Euro digital screening lags behind U.S.

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LONDON -- Market fragmentation across the European exhibition circuit is likely to mean that just 20% of screens will be digital by 2011, lagging behind the U.S., according to research published Tuesday.

The report by U.K. exhibition analysts Dodona Research says that while only 20% of screens will be equipped with digital systems meeting Digital Cinema Initiative specifications by 2011, there are big variations across the territories in Europe.

Belgium, Ireland and Luxembourg are expected to lead the digital conversion charge with well over half of all screens converted over the next five years, the report says, while in other European territories, "the process may barely have begun."

The report, titled Digital Cinema, also predicts that exactly half of all U.S. screens will be digitally equipped at that point.

In Asia, only 10% of screens overall will have DCI specification digital capability by 2011, but Singapore and South Korea will see more than 50% of screens converted, the report says.

Dodona says that the publication of the DCI Digital Cinema Systems specification kick-started the transition to digital in the U.S.

As of June, there were 841 2K digital screens in the U.S. compared to 112 at the end of 2005, according to Dodona. Despite the progress, "digital cinema is still very much in a transitional phase and the true benefits of digital are still some way in the future," the report says.

The virtual print-fee model adopted in the U.S. is described as "a fairly rigid one," which essentially replicates the existing business model.

"The cinema industry appears to be lagging behind compared to the enormous changes taking place in other areas of the media and entertainment industry," report author Katharine Wright said. "A new mindset may be needed before the real advantages of digital cinema can be reaped."

As of June, there were 334 2K digital cinema screens in Europe, with the U.K. -- fueled by the U.K. Film Council's Digital Screen Network initiative -- having the largest number at 71.

But adoption of digital cinema is happening far more slowly than in the U.S. due to multiple languages, the large number of distributors active in the market and differing regulations and industry practices, according to Dodona.

The report also points the finger at "foot-dragging by the studios," who are currently waiting to see how the U.S. experience works out "before committing to finance conversion in Europe."

Similar issues face the industry in Asia. Dodona's report anticipates that progress over the next two years in both Europe and Asia will be fairly modest until conversion begins in earnest in 2008-09. South Korean exhibitors are moving fastest at present, with 45 2K screens in place as of June.

The report concludes that, in the short-term, the cinema industry may polarize around a studio-led blockbuster-driven model on one hand and an alternative-product model that attracts niche audiences on the other.

But in the long run, such distinctions "are likely to blur as market participants seek to mix and match the most successful programming and distribution strategies within the much more flexible environment that digital cinema potentially offers."

Said Wright: "We think that in the long run digital will lead to cinemas being programmed more flexibly and appropriately for potential audiences, at whatever time of day, and that this alone, just using existing capacity better, is capable of expanding theatrical business by perhaps 10%."
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