Digital cinema installs have the greatest penetration in the US, with conversions in Europe and Asia lagging behind. The US was the first to find a reasonable business model in the virtual print fee system, but now it seems that GDC Technology, in conjunction with 20th Century Fox, Paramount Pictures International and Universal Pictures International, has finally been able to put together a virtual print fee for Asia. This should finally help jump-start sales in the region.

Chris Chinnock
Senior Analyst and Editor
for Insight Media

First, the virtual print fee business model was developed to help share the expense and benefits of the digital cinema conversion between the theater operators (exhibitors) and the studios. After all, it is the studios that have the most to gain by adopting digital film technology as is saves bundles by not having to reproduce films and ship them to theaters. The exhibitors, on the other hand, are the ones who have to shoulder the major costs of the new projection equipment, cinema servers, player software and optional satellite delivery.

The virtual print fee, a fee that is paid by the studios, is used to help subsidize the cost of the new equipment for the exhibitors. In North America, three vehicles have been created to raise capital, manage the virtual print fee administration and facilitate the buying and installation of DCI-compliant digital cinema equipment. These are:

• Access IT (now Cinedigm Digital Cinema)
• DCIP (Digital Cinema Implementation Partners), a joint venture among Regal, Cinemark and AMC Entertainment
• Cinema Buying Group, which is composed of small and medium-sized exhibitors, mostly members of the National Association of Theater Owners (NATO

These three groups all announced major deals with studios earlier this fall to create the next wave of digital cinema installs across the US. This whole process has been treading water lately however, as the funds for the operations have become difficult to obtain during the credit crisis.

In the deal with Hong Kong-based GDC Technology, Phase 1 of the program will include the rollout of 6000 screens throughout Asia using DCI-compliant projectors. No timetable for the deployment was announced, nor were any details on how it will be financed. There has been some resistance to using DCI-compliant projectors, which helps Hollywood protect it content, so this seems to be a minor coup for the studios.

These screens will also support the staging of live events like sports and music, and a percentage will also be outfitted with 3D capabilities. We were not able to contact GDC to get an estimate on how many screens would be 2D/3D capable, but in the past, GDC has told us that nearly every digital cinema screen it has installed to date has been 2D/3D capable. If this trend extends to this larger-scale roll out, that is good news for the 3D camp as it will help build the base toward a critical mass much more quickly.

While China and many other Asian markets are expected to gobble up digital cinema products and show Hollywood content, India, where lower resolution, non-DCI compliant projectors are preferred and local content is bigger than Hollywood content, is likely to be an exception.

Content is king, as they say, so GDC will need other studios to join their program to increase the flow. According Man-Nang Chong, founder and CEO of GDC Technology, "We are expecting more signings with other studios and independent distributors in the near future."

That’s good news, and I suspect other forms of content will follow, too - both 2D and 3D. For example, we just learned today that Turner Sports, The National Basketball Association and Cinedigm Digital Cinema will team up to broadcast TNT’s coverage of "NBA All-Star Saturday Night" in live 3-D to 80 digitally equipped theaters across the United States. Scheduled for Feb. 14, the broadcast will play on as many as 160 screens in 35 states, allowing ordinary consumers to pay $18 to $22 to see the game. I have got to believe that sporting events in Asia will also find willing audiences in theaters. Stay tuned.