For your viewing pleasure: Digital Cinema – Aravind G R

A quick number crunching gives me a figure of 25-50%, this is the ‘proportion’ of opening weekend collection to the total gross a movie makes through its theatrical run. Now, if I’m a producer (studio in case of Hollywood), I would focus most of my energy & money to make sure that these 3 days work out well for me.

If I want to cash in on these three days, I better maximize the number of theaters I’m running my movie in. But, there’s a problem- each movie print costs about 3-10 lakhs, limiting my ability to cover the entire country at the same time. So, I usually try to use them multiple times, it goes to the multiplex in the city for the first few weeks (months, I hope) and then I ship the same ‘print’ to tier-2 towns like Raebareli.

To the rescue

Now this is creating two problems for me, even though the weekend market for me is a potential 4000-5000 screens (I produce bollywood blockbusters); I can barely afford 1,000 prints. Also, by the time these 1000 prints reach Raebareli, most kids there have already bought pirated camera prints of my movie on CD’s for 20 bucks.

Along came technology to my rescue. I can reach Raebareli & Chicago the same day and each ‘print’ costs me a few thousand rupees.

Distribution today happens over the airwaves; encrypted digital copies (Mpeg files) of movies are delivered directly to multiple screens (through VSAT). The exhibitor then unlocks the files before playing the movies; I also get to keep a track of how many times the movie was actually shown, lending me better control & accountability.

The digital projection & storage systems do cost 4-10 times more than film based projectors, so naturally the exhibitors resisted. Many companies (third parties) in the past have taken up the job of setting up digital systems for exhibitors and have come up with many models over the years to counter the cost issue and have seen varying degrees of success.

Cinema models

There are two basic models that have been adopted (a) D-Cinema (b) E-Cinema:

D-Cinema: The funding (to go digital) could come from a party within the system or outside. Within the system major studios who were convinced about the digital system agreed to finance (partly) the purchase of digital equipment through the Virtual Print Fee (VPF), a funding mechanism where it pays the savings it makes from digital prints over film prints.

In India, Scrabble Entertainment finances (major part) the DT equipment purchase (& installation) and recoups this investment from the negotiated VPF that the studio pays it ,each time a digital print is released to the exhibitor. The company founded by Ranjit Thakur & Manmohan Shetty (Adlabs/WalkWater), in return also gets exclusive rights to exhibit the movies from the studios at these screens.

E- Cinema: UFO Moviez (UFO), part of the Valuable Media Group finances & installs digital equipment & recoups the investment by charging a  per screening fee. UFO also manages the distribution (MPEG-4 video format) based on VSAT technology, so in essence it is a supply chain for movies across the 2000+ screens it has converted, aiding the production houses to reach all such locations simultaneously without investing heavily on film prints (opening weekends!). The equipment is not necessarily of the highest quality and has found takers mostly in single screen theaters in C&D centers.

Then, D or E?: The lower cost & the fact that UFO could invest heavily in purchase & installation of digital (quasi-digital, in most cases) equipment has worked well .The company has achieved significant strides by converting 2000+ centers in a span of just 2-3 years. They have essentially changed the game of distribution and will be a very disruptive force in the entertainment industry.

However, we at Viedea believe the way forward is more towards enhancing the cinema viewing experience and hence higher quality (DCI Systems) systems would find more takers. We expect many more companies to join this bandwagon once (a) the studios start the VPF discussions in full swing and (b) the noise around un-availability of DCI compliant equipment settles.

PS: I just read that Golmaal 3 made $25 mn in its first weekend. That’s as good as any Hollywood movie!


About Deepak
Venture Capital and M&A advisor, Entrepreneur, Startup enthusiast..

3 Responses to For your viewing pleasure: Digital Cinema – Aravind G R

  1. Ravi says:

    Illuminating piece. Thanks

  2. Arvind Jha says:

    Most movies are post processed digitally at 2k/4K resolution and then committed to tape. Theoretically one could transmit the 2k/4K resolution to the cinema theaters – bandwidth is the main constraints and the quality would be awesome..

    The big idea lies in extending the %age revenue beyond the 3 days..What happens after the 1-2 week cinema release? TV/DVD/Cable…

    At Movico we believe that home theaters + web-based VOD + good bandwidth will be exciting to break the current paradigm. At what bandwidth does this become feasible? experience from Korea/Japan shows 50Mbps is a good target.

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