Cinema’s next Digital Transition is upon us and we don’t have a VPF subsidy to help us.

Cinema’s next Digital Transition is upon us and we don’t have a VPF subsidy to help us.

There has been little to write about in recent months.  All I can say is that “Cinemas cannot catch a break”. The strikes are over but the fallout is baken in and yet to be fully felt.  This is piling on top of already depressed attendance levels.  I have covered this in previous newsletters found Here and Here. The analysis performed has panned out, is surprisingly accurate, and is recommended if readers are trying to predict commercial viability in the coming years.  However, in this newsletter, I don't think going over how bad things are is beneficial. You are living it now, telling you that has no benefit.

In this newsletter, I want to go over future issues that are likely not on your radar or you have not had time to consider in detail yet, as you are likely distracted.  The topic: the next digital cinema hardware transition.  Yes, just like celluloid film to digital projectors, we are now at a stage where it has to happen all over again.  And this time there is no VPF.  For new readers, the VPF was a subsidy paid for by the larger distributors to encourage cinemas to convert to digital.  See

This looks like just more bad news, and unfortunately, it is.  However, this newsletter will hopefully help cinema owners understand the issue in more detail and the options they have to ride out this issue by making the best informed decisions.

NOTE: This is an important issue, and I would appreciate you forward this to other cinema owners and industries that may need clarity on these issues.

Why is there another Digital Cinema Transition?

For many cinema owners, this is a hard pill to swallow.  Celluloid film projectors lasted a long time.  It was not uncommon to see a 50+ years old celluloid projector still in use by many older cinema locations.  With digital cinema, projectors are not expected to last much over 10 years.  A modern cinema projector has more in common with a mobile phone or computer than a traditional sprocket and belt-run celluloid projector.  Due to this the lifespan and viability of digital projectors is more in line with computers.  A typical business computer has a 5-7 year life span.  Digital cinema equipment generally has a 10-year life span (Generally due to the 10 year length of the VPF contracts and legal requirements around fulfilling those contractual agreements).

In general, DCI projectors are made using industrial components that should last at least 10 years. Usually more if looked after.  However, as time goes by, it becomes harder to obtain certain specific parts or computer chips used in designs.  This is because better and cheaper materials may be adopted and those historical parts made EOL and no longer available. This can also be partly due to designed obsolescence by parts manufacturers.  For example, if you buy a basic computer today, you cannot install older operating systems like Windows XP due to newer generation chips not having the software drivers produced for older operating systems.  It is just a reality of dealing with high-tech manufacturing.

This leads to manufacturers being unable to keep spares for these older projectors.  It becomes uneconomical. In other words, it's cheaper to sell you a new-generation projector than trying to keep an older projector operational.

It must also be noted that fixing a older projector, for example putting in a new laser light source in a 8+ year old projector may not be prudent as the rest of the projector may start to fail soon after, negating the benefit of the light source purchase.

The evolution of screen technologies marches on

Now cinema is digital, the ability to implement new display technologies is also a major factor in the lifespan of projectors.  The recent 3D fad was only made available due to the switch to digital.  We have also seen High-Frame-Rate (HFR) that has had mixed acceptance.  And more recently, laser projectors that typically save 50-70% in power consumption.  This alone can explain how it is uneconomical for manufacturers to keep older projector models supported when it is obvious no one is going to be buying the older projectors with excessive power consumption in this era of high power prices. Xenon-based projectors have all but disappeared from projector manufacturers' product lists.

We also have other developments well underway as manufacturers push forward with bringing us LED-based emissive screens (hopefully at competitive prices eventually) or general projectors with Dolby Visions type (Better dynamic range, aka EDR/HDR) capabilities with light steering and other technologies become available in the coming years, (I heard more news on this will arrive at CinemaCon 2024).

For the industry to move forward, there needs to be a certain level of turnover of current equipment to allow for these technologies to mature and become commercially viable for vendors to produce.

Evolution of content against older equipment capability

A major factor in the evolution of digital cinema is the creation of content.  For example, the amount of 4K DCPs today has exploded compared to just a few years ago.  Also, the use of IAB (Immersive Audio Bitstream, also known as ATMOS) and other auxiliary tracks (motion chairs) have brought with them changes in the DCPs we play today compared to 2-5 years ago.  Many of the older digital players were not exposed to these files, and edge case errors have started to occur far more often.  So much so, that the larger distributors and vendors are investing into chasing down these errors so they can determine how to avoid them.

The easy answer is to tell those who have this problem to upgrade to the latest hardware.  This is not a viable path for many so great effort by the DCI members is underway to keep this equipment serviceable for as long as possible.

This is of course an expensive exercise, but it shows how the major studios are aware of how important it has become to allow many cinemas to continue with the older equipment.  In general, none of these issues are known to occur are with currently supported equipment.  If they did, they would be addressed and fixed.  It is the older, End-Of-Life (EOL) equipment that is of focus as they can not longer get bug fixes to address the problems or the problem is not possible to address utilising the older designs.

Even still, this is a major reason why, at some stage, your 10+ old equipment will need to be upgraded.  This effort cannot go on forever or is unlikely to be able to rectify all the issues that have surfaced.

On this topic, more details will be released when more is known.  But in general, issues such as

  1. ‘0xffff’Issue
  2. ‘UnbalancedImage’Issue–UnderInvestigation
  3. ‘GreenFlash’Issue–UnderInvestigation

Some examples of these issues are seen below..

Green around certain edges,  Purple colouring.

These types of playback issues have increased in recent times and great effort by DCI and vendors is being taken to discover why these issues happen and how to avoid them in the future by changing content production processes (if possible) is underway.

If you see these types of problems, it is recommended that you contact your integrator to report them so they can be reported back to the team investigating these issues. (Typically through Deluxe in your local region) The team is after the projector/player type with firmware and DCP used to produce the error. The more data they have, the more likely they can overcome these issues.

Content security evolution

A key factor in the success of cinema has been the creation of the DCI standard. (a joint venture of Disney, Paramount, Sony Pictures Entertainment, Universal and Warner Bros. Studios. See

The security model developed around the distribution of theatrical films has been very successful in protecting the industry from piracy.  However, like all security, it needs to evolve as technologies to break these security implementations improve.  For example, the advent of Crypto and mining coins has allowed the development of hashing speed that has been much faster than ever thought.  Hashing is a major factor in the effort to break into an encrypted file.  As such, DCI will, at some stage have to improve on its implementation.

Some accidents may have occurred that may expose certain equipment to vulnerabilities.  Due to this, we must take on the fact that it is not inconceivable that a distributor may stop issuing KDMs against certain older equipment that is now considered to be vulnerable.

This is a very serious issue.  An issue that is more likely to occur with older equipment as time passes.

As you can expect, older, EOL equipment is more likely to fall into this category.  A development like this is unlikely, but it is a possibility and as a cinema owner you should be informed of this and prepared if it does occur.  The security of every projector is important as if just one is compromised, it affects us all.

This is another reason why you should, if possible keep your equipment up to date and move on from equipment that is End-Of-Live, when possible. (When commercially viable)

Amendment, the certificate-signing dark screen event.

I am adding this late in the article review process due to its importance. Over New Years, Dec 31, there was a significant dark screen event.  The exact number of screen effected is unknown but it is expected to be in the thousands. This effect a lot of locations even so far as causing some to close. See “Alamo Drafthouse” temporarily closed “” and other media concerning the event. Many DCI-Players would not allow show to start due to an issue.  The exact and very detailed report can be found here “”.  Ultimately, the equipment that was up to date was far less likely to be  effected by this issue.  This is an example of the types of issues that can and do occur and why keeping equipment up to day is prudent.

Avoiding cost blowouts.

Finally, I would like to mention that, with a lot of equipment at EOL out there and still in use. Unfortunately, if it does fail due to a small issue.  It is becoming more likely that rectifying the problem will require a full replacement as you cannot repair it.  Resulting in an unplanned high cost and long delay to get a screen back up.

A major issue with DCI-based projection equipment is the security implementation requires you to maintain the equipment. You cannot leave a spare in the cupboard for years at a time.  It needs to be charged and maintained.  Due to this, you cannot expect a lot of spare parts from decommissioned equipment will be available.  It simply costs too much to maintain the stock when you don't even know if you are going to sell it.   It may make sense for larger cinema chains, but for a general integrator, storing and maintaining the equipment does not make commercial sense.

The message here is not to rely on being able to get spare parts, and as the equipment ages, it gets harder and harder.

Do I have a choice?

Yes, you have a choice.  I may have listed all the reasons why we need to upgrade, but at the end of the day, keeping as many screens going and lit up with films is the objective. If you cannot afford to upgrade and have to move forward with what you have, DCI, the distributors and many integrators will attempt to help you as best they can.  Hopefully to ensure you can make it to a proper upgrade down the track.  A closed cinema is bad for everyone.

EDITORS NOTE: It is recommended that you contact integrators in your local region to get the lay of the land in your region, however, in general, and to avoid calling any particular vendor out, it must be mentioned.  Out of the 4 major DCI projector vendors.  One has left the market completely.  2 no longer have the ability to supply spares for the majority of equipment sold during the VPF transition.  Only one vendor is in a position to readily rectify a VPF era projector if failed (And that support runs out in months not years from the date of this article).

Can I extend the life of my equipment?

To get the best long-term use of your equipment, the basic recommendations is to keep it in the best environment possible and to not overpower the projector.  I.e. don't run to at full power if possible.

Correct temperature/environment and clean filters are key.  With an environment that is cool and as free as possible of dust.  Like any computer, they last longer when they are kept clean as particulates cannot contaminate the unit and potentially cause erosion.

If running the projector at near full power, the heat and wear will occur quicker and eventually lead to a major issue.  For example, it may be prudent to move a projector from a larger screen to a smaller one that needs replacing.  Running the older projector well within its capabilities so it lasts longer, and replace the larger screen with a newer more efficient projector.

There are tricks you can take to mitigate/reduce the cost of upgrades or delay them.

Can Cinemas wait this out and for conditions to improve?

The need to replace all your projectors could not come at a worse time.  The post-pandemic environment has shown that patrons have developed more options for disposable income and are not likely to ever go back to pre-pandemic visits per year per person.  Since the pandemic, many cinemas have not made money, with this year still indicating a 20% plus drop in attendance based on pre-pandemic levels.  That will make 4 years of being in the red, with 2024 already cooked in to be even worse due to the strikes resulting in a content famine.  That will be 5 years of losses for most cinemas and no guarantee of viability following 2024.

Yes, I am painting a very bad picture, but a realistic one.  It is not time to invest in equipment that needs 5-10 years of payback.  Not when conditions appear so uncertain.

Paths forward

Unless you are lucky enough to have a good catchment to yourself, bringing you back into profitability already, it would be prudent to hold off on upgrades until you have a clear picture to profitability.  This may unfortunately be up to surviving longer than your nearest rival cinema, absorbing their patronage and bringing you back to commercial viability. Or hoping for recent high immigration trends indexing to your region and catchment.

It is also expected that many cinemas have leasing agreements on their projectors.  Typically, once the equipment is no longer capable of having a support contract as its EOL, the company must replace with new to maintain the lease contractual obligations.  But as the lease is a 10 years commitment.  It may not be ideal to take on that commitment in the current environment.

Hopefully, you are in a position to buy the equipment at the end of the lease at a greatly reduced rate as it is near workless in this market, The leasing company should be able to see that conditions are not right and allow you to battle on until you're in a position to replace with new.  Again, a closed cinema is not good for anyone.  The leasing company should understand this predicament, but outcomes may vary.

New leasing models.

Another development by some projector vendors is a leasing model in that you purchase the light used by the projector and pay for that over time reducing the upfront commitment. This model was developed by Barco/Cinionic. This model is specific to different regions.  It may be more agreeable to some cinemas and the risk profile they are under as the vendor takes on some of the risks. This comes at a cost but may be a viable path for some cinema locations.  I recommend you contact vendors in your region to see what is available.

Integrator implications

The main part of this article was written to target the global cinema exhibition community.  In the following section, I will be talking about Australia, my home region.  I will discuss trends in the integrator market based on the very limited size of the Australian market and limited integrator offerings and how this new digital transition is likely to impact the integrator market.

Support is as important as the equipment you purchase

When buying a projector from a vendor, you are not just partnering with the vendor but with the integrator that will service and support that projector over the next 10 years.  It is not uncommon for me to give purchase advice to cinema owners that comes down to a question of good support over projector vendor as it is that important.

Due to this, I feel it is important to discuss integrators and how they will support cinemas going into the future. With the cinema exhibition market likely to contract over the coming years, this will put pressure on the integrator market to also contract.  We will see either closures or by-outs, as was recently seen with CinemaNext purchasing numerous integrators and recently Acquires Sonic Equipment Company.  At the same time, this new digital cinema transition will result in, like during the VPF, a lot of money made as huge investments in equipment will have to occur again.

Due to the wider critical date deadline of the purchase of new equipment in this transition, the opportunity is not seen as big a rush to sell the equipment.  As already made clear above, cinemas have many options to hold off the 10-year commitment on new projection equipment.  However, there are still well-positioned entities that will try to take advantage of the situation.

In this example, I will use Australia and its history of integration entities to help explain what is likely to happen, and how cinemas are best positioned to combat potential profiteering.

Australian, a brief Integrator history

Australia has a very bumpy history when it comes to the transition to digital cinema.  Specifically, it is where the worst example of profiteering occurred due to the VPF, resulting in a large federal court case that occurred due to an attempt to steal the opportunity of the VPF. See ”Australian court slams Omnilab and Michael Smith for collusion in VPF scandal”, and Court findings: Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509 (16 May 2011)

I am pointing out these unfortunate events as it is through history that we learn from our mistakes and how to avoid them in the future.  Considering the industry is in such poor shape, I feel it is of great importance that we don’t repeat our mistakes.

It must be noted that during this time, a major request by ICAA (Or ICA as it is known by now), the Australian Independent Cinema Association, was that through the formation of an independent VPF entity that a national independent integrator would be the result.  These efforts eventually failed due to questionable behaviour, of which you can find out more in an older SCO newsletter HERE.

In the end, ICA, who wanted to control the integrator and take advantage of the opportunities they expected to arise, failed.  It turns out that knowing an opportunity exists and being able to take advantage of those opportunities is a much more difficult task.  ICA was forced to sell the support entity to Christie to ensure the VPF contract did not fall over as it was contractually connected to the viability of the integrator.  Then once the VPF contract was over, the integrator entity collapsed.

The point of this story is that integration is much harder to do than many expect.  In reality, it is a specialised computer and network support entity with specialised training requirements.  It is a company that is difficult to keep profitable in the limited market that is Australia.  Keeping staff with the right level of technical expertise is very difficult as such intelligent people can make far more money working for large corporations.

Ultimately, this has resulted in the only viable integrators in the region being owned by the larger cinema chains. They have no choice but to make sure integrator entities exist to ensure these large cinema chains can exist. This is done by subsidising the running of those entities. These integrator entities then directly rely on the larger cinema chains which are direct competitors to independent cinemas and why ICA wanted an independent integrator entity to remove conflicts of interest in the sale and support to independent cinemas.

Considering the Australian market failed to implement an independent national integrator back when cinema was still growing and expanding.  Now in this sunset period and an expected contraction in the coming years, it is inconceivable to expect any form of independent integrator can be viable in Australia at all going forward.  Unfortunately, actions are afoot to try this again in Australia.  By those who are deeply connected to the original VPF train wreck.  The industry must be very weary of these actions and those involved.

It is likely to end poorly as did previously if the industry ignores lessons learnt from the original VPF fraud. Considering the current commercial environment and the conflict of interest that key integrators/equipment suppliers have, we need to, as an industry, navigate these issues to ensure the industry loses as few cinemas as possible in the coming years.

How should cinemas navigate these issues?

The question is, how do we avoid these profiteering entities and at the same time, ensure the current entities supply the best possible prices and services?

There is no easy path, however, the best possible advice is to seek the service of consultants who have a deep knowledge of the entities and procedures involved.  And as they are contracted by the cinema itself, have a contractual agreement that no kickbacks or other conflicts of interest exist in the dealing they have in helping a cinema obtain the best possible terms in the purchase of new equipment and service contracts.  In other words, in place of a competitive entity, an individual consultant that can bring the key benefits of an independent integrator and pressure the existing integrators, owned by major chains, to be competitive as they have the knowledge of price levels for equipment, supplies and servicing.  

As a person who helps out other cinemas with integration issues. An independent consultant can also help cinemas develop their own procedures and operational processes that are right for them. That can improve worker productivity by adopting the evolving capabilities of digital cinema and not be forced into servicing procedures that benefit the integrator over the cinema.

Where do I find a consultant?

Unfortunately, due to the train wreck of an industry here in Australia, most individuals with the expertise to do this work are tainted by what has occurred in the past.  Full disclosure, I often do this for friend cinemas but am not available for general consultation work.  I have my own cinemas to run and other side jobs in other industries to keep myself diversified from this sunset period and the high risk of closure for my small sites going into the future.  However, overseas individuals are available and may be a viable option.  Integrity is of utmost importance when looking for a person to supply this service.

Good luck in the coming year

I hope this newsletter better equips you with an understanding of what questions to ask and what paths to take to ensure the best possible outcome for you and your future be it in cinema-exhibition or the next chapter of your life.

James Gardiner
Principal at Small Cinema Owners Association (

Published: 2024-02-07
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.

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