2017 a year of technological development… and disruption

David Hancock examines technology implemented in cinemas globally, including the big news: LED screens.


In a year when global box office got back into growth, rising just over 4% to shade $40bn for the first time, and when China returned to growth levels the industry has become accustomed to, there seems much to applaud in the cinema world. North America sustained an $11bn+ market for the third year in a row, driven by the impact of premium pricing on the overall box office, albeit just over the $11bn mark and with a significant drop in admissions of nearly 6%. In global terms, the North American market now accounts for 27.8% of the world’s gross box office earned at cinemas.

The industry is also now set on a path of structural change that will affect our industry profoundly, both in positive and negative ways. One of the greatest areas of change, now and in the next two years, is the consolidation of cinema circuits: the leading 10 circuits now account for 30% of all screens, up from 26% a year ago — and that is set to change further if the European company Cineworld succeeds in acquiring US circuit Regal Entertainment.

The past year has been an intriguing one in the world of cinema exhibition, and innovation is being seen in all areas: projection and sound technology, premium technology, experiential technology and service offers, POS systems, pricing, data analytics, site management, F&B, seating, foyer design and tech, cinema design and more. Every aspect of the cinema offer
is now open to change and innovation.
The result is a broad-based offer to the consumer, linking the cinema experience with the experience economy (the “Premium” economy). Circuits and even individual cinemas serve up multiple experiences to cinemagoers. The cinema experience is broadening its base.

On the technology front, immersive sound is still growing fast, with more than 4,400 screens equipped with one of the three systems being commercialised. Dolby is the clear leader with Atmos (3,200 systems). DTS:X (now owned by Xperi) is now installed in 576 screens globally, and committed on 822 (many of them in Asia through GDC) with Barco Auro also still challenging with more than 600 screens installed or committed. The issue of standards (or lack of them) has held up progress to some extent.

Laser illumination in cinemas is still
a live and active issue for the cinema industry and RGB laser continues to grow its installed base, with nearly 800 in place at end 2017. The prices for high-end laser are coming down and all TI projector manufacturers are offering RGB machines (Barco, NEC and Christie). There are also more than 10,000 laser phosphor machines installed in cinemas globally now, many in China. This includes both types of laser phosphor: laser phosphor and RB laser. NEC, Barco and Sony all have a laser phosphor machine in the market although Christie has decided not to pursue this technology (it does have one still in the market which is being phased out soon), focusing on xenon and RGB.

A new technology has also entered the market during 2017: the only genuine disruptor for the business in that it will remove projection from the cinema. LED, currently being marketed by Samsung will soon be installed in four sites in the world (in Korea, Thailand and Switzerland) and while the technology is at a pioneer stage and is still relatively expensive and untested, these sites will show the industry more about whether LED has a future.

3d: a format in retreat?

3D is the favoured format for screens globally, with over 99,000 in place at end 2017, of which half are in China. Despite this, the format accounted for around 17% of revenues globally, around $8bn in 2016 (last full year of data), but in some markets has almost been abandoned. In Italy, event cinema generated more revenues than 3D in 2017. Where 3D is strong, it continues to be, but its declining financial contribution should be a wake-up call to the industry to re-think what can be a powerful format when done right. There are aspects of new technology that will help the 3D case, such as the brightness of laser projectors and LED screens. However, with Avatar 2 nearly three years away, the challenge could well be to maintain the popularity of 3D until then, when a new impetus could be injected into this format.

At the end of June 2017, there were just over 2,800 PLF screens in the world of which 57% are of the global brands (such as IMAX, Dolby Cinema…). Most of the global brands are IMAX screens. Of these total PLF screens, over a third are in North America. The largest region for PLF is Asia Pacific though, housing 41% of the world’s PLF screens. The concept of PLF is widening a little too; the ‘L’ of large is not as crucial as it was once seen to be, the overall premium experience is of greater import. Asian cinemas favour the global-branded solutions over developing their own exhibitor PLF concepts, with the region accounting for 54.5% of all global-branded PLF screens in the world. Global-branded PLF includes multi-screen formats, a more complex proposition than some other technologies. Barco Escape, which the company announced last month will no longer be rolled out, was installed in 36 sites last year, similar to 2016, while ScreenX (backed by CGV) is present in 128 screens at end 2017.

At 1H 2017, there are 1,220 screens equipped with either immersive motion seating (from D-Box) or 4D cinema (motion seating plus effects) from mainly 4DX (CGV) or MX4D (Mediamation). Following the steep growth of the past two years, the combined market is now 2.8x larger than it was in 2014. China quadrupled its 4D screen base in the 12 months to 1H 2017 and now accounts for almost 50% of the world’s 4D screen base. Penetration of 4D is driven by partnerships between the two main brands, 4DX and MD4X, and the largest cinema exhibitors in each territory. Asia is the enthusiastic adopter, accounting for 71.4% of all 4D-equipped screens.

We are seeing the launch and extension of High Dynamic Range as a branded concept in cinemas, with Dolby Cinema progressing and the more recent option
of EclairColor also gaining traction, notably in Europe (mainly Germany and France). However, with recent advances in TV technology, for the first time cinema is lagging behind TV in the adoption of new image technologies such as HDR (UHD). While HDR in cinemas is different to that in the home (as is the overall experience
of watching a film), the perception is important and cinema needs to progress further on this front.

Dolby Cinema is installed in 133 cinemas in the beginning of 2018, with more than 350 now signed up, many in USA and China. As for EclairColor, a newer entrant for HDR, the number of screens now exceeds 100 in Europe and USA, with 50+ movies mixed in the format during 2017. The latter offers a genuine choice for exhibitors when it comes to HDR. Outside of these branded HDR offerings, and add to that the IMAX sites installed with laser that are also HDR-ready, a number of  individual projectors are capable of the higher contrast ratio that HDR requires (not all of them laser). EclairColor was developed with the Sony SRX-R500 projector and is also now compatible with some Barco machines.

One of the key goals of new technology in the market is establishing a wide enough footprint to make distributing content onto these screens worthwhile. By the same token, the regular and sufficient supply of content for exhibitors is a key to a new technology becoming established and thriving. Dolby Atmos, for example, both rolled out onto screens (over 3,000 now) and worked with the creative community to have its films mixed into the Atmos format. This involved getting post-production suites equipped with relevant mixing equipment and ensuring high quality/mass market films were available in Atmos. Thus, there are over 150 mixing facilities in the world using Dolby Atmos, and more than 650 films mixed in Atmos.  DTS:X has had 135 films released theatrically through to January 2018 and has 60 mixing/QC rooms worldwide. Barco Auro has had over 150 films mixed.

sink or swim? Sync and fly…

Similarly, the 4D and immersive motion seating suppliers have also understood this. In 2016, the last full year of data available, CGV’s 4DX had the largest number of films synced for and released in its format in 2016 (105, and 101 in 2017), taking the total number of titles released to 395 between 2012 and 2016. Mediamation’s MX4D released the second largest catalogue with 67 films in 2016. Immersive motion seating supplier D-Box released 60 new titles during the year to March 2017 and took the total of titles released in commercial theatres to 250. With a much smaller screen base, Lumma has synced 46 films for its E-Motion format since the start. Finally, Shuqee operates on an on-demand basis — exhibitors request specific films, Shuqee syncs with motion and effects at no extra cost to the exhibitor.

One of the issues with multi-screen formats has been the availability of content, partly due to the complexity of producing it. ScreenX screened 10 titles during 2017, including mainstream titles Kingsman and Pirates of the Caribbean. Barco Escape struggled with major releases, the last being a part of Star Trek in 2016, and that would have contributed to its closure.

A growing number of cinemas are
also trying out Virtual Reality as a complementary experience in their cinemas, many of these in China. Wanda, Dadi, Perfect World, SFC Cinemas, Jinyi Cinema have all established VR venues within their cinemas. The owners of two circuits (Jinyi and Poly Wanhe Cinema) are also exploring the world of VR either within or without cinema. IMAX is also rolling out its IMAX VR concept to wider geographical reach, to Canada, UK, China from its launch in Los Angeles in early 2017, and AMC is one of several investors backing a rollout of VR venture Dreamscape. The market has also seen a new branded cinema offer in the field of eSports, EclairGame, which could be a link for cinemas in winning back and driving on younger audiences.

the technological steamroller

A potential problem has arisen with the proliferation of technology at both creative and the projection level. A film such as Billy Lynn highlights the potential for a disconnect between creative ambition and the projection of movies in cinemas. Avatar may have driven 3D and digital projection and launched this format into the mainstream, but The Hobbit’s foray into High Frame Rates wasn’t as successful, and could only be seen in its intended format on around 2,500 screens.

By the time Billy Lynn came along, an astonishing visual achievement in its original format, this film was unable to be screened in standard cinemas (the distributors Sony built five ad-hoc sites to this end) and therefore Ang Lee’s original vision was lost to the majority of the film-going public. There needs to be greater, smoother communication between cinema exhibitors and the creative communities, something the EDCF, UNIC, ASC and other bodies have understood and are acting on.

This makes for interesting times for us all, and for a more complex life for cinema exhibitors, but if we all get it right as
an industry, the consumer is the real beneficiary. Forget Netflix, which is busy disrupting other sectors, the cinema is a  powerful medium and can move into the future with a focus on enhanced customer experience, but with the confidence based on solid century-old foundations.    

David Hancock is Director, Film and Cinema at IHS Markit and the President of European Digital Cinema Forum (EDCF).