CineAsia: Premium Cinema Offerings Becoming Less Rewarding for Exhibitors

The high costs of property and new technology are making it harder for exhibitors to recoup investments in Asia, say senior execs from Paramount and Twentieth Century Fox International.

HONG KONG – Exhibitors and distributors need to pay attention to the changing expectations of a more discerning audience, while premium offerings are becoming less rewarding for exhibitors due to the cost of new technologies, said industry panelists at Hong Kong'sCineAsia confab.

"As exhibitors, we need to work much more closer with distributors, filmmakers, technology providers to say, 'how can we provide this whole package of experiences for consumers so we can still upcharge?,'" said Brian Hall, president and CEO, Megastar Media. "We're still going to pay attention to the fact that the main audience just wants to have a good, clean, safe environment in which to watch fantastic content at a cheap price."

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"If it's 3D," Hall added, "I think we've learned a lesson -- don't give them crap in 3D. Give them something that was imagined by the artist in 3D."

Mark Viane, senior vice president of Latin America and Asia Pacific for Paramount Pictures International agreed: "Whatever we do as an industry, we need to make sure we're providing 3D in the way that it is supposed to be seen," said Viane. "We need to make sure the experience makes people want to come back. Some people are saying we only have 20 percent of the business in 3D. But yes, it's 20 percent with an upcharge. It benefits all of us. We need to continue to push this, but push this in the right way."

The panelists cited Gravity as an example of a film for adults that is in 3D that delivers at the box office.

The biggest issue for exhibitors is the theatrical windows.

"Theatrical window is way too important, and way too valuable for creating value downstream," said Sunder Kimatrai, senior vice president of Asia Pacific at Twentieth Century Fox International. "It'd be in the studios' best interest to make sure theatrical windows continue to exist. The studio business model is under pressure from diminishing ancillaries... But I continue to believe that the theatrical business will continue to be the leading edge that drives the momentum in the film entertainment business, across the industry. It is where value is first perceived. Consumer options might proliferate, but the fact is, they always have. And consumers have continued to come back to the moviegoing experience."

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The panel also agreed that the cost of new technologies is making it harder for exhibitors to recoup their investments.

"It costs more and more to present the best picture and the best sound," said Irving Chee, general manager of Golden Screen Cinemas. "As much as we've been exploring new ways and new revenues, ancillaries, etc, the cost of running the theatrical market is increasing -- with the laser coming in, giant screens, it's getting expensive. Especially in Asia, land cost is expensive and building those empty boxes is expensive."

"Exhibitors will be happy to invest in continuous upgrade in order to maintain a healthy percentage of our theatrical customers at the premium level. But land is expensive. Technology is getting more and more expensive, and their life cycle is getting shorter and shorter," said Hall. "I worry that premium offering, while good for the consumer and the studio, gets less and less rewarding for the exhibitors. We need to reward exhibitors to compensate them for making those investments. Exhibitors will be a lot more comfortable about continuing to invest in lower margin technologies because they got a taste of the backend as well.

An aging demographic is also presenting challenges to the film exhibition and distribution industry, the panelists said.

"As Asia ages, for the most part we have a cluster of older and a cluster of younger markets.," said Kimatrai. "The consumers who continue to go to the movies actively in mature markets are those that begin to go to the movies fairly young as a rite of passage. Hong Kong is one of the examples of the highest, oldest average audience in the world. Japan is facing huge challenges as well. As its population ages to become one of the oldest in the world, we're seeing diminishing younger moviegoers engaging in the moviegoing experience -- and that is really scary. Because once you lose those young moviegoers, they're not coming back when they're older."