Digital Cinema Looks South

Latin America is slowly waking up to digital cinema. While still far behind the U.S., Europe and Asia, the number of DCI-grade digital systems south of the border has tripled in the past year—from around 15 systems in the fall of 2007 to approximately 50 expected by the end of 2008. Mexico will have 16 systems, Brazil 15 and Ecuador four, with the rest in Chile, Peru and Argentina. Even the Falkland Islands, possibly the first country in the world to go 100% digital, has upgraded their single screen in Stanley with digital 3D.

3D is the primary factor driving digital conversions. Of the 50 digital systems, all but a few of the original 1.3K installations have been upgraded to 3D. The addition of 3D makes it easier for exhibitors to justify the cost, as they see immediate results at the box office. Latin American exhibitors typically increase the ticket prices by 10 to 20% over the standard, with the houses frequently selling out and the 3D titles running significantly longer than non-3D titles. For instance, it’s not uncommon for a popular 3D title, such as Disney’s Meet the Robinsons, to be on screens for a good five months in markets like São Paulo, Brazil.

In some cases, the cost of the entire digital conversion, including projectors, servers and 3D, can be recouped within a relatively short six to nine-month period. As an added bonus, some exhibitors have partnered with local third-party companies who sponsor the 3D systems in exchange for advertising and other promotional considerations.

While the conversion of a few select theatres to 3D can be justified, the conversion of the rest of Latin America’s approximately 9,000 screens from 35mm to base-level 2D digital is a far more difficult proposition. Digital titles dubbed or subtitled into the local language are still in short supply, and the audience sees little increased value with 2D digital over 35mm presentations. So far, there has been little to no support from the major U.S. film distributors in providing incentives for 35mm-to-digital upgrades.

Contributing to the past year’s growth in digital systems is the general decline of the U.S. dollar relative to Latin American currencies. In the past five years, the dollar has dropped to approximately 50% from its previous value relative to the Brazilian real, and that has helped U.S.-based companies such as Christie, Dolby and Real D establish stronger footholds in the South American market. High import restrictions, taxes and duties are still a major obstacle when building or upgrading a theatre. In some markets, the combined fees can add up to 100% to the cost of equipment, making digital upgrades prohibitively expensive. Most U.S.-based equipment manufacturers have found solutions by working with local system integrators who know the market and regulations, and frequently can ease the difficulties in getting equipment into the area. Christie Digital Systems, of Cypress, CA, has the leading position in digital projector sales. Craig Sholder, Christie’s VP of entertainment solutions, comments, “For years, Christie has worked diligently in Latin America establishing a trusted sales and support network for our 35mm projectors. Our success with digital is a natural follow-on to our tradition of supporting the local exhibitors.”

U.S.-based Cinemark International currently operates 1,030 screens in Latin America, with 11 converted over to digital 3D, using primarily Christie projectors, Doremi servers and Real D 3D equipment. To date, Cinemark has strategically placed five systems in Brazil, two in Mexico City, and one system in each of Chile, Argentina, Peru and Colombia. Valmir Fernandes, president of Cinemark International, says, “It’s hard to say how far and fast we will go, but likely will have 20 or 30 digital 3D screens installed by the end of 2009. We are getting third-party sponsorships for new 3D systems. 3D has been very good for films for kids and teens, but we are looking at the broader digital rollout and not only at 3D. Cinemark is working side by side with other exhibitors in the area to find the best solutions for the region.”

Cine Hoyts currently has 160 screens in Latin America, with 87 in Argentina, 50 in Chile, 15 in Brazil and eight in Uruguay. So far, only two—one in Santiago, Chile, and another in Buenos Aires, Argentina—are equipped for digital 3D. Cine Hoyts expects to add up to six more digital screens by mid-2009, all 3D-enabled. Heriberto Brown, Cine Hoyts general manager, notes, “We have received a lot of pressure to start deploying digital screens but are receiving little from distributors in the way of a VPF or similar incentive schemes to help us go faster. Some important titles are not distributed in South America because of the additional cost to either subtitle or dub a copy. In addition, we need more marketing support from the distributors to increase the knowledge of digital in theatres.”

Mexico is unique from the other Latin American countries in that it is driven much more by U.S. issues and trends. Cinepolis, the world’s fifth-largest cinema circuit with theatres in Mexico, Guatemala, Costa Rica, Panama, El Salvador and Colombia, and with over 91 million admissions in 2007, has made an exclusive partnership with Real D for 3D systems.

Real D’s announced rollout of 500 3D screens has begun with six new screens installed for the release of Journey to the Center of the Earth, with installations planned to continue through 2010. "Cinepolis confirms its commitment to innovation and client service by placing its confidence in 3D technology. As a company that has always been at the forefront in market innovation and new products and services, Cinepolis is proud to join forces with Real D. We believe this cutting-edge technology represents the future of the exhibition business, and with this deal Cinepolis moves ahead in the very competitive Latin American market," said Miguel Mier, chief operating officer of Cinepolis.

XpanD, also a provider of 3D technology, has made advancements in Latin America with installations in Mexico, several being planned with Box Cinemas in Brazil, as well as announcing a deal with Rain Networks, Brazil’s largest e-cinema provider. Working with Rain, XpanD is expected to deploy 100 sites in Latin America in the next two quarters and is excited about further opportunities in the Latin American market.

By Bill Mead, Film Journal International