Where are the cost savings from going digital?

Where are the cost savings from going digital?

In this SCO newsletter we will be answering an important questions for smaller cinema exhibitors. "Where are the cost saving from going to digital cinema?"

This is an important time for smaller exhibitors as the Australian market is expected to transition to digital delivery of DCPs within 12 months with the bulk of locations receiving films digitally. In this newsletter I will be going over the following areas:

  1. costs reductions and reduce labour
  2. how to prepare for the delivery of DCPs digitally
  3. how to best manage the new era of digital delivery with training and implementation
  4. The SCO, Australian Content for Australian Communities (ACAC) initiative to accelerate the transition

The objective of this newsletter is to help you understand the transition and how to best take advantage of it by giving SCO members an informed overview.

Why now?

In many other parts of the world digital delivery is already commonplace, (The EU and US for example) Australian is behind the times when it comes to taking advantages of digital delivery in cinema exhibition.

With the finalisation of the NBN, most cinema locations now have access to Internet connection speeds that allow the transfer of DCPs in a reasonable timeframe. Recently a number of companies have been vying for supplying these services. Ultimately, however, it is the move by Deluxe, the predominant service entity for DCPs from the major studios, that is the ignition point for Australian.

Currently Deluxe is doing beta test of trailer and initial feature delivery to a number of beta test sites. As a I am known for being highly technical and a programmer myself, my cinemas are on this program. The delivery of trailers has been extremely successful. Deluxe has confirmed with me their intention to implement feature delivery in the near future.

What are the savings?

A cinema no matter how big it is has a similar cost in managing DCPs and the traffic of films coming into the cinema. Smaller operators, however, have a larger burden in its operations as it cannot share the infrastructure costs between as many screens/admissions. The cost of managing DCPs is of major importance to the commercial viability of smaller cinemas.

The adoption of digital delivery reduces or removes certain costs to an exhibitor. These include:

  1. The cost of shipment of DCP drives from and back to state dispatch locations.
  2. The labour in fetching/receiving and dispatching the drives.
  3. The labour in ingesting and making sure the drive passes data integrity tests.
  4. Storing, management and upkeep of the library of DCPs drives at the location.
  5. Ensuring the DCP drives are kept secure and cannot be walked of site.

Shipment costs are significant, however, it must not be underestimated the amount of time you will get back from no longer needing to spend time managing the logistics of the physical shipping containers and hard drives. As smaller cinema operators we could be reducing labour costs or utilising the time better. For example, working with the community and organising community events such as school holidays programs or retirement community visits. (Very common with my locations)

What are the costs?

Digital delivery requires different and potentially new or upgraded hardware to deal with it. In this section I will go over the basic areas you will need to look into.

Internet link upgrade: All cinema have internet connections as emails are the backbone of organising content and receiving KDMs. DCPs are large files and a internet link must be of substantial performance to deal with the files. It is likely you will be required to upgrade to a better performing internet service. for example. Estimate only. Go from $60 to $100 per month internet servicing costs. Note, a common NBN-50 is very suitable, however I would recommend NBN-100 if available. NOTE: Unlimited data plans are common place in cities but less so in regional areas. A DATA budget and extra costs may apply to ensure you have enough download capacity in your region. A good rule of thumb is 200gig per film downloaded per month. If possible go with unlimited data and a poorer service as the bulk of the transfers happen at night when this is not an issue.

To download a DCP, you will need a computer to download it to. If you have a TMS, it is likely you will simply utilise it as the platform to download the DCP to as it will have the disk storage requirements already. Otherwise, Typically all cinemas have a management computer. This computer could be used, or a dedicated computer can also be purchased. The main issue here is that the computer must have significant disk storage to store the incoming DCPs. At the very least, upgrading the disk storage on your management computer will be required. This computer must also be online/powerd-on all the time as it will be downloading the DCP for long periods of time.

Network configuration is also an important area. Many locations may have restrictive network policies imposed on them by their integrator. Personally I have seen many locations with over restrictive implementations. The PC that is downloading the DCPs will be required to have access to internet for download, and the projection network so the DCP can be moved onto the Cinema Player (ie allowing the PC to also manage/control the cinema player.) You may need your integrator to help set this up.

The costs can vary depending on your current infrastructure and the level of performance and reliability of the computer you wish to use to receive the DCP downloads.

Training is always an issue when adopting new procedures. Fortunately we are all quite Internet literate by now and downloading a file using a simple app is likely to be easy to learn.

If you would like a third party perspective, I am happy to spend some time on the phone to discuss your issues and how to best deal with your integrator to find cost effective result.

The History of Digital Delivery in Australia

In this section I would like to discuss in more detail what has occurred and why in Australia when it comes to digital delivery. It is only my opinion (you don't have to agree with me) and I hope you can take this on board to help make informed decisions in this area.

I have been an active participant for the digital cinema steering committee (isdcf.com) for over 10 years. I would also recommend you have a look at the document "ISDCF Document 14 - Digital Delivery of DCPs - Informational". I chaired the creation of this document to help combat miss-information in the industry. This document is a more detailed overview of digital delivery and the details around it, it is a good read if so inclined.

What happened to Satellite?

Satellite has been suggested numerous times over the years. Before I was a cinema exhibitor I was the CTO of a public company that operated Access-ONE, the first satellite internet company in Australia. Having an understanding of the pricing and infrastructure requirements, satellite was never going to be a commercially profitable path. The density of customers under a transponder was nowhere near high enough. However, this was attempted as those companies behind this expected to become the single path for delivering DCPs to cinemas. Becoming a GateKeeper so to speak. And from that, being able to dictate prices and build other auxiliary businesses around the captured market.

These attempts failed as distributors, or the target market for these services, woke up to this idea. Knowing it was very bad for them, they did not engage and these businesses failed and disappeared.

What is this Catch server offer?

A catch server is similar to the Satellite as it to hopes to build a gatekeeper market model in that sites are expected to side with the company offering the "FREE" catch server. However, this is also unlikely to win out in the short term.

A free catch server does have some advantages as the entity offering it takes on a lot of the technical issues and management of the device. Initially, less training is required. (Not that downloading a file requires a lot of training) However, the site still has power and maintenance costs. For example:

  1. you cannot "fix it yourself" like your management computer. A significant issue for regional locations.
  2. You cannot go off site and download the DCP to your home internet if the cinema internet goes down.
  3. A engineer visit could cost more then purchase of a new computer. (Travel, labour costs)
  4. The costs to the entity to remotely manage the device adds a significant cost to their business model. This must be passed onto the distributors/customers using the service resulting in a higher cost.

It is expected that these devices will slowly fade away as distributors realise there are cost savings when going with providers that do not have the infrastructure costs of operating catch servers. It is also expected that distributors will dictate which service entities they will use to digitally deliver the DCP, not the service-entity that operates the catch-server. This will resulting in these catch servers becoming unused and nothing but a cost in terms of power and upkeep.

Deluxe has it right.

In this case, Deluxe is a good example of the cost effective path. They do not offer any hardware or remotely managed system that locks you into a specific path. They offer a software install that can go on your pre existing TMS of management computer. Utilising your pre-existing support entity. This introduces no extra or minimal costs.

Local content delivery suppliers will take a similar path. They will also be the more competitive.

New Opportunities

Due to this new dynamic in the cost of distribution, it opens up a large opportunity for smaller cinemas. Traditional costs of physical distribution required a $300 est. minimum guarantee that most distributors require. It makes it very difficult for smaller cinemas to offer a wide range of content as the requirement of the $300 MG restricts offering neche content. Smaller cinemas cannot archive the minimum guarantee with niche content in a smaller market.

It also allows locations to more easily navigate periods when policy contractual agreements leave no room to play a film with enough sessions a week to reach minimum guarantee.

This issues will be significantly reduced when digital delivery reduces minimum guarantee to near or more likely a ZERO cost. (Zero as it expect keeping track of MG will cost more then it returns to the distributor.)

With digital content distribution lower cost and ease of implementation, a film that may only attract or be limited to 1-3 sessions in a week is a viable and profitable path.

Australian Content for Australian Communities (ACAC), a SCO initiative

SCO considers this a major development for the smaller cinema owners. So much so we are investing in making this transition occur as quickly as possible. To archive this SCO has made an offer to the general Australian producer community to implement zero cost DCP internet distribution for qualified Australian films. We are also a big supporter for Australian made content.

As this offer makes distribution of DCPs over the internet to a cinema Zero dollars, the MG will also be Zero for films distributed using the ACAC initiative. NOTE, USB drive are also supported to locations not yet internet ready. These too are at a reduced cost and as such a reduced Minimum Guarantee (MG).

How can SCO offer the service for zero/reduced cost? Simply as it does not cost a significant amount. SCO is willing to absorb these costs as to demonstrate to the industry the real costs and the expected outcomes.

Announcing the first ACAC sponsored release - Animals released by Bonsai Films

Animals Poster

ANIMALS by Sophie Hyde



Release Date September 12th

The main push for this newsletter is to encourage small cinemas to become "Internet Delivery Ready". To upgrade your Internet links and get an understanding of how you will implement the new processes that are required for digital delivery of DCPs.

More information and details on this initiative will follow in coming weeks.

Wishing you all the best with your cinema.

James Gardiner
Founder, Small Cinema Owners Association
mob: 0412997011

Published: 2019-08-02
jamieg administrator

James is the Founder of Small Cinema Owners Association. He is also known for his YouTube channel CineTechGeek, has been involved with ISDCF and the formation of the digital cinema technologies, is a member of SMPTE. For a job he runs three small regional cinemas in Australia.