If 2010 was a great year for digital cinema, 2011 was phenomenal. By the close of the year, it’s expected that close to 60,000 digital cinema projectors were deployed around the world. Approximately 60% of those are outside of the US. It is a remarkable achievement.
Just as it is remarkable, it is unlikely to be repeated. The surge in installations is largely due to the nature of digital cinema deployment deals recently struck. Direct-to-exhibitor deals typically have a fixed VPF pay period, versus the adjustable term of older deals based on mean deployment dates. These deals are simpler to manage, and incentivize the exhibitor to rollout quickly. Where early deployment deals often had two or three year rollout periods, the recent wave of deals require speedy rollout for the exhibitor to collect the maximum VPFs. Even Texas Instruments, the one technology company that benefited most from this year’s bonanza, doesn’t expect to see single-year sales this high again.
That’s not to say that worldwide sales will plummet. That scenario is more likely to happen in the US, as the rollout periods for Cinedigm, DCIP, and Sony come to an end. The US was 50% deployed by July 2011 – earlier than this publication expected – and should reach 70% deployment by the end of 2012. Following that, Christie and GDC will lead in US deployment deals, but the installation rate is destined to fall.
Internationally, the market will remain hot, but not phenomenal. There are plenty of screens to convert in Asia, Middle East, Africa, and South America, and it will take years to accomplish it. It’s a fair assumption that the studios will continue to sign new VPF deals push the rollout throughout the world. But the appetite of new markets to quickly convert is not strong. That suggests a longer, slower rollout that that experienced in recent years.
The coming drop in sales will not be catastrophic, but could lead to another shakeout. If a manufacturer didn’t do well in the 2010-2011 market, it certainly isn’t going to do well down the road.
As conversion continues, the big concern in all countries is whether the independent cinemas owners will survive. The fears are founded in concern for the availability of VPF deals for independents and concern for the ability of second run and art house cinemas to afford conversion. The availability of VPF deals for independents usually requires the independent cinema owners to work together. In some markets, this has been a challenge. The conversion of art house and second run houses is a thornier issue, and has only been adequately solved in those countries that can afford to subsidize them.
DCI had its challenges this year, and held up nicely. It survived its bottleneck in CTP testing, if barely. We talk more about that in the section on DCI in this month’s report. Filmmakers stepped up to make their movies in frame rates that go beyond the DCI spec, launching a standards study effort on high frame rates for 2-D and 3-D. We discuss the issues of high frame rates in both our Projector and Server and Media Block sections later in this report.
ISDCF continued its Plugfest demonstrations, checking equipment readiness for the eventual transition to the SMPTE-DCP distribution format. In 2011, SMPTE-DCP compliance was overshadowed by the push to achieve DCI compliance. SMPTE-DCP, though, is likely to come out of the closet again in 2012.
Technology evolves, and digital cinema is beginning to evolve as well. Beyond high frame rates and laser light (discussed in our Projector section), innovative sound is experiencing a renaissance. More new sound formats exist today than in the 90’s, when digital sound for film was introduced. This brings both joy and sadness to exhibitors, who would appreciate stability in regards to the recent investment in digital technology, but are always pleased to have a new experience to sell customers. Technology evolution will be a mark of 2012.
Improvements to digital cinema products and operations will be motivated by the need to reduce equipment costs further as manufacturers reach into more price sensitive markets. That motivated Christie Digital to make the announcement in 2011 for a home-grown in-projector media block (IMB). Security key management got a boost late in the year when Fox proposed its Theatre Key Retrieval (TKR) method. More on this in our section on Security Key Management. TMS manufacturers are beginning to demonstrate methods for selecting the right CPL given the feature set of an auditorium. All of these efforts reduce the cost of ownership in some manner.
For those waiting for digital cinema to be perfect, it’ll be perfect when we are. We should be glad that there’s room for innovation, else the problem solvers would grow tired of digital cinema and go elsewhere.
In celebration of problem solving and the birth of 2012, the remainder of this report delves further into the state of digital cinema at the end of 2011.
