There is a discussion of digital cinema distribution and projection issues on the Media Student’s Book website, but as things are moving very quickly in the industry we’ll have to keep updating.
Big news today is that Arts Alliance Media (AAM), the company which has so far been instrumental in equipping digital cinema screens in the UK as part of the UK Film Council’s Digital Screen Network, has got a big new contract with Hoyts in Australia and New Zealand. AAM announced a major deal earlier this month with Spanish cinema chain Yelmo to equip 370 screens in 31 cinemas – all capable of 3D. That was AAM’s seventh ‘territory deal’ in Europe. The others are in France, Italy, Holland, Denmark and Norway as well as in the UK where two chains, Cineworld and Reel Cinemas are both going completely digital.
The Australian deal is different in that it takes AAM into the whole of Hoyts’ 400 cinema circuit via its ‘TMS‘ or Theatre Management System software rather than through its equipment supply. The TMS allows a whole cinema digital projection system to be controlled from a central location. Although AAM is based in Europe, this deal shows that its software is a global commodity and it has also negotiated licences to take it into Japan.
Part of AAM’s expansion also includes negotiation of VPFs – the ‘Virtual Print Fees’ agreed with major studios. The VPF is the key to the economics of the rollout of digital cinema. Digital distribution and exhibition should cut costs for everyone, but the initial equipment cost for cinemas of installing projectors is so great that without some kind of deal many wouldn’t contemplate change. Companies like AAM are integrators that specialise in supplying equipment to cinemas which effectively lease the kit for a period of up to ten years, at the end of which they own it. AAM carry the costs of equipment ‘up front’ and negotiate bulk buying from suppliers. They also guarantee the distributors that it will be worthwhile to make digital prints because the screens will be functioning. They exhibitors pay a monthly maintenance fee to AAM to look after the kit, but the majority of the cost of conversion is met by the distributor which pays a fee to AAM each time their ‘print’ is ‘released’ to a cinema complex. In a sense, this fee replaces the much higher cost of making a physical film print and transporting it from one venue to another.
There is a useful introductory summary of some of the costs and technologies involved in digital cinema on Wikipedia. (But note that in this very fast moving market sector, Wikipedia, like everyone else, struggles to keep up-to-date.)