Low-res approach to distribution finds success

India is fast becoming the world’s largest proving ground for how digital cinema can change an industry.

Based on 1.3K projection e-cinema standards, rather than the 2K d-cinema norms promoted by Hollywood’s Digital Cinema Initiatives, India’s approach to digital might be sneered at if it weren’t so successful.

The country’s tech suppliers and exhibitors are putting rival business models into operation, and distributors are increasingly making use of the expanded options.

“India may have 13,000 screens, but a wide release is 500 prints. Digital is great, it changes that,” says Jyoti Deshpande, chief operating officer of Eros Entertainment. “If we try and go above that number, the cost of prints starts to take us to the Hollywood model where P&A costs equal a film’s production budget.”

Last month UTV gave big-budget “Jodhaa Akbar” an ultra-wide 900-print release, of which only 500 were physical prints and 400 were digital copies.

With a business model incredibly simple for theater owners, UFO Moviez now has an installed base of more than 1,000 cinemas. For each cinema it equips, the company spends some $35,000 installing projectors, servers and satellite receivers. To exhibitors it provides free maintenance and upgrades, and on behalf of the distributors it encrypts movies directly from digital intermediates and distributes MPEG4 compressed files by satellite.

Doing away with virtual print fees (VPF), UFO instead charges $10, split between distributor and exhibitor, for each screening of a movie. With each server individually addressable, UFO downloads movie files only to the agreed theaters and plays out only on release of a digital key.

Pyramid Saimira, one of the dominant exhibitors in the south, favors purchasing cinemas or putting them on long leases,¬†converting them to digital and then acting as distributor, a model referred to as “program lease.”

E-City Digital, which operates a mix of high-end multiplexes and branded lower-cost cinemas, favors a revenue-sharing model.

Given the number of multiplexes being built in big cities that could potentially be digital from the start, it may be surprising that all three digital players are concentrating their efforts on single-screen operators instead.

“Single screeners will not become extinct for a long time; that’s because they charge $1-$2 per ticket, not the $4 at a multiplex,” says E-City Ventures CEO Atul Goel. “Sixty-five percent of the market by value comes from single screens, especially in Tamil and Telegu areas. In Hindi areas, multiplexes account for, maybe, 45% of the box office.”

Both options take the business model away from the traditional theater hire and minimum guarantee system that has dominated the Indian distribution sector.

Digital distribution has the potential for far greater change still — it could eventually create a nationwide market.

The distribution sector is traditionally fragmented regionally, by language and between big cities and small towns. India doesn’t naturally have a day-and-date releasing structure, but digital is changing that and may allow distributors to monetize product before pirates do.

“The ‘first day, first show’ concept has taken the industry by storm and has collapsed the artificial boundaries that existed between A, B and C class centers,” says Raaja Kanwar, vice chairman of UFO Moviez. “The availability of fresh content week after week has translated into 200% increases in the box office of the UFO-installed theaters.”

India’s digital promoters insist that their brand of e-cinema delivers on quality too. UFO says the eye can scarcely differentiate between systems with more than a 1K output and claims that its proprietary servers have Dolby 5.1 processors built in. That means theater owners can upgrade their sound output simply by buying compliant speakers.

“We installed a system last month at the residence of the president of India, and if it is good enough for him it should be good enough for everyone,” says Kanwar.

If the DCI and Hollywood beg to differ, UFO and E-City both see scale as the answer.

Goel says he’s on course for 1,500 screens by 2011.

“When we get to 2,000 or 3,000 screens, we become the standard-setters,” Kanwar argues.¬†

And if the Hollywood distributors insist on holding back digital prints, as they did in China, until exhibs install DCI-compliant 2K, they risk missing out on India’s box office boom.

Kanwar says his circuit is already big enough to create the beginnings of a nationwide cinema advertising platform, something else that doesn’t exist, but which is attractive to consumer goods companies.

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