July 2008

Have It Your Way

 

Have it your way.  It is not always about burgers.  In this case, it refers to something more relevant to the people with whom we work and interface in our consulting practice.

 

Have it your way often reminds me of a sometimes over used phrase that we see all the time when working on consumer electronics based projects, “anywhere, anytime and on a device of one’s own choosing.”

 

The movie distribution and exhibition business offers a format of one’s choosing more and more for its major releases and many of its not so major releases.  As audiences become accustomed to being able to pick and choose depending on the theater location and the specific movie there will be more opportunities to choose a format to meet one’s preferences.  

 

Different movie theater presentation formats are not new.  However, the increased penetration of the many formats is spreading to a larger geographical base, both in the US and outside the US. This will make it even easier to have it your way in the future.

 

Take the forthcoming The Dark Knight, for instance.  For those interested in seeing this movie, including me, the following opportunities are available:

  

·       Film projection – this is the way that theater attendees have been viewing Hollywood product since the business began, or thereabouts.  The vast majority of the global commercial theaters are still film/celluloid based.  The format is one that is effectively universal, with a print that plays in Los Angeles capable of being played in Mumbai.  How long this format will continue to dominate is open to discussion.

 

·       Digital projection – at this juncture the roll out of digital projection is moving forward, but not quite at the pace that seemed probable even a year ago.  Most industry prognosticators and observers seem to predict that once the Digital Cinema Implementation Partners – DCIP – are able to resolve the virtual print fee issue with the remaining studios, the process will pick up steam and they will proceed to convert the theaters.  Since DCIP is comprised of the three largest exhibitors in the US, Regal, AMC and Cinemark, their complete implementation of digital will mean the majority of US theaters will be converted.

 

With this phase complete, we’ll see a continuing increase in alternative content in theaters in addition to traditional movies. 

 

Already, the Metropolitan Opera, for example, earned more revenue in the past year from their series in digital cinema enabled movie theaters around the country than they did at their home base in New York and that was only for the second season for this presentation.  Next season, 11 HD live presentations are anticipated to fill theaters.  There are many other organizations that are involved in taking advantage of this technology, preparing content that extends across many demographics, in both 2D and 3D.  

 

·       IMAX – once relegated to nature, space and documentary movies in the world’s museums and science centers, the IMAX format has been making a comeback as more commercial product each year has been converted through the IMAX DMR – digital re-mastering – process to enable commercial Hollywood product to be viewed on IMAX screens.  This is reminiscent of the 70 mm theaters of the 70s and 80s that provided a larger than 35 mm experience with the added benefit of better sound quality.  Digital sound systems caused this 70 mm process to become less viable. 

IMAX recently reported that advance sales for The Dark Knight have exceeded the $2 million level as the picture will roll out to more IMAX screens than any movie has in the past.  Good box office results may prompt more studios to release more product in this format.  In turn, that could precipitate a larger installed base of systems. 

 

Other theatrical exhibition formats in the marketplace today include digital 3D stereoscopic and IMAX 3D, although neither is being used for The Dark Knight.  Thus, many future movie releases could easily be viewed in up to 5 different formats.  The number of choices could be further expanded when different language versions and the edited versions required by customs in select international territories are taken into consideration.

 

Digital 3D stereoscopic is still in its early stages, notwithstanding the number of movies and concerts that have been exhibited in 3D and the number that are in production and scheduled for release in the next 18 – 24 months.  Some of the forthcoming releases may very well be released in all five formats. 

 

If we add the forthcoming release of IMAX digital, still seen by only a select few in the marketplace, the number of potential formats would be six or even seven for 2D and 3D.  With print costs for a 3D IMAX movie reportedly in the $40 - $50,000 range, the benefit of going digital is quite clear.

 

Similar to exhibition models, the entire image acquisition business, the front end of all movie productions, is going through a series of changes as well, as filmmakers are able to pick and choose the type of camera and format as well.  This is occurring as more projects are being shot digitally or in HD as opposed to film, and will continue to evolve as the next generation tools become more robust and as the next generation filmmaker becomes the dominant force in the industry.

 

But that is a story for another time.

 

Trends in the Marketplace

 

·       Tax incentives – it is a topic that seemingly everyone is talking about these days and it is one that we are following very closely.  Movie and TV production is changing as productions of all kinds are taking advantage of the many incentive packages that are being offered by locales around the world, including numerous states in the US.  While movies have been shot on location for years, TV, especially episodic TV, has been a Los Angeles centric business for a long time with New York a distant second. 

 

In a major wake up call, Ugly Betty announced a couple of months ago that it was moving its base of operations to New York in order to take advantage of the incentives being offered there as a means of reducing the cost of production.  What is important about the announcement more than the announcement itself and its cost implications, is that rarely in the past have TV productions changed venues, major cast or other disruptive changes once production of the first season begins. 

 

This is particularly important as the TV viewing audience has been gravitating in large numbers from the traditional broadcast networks to the many cable networks.  With a penetration rate of approximately 80 - 85% of US TV households having cable or satellite delivery of programming, there is no differentiation between the two types of nets, another example of having it your way.

 

We expect that in the next year or so that other shows will move from LA to other cost friendly locations.  With the technology available today, including ever sophisticated collaborative work processes, and its ever evolving enhancements, working across the country or half way around the world can be every bit as productive as working in LA.

 

·       Blu Ray – in prior newsletters, we have stated that the until such time as the Blu Ray player drops significantly in price, there cannot be any meaningful traction in gaining market share.  Buying an expensive player after purchasing an expensive HDTV is just out of reach for too many people, especially in these trying economic times. 

 

We were pleased to see that Wal Mart is offering a BD from Magnavox for US$298.  While this may gain some converts, the price will need to drop to no higher than $200 in order to even begin moving toward critical mass, in our opinion.  This forthcoming holiday season may see some lower priced players, but realistically, it will not be for another year or more before this happens on a large scale.  The Toshiba announcement that they have developed a better up-converting player may help them to continue to combat the BD camp. 

 

Indeed, this will be an interesting product roll out to watch and it will be more interesting to see how disruptive VOD becomes in the marketplace, especially when VOD is truly, an anywhere, anytime on my device type of system.

 

·       Two-way digital TVs – on the plus side was Sony’s recent announcement that they have reached an agreement with the major cable operators to enable tru2way TV.  This is a system that will allow consumers to access interactive digital and high-definition video without the assistance of a set-top cable box.  In other words, have it your way.

 

As for The Shindler Perspective

 

We have had several extra busy months since our last newsletter.  Here is some of what we have been doing and a little bit about an upcoming event.

 

·       NAB – Since last sending our consulting newsletter, we have been to the National Association of Broadcasters (NAB) conference.   In addition to seeing the many product offerings on the show floor and seeing many acquaintances as we roamed the Las Vegas Convention Center, the highlight for us was attending the Alvin and Heidi Toffler keynote.  Following their presentation, we had a few moments to chat with Mr. and Mrs. Toffler.

 

A number of years ago, we worked with famed futurist Mr. Toffler on a consulting project during which time we had the unique opportunity to spend some time chatting with him one on one as well as working with him and his business associates.  Those conversations about his approach to thinking about the future influenced our focus on the future, an aspect of our consulting practice for many years as we work with entrepreneurs on many next generation businesses. 

 

·       Creative Storage - During NAB, I moderated a panel at the Creative Storage conference entitled Entertainment and Media Users Session.  Panelists were from Technicolor, Microsoft Studios, Stargate Films, CNN and ABC.  While there is not sufficient space here to describe the entire series of questions and discussion, feedback from attendees indicated the CNN and ABC descriptions of their efforts to digitize, track, and archive years of precious, irreplaceable news footage were the most interesting aspect of the panel.

 

·       Digital Hollywood – the panel I moderated entitled The Arrival of 3D - Digital 3D Platform for Feature Films and Television explored the changing landscape for stereoscopic product.  While prior panels focused primarily on the movie exhibition side of 3D, this time, we were able to discuss alternative content and 3D TV in more detail. 

 

·       DGA – the Directors Guild annual Digital Day is generally one filled with informative panels and presentations.  This year, for the second year in a row, I am moderating discussions.  The topics for my two panels are 3D workflow and the future of 3D TV.  More details will be posted on our web site at Speaking Engagements on iShindler.com as they become available.  The event is August 2, 2008 and will be held at DGA headquarters.

 

We are always pleased to hear from our friends and clients. We look forward to hearing from you.

 

For The Shindler Perspective, Inc.

Sincerely,

Marty Shindler

Chief Executive Officer

 

© 2008 The Shindler Perspective, Inc.