment, said Greater Union would soon begin running tests in its George Street cinema in central Sydney, "sharpening" the focus on broadening the 2D rollout.

"There is plenty of discussion around the VPF model, which is the only one that has been a large part of the deployment anywhere in the world, and we are working with our friends at (equipment supplier and sister company) Atlab to arrive at a solution for us in terms of the broader roll-out," Mr Entwistle said.

Some Australian cinemas have installed digital cinemas that are not of the standard set by US studios.

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