The Indie and the Holy Grail of Digital Cinema

Implications: Alternative content is a great concept for idle capacity in the nation’s movie theaters and is enabled due to the transition to digital cinema. It will be a while before this concept is proven or disproven. The reasons are simple: there has not been much alternative content and the theaters, used to having product marketed for them by the major studios and independent distributors, may not be in a position to market the product in a way that can be financially rewarding to all concerned. Different kinds of programming have been produced for this market from kids programming as discussed in this article to the Metropolitan Opera. There are a number of projects on the horizon that may click with consumers, including the broadcast of sporting events to the theaters. National Amusements has been doing this for a while with Red Sox games. Chances are this content, at least at the outset, will come from the independent producers, not from the studios.

Analysis: This article discusses the business model of an Access IT acquisition, Bigger Picture. Bigger Picture has been producing kid oriented content for movie theaters to exhibit early on Saturday mornings when the theaters are relatively quiet. It is a good concept and if it works, it will pave the way for others to make similarly low budget fare for the tykes.

However, theaters will need to have more robust product if the concept is going to take off and provide solid incremental revenue beyond concessions. For example, the fact that many theaters have had success with the Metropolitan Opera live HD broadcasts bodes well for the concept. (See The Fat Lady and the Holy Grail https://news.glgroup.com/CM/Analysis/PostDetail.aspx?pid=3911).

The Met has already announced plans for a number of live HD broadcasts to theaters for the coming season. This can add significant incremental revenue from the point of view of both the Met and the theaters. And since the theaters generally have great acoustics, it is a winning situation.

Presently, there are some 4,000 digital theaters worldwide, with approximately 3,000 in North America, so it will be another couple of years before the installed base is sufficient to measure the effectiveness and viability of alternative content.

Recently, the NBA conducted tests of a 3D broadcast during an NBA finals game from San Antonio to Cleveland. Although the event was broadcast to a stadium, not a theater, it could as easily have gone to a theater setting, or multiple theaters given the near 14,000 attendees.

This concept is something that could take hold next season when it is expected that there will be approximately 1,200 3D digital theaters in North America, all awaiting the release of Robert Zemeckis’ Beowulf in November. Since there is not yet a sufficient supply of 3D theaters today, the timing may be right for NBA games and perhaps other sporting events to use the venues. And even without the 3D theaters, 2D theaters could be used as well, but they do not provide the same immersive experience.

There is also the issue of marketing. Theaters do not generally market the movies they show. That has always been the domain of the studios and independent distributors.

The challenges of marketing the product can be overcome. Time will tell whether the market is ready for the alternative content.