[Ed: We have received lots of feedback and updated info from readers fram and active in the region. ¡Muchas Gracias/Muito Obrigado! The article has been UPDATED THROUGHOUT as a result.]
Much like Butch Cassidy and the Sundance Kid headed to Bolivia after they had run out of banks in the Wild West to hold up, so too digital cinema integrators have moved on to Latin America, now that virtual print fee (VPF) coffers are empty in North America and Europe. Yet despite the flurry of Latin America-related VPF press releases at the recent CinemaCon, there are fundamental issues that will make it a challenge to migrate the continent to digital cinema.
We have already discussed the press releases from CinemaCon 2014, including those related to Latin America, so for a full breakdown have a look HERE. We will not provide a full analysis or analyse each deal, but try to look at the context and outlook for the region, as it struggles to catch up with the rest of the world in going digital.
As we pointed out during ShowEast 2012 it was the last chance for Latin American countries to get a VPF deal and we are unlikely to see many more major deals after this one. Gary Johns from Sony Electronics commented then that their VPF deals for North America were available until 31 March 2013, i.e. almost exactly a year ago. While international deals do have a little longer to run, studios like Twentieth Century Fox have politely but firmly informed exhibitors, distributors and (perhaps most importantly) government representatives in Brazil and elsewhere in Asia that the end of 35mm prints is nigh.
GDC at the Forefront – of press release announcements
It is noteworthy that deployment entities like Scrabble and GDC have signed separate VPF deployment deals with Hollywood studios (here and here respectively), highlighting that the continent could not easily follow deployment patterns and terms even for non-US or EU territories such as India and China. Of these two entities GDC has been the more active, with no less than five announcements relating to Latin America, while Scrabble has been largely silent recently.
So what’s the motivation to be aggressive on the VPF front in Latin America?
For GDC this is primarily a hardware-play to establish itself as the dominant international digital cinema equipment provider. Industry insiders say that GDC is quite relaxed about Dolby’s take-over of the world’s largest digital cinema server manufacturer Doremi and is likely to exploit any uncertainty in the transition period to position itself as the more known entity. Quoted in the press release relating to the deployment with National Amusements, the message is unmistakable:
“Reliability of the equipment involved is one of the keys to a successful VPF program,” said Dr. Man-Nang Chong, founder and CEO of GDC Technology. “With our technical leadership and quality products backed by our prompt service support, we are proud to be National Amusements’ choice for its conversion to digital in Brazil and Argentina.”
GDC has perhaps the widest footprint of any deployment entity in the region, covering not just Latin America, but also the Caribbean. However, it is far from the only one.
UPDATE: People familiar with the region that Celluloid Junkie has spoken to question GDC’s supposed dominance, one going so far as to claim that “GDC is pretty much dead in LatAm” and that most of the press releases were old news or non-news rolled out for CinemaCon.
Hoyt’s was the biggest news of GDC regional signing, though even this is said to have been largely a factor of Cinecolor given the chance to pitch their tent with GDC. Cinecolor was thus said to have found some relevance as a local VPF administrator/integrator, after years of claiming to have had VPF deals for South America. In addition to Hoyt’s GDC has Procinal Colombia, UCI, Moviecom, CineFlix in Brazil and some smaller screens. It is said to be struggling in Argentina (more on the problems of that country below).
In total GDC is estimated to have signed around 450 screens in South America and deployed 180-200. It should be recognised that GDC did secure a major deal Cinemex in Mexico (technically North America) and also did well with Caribbean Cinemas, as stated in their press release, though South America is looking like a tougher nut to crack. (We’ve not yet been able to corroborate these numbers with GDC, so we hope to publish a further update when we do, but they come from a trusted third-party).
In addition to the already mentioned Scrabble, there is also Arts Alliance and Quanta-DGT, which announced their intentions six months ago:
Arts Alliance Media (AAM) and Quanta-DGT have announced that at the end of the annual ShowEast conference in Florida, they have signed 600 screens in Latin America to their joint digital cinema VPF programme.
In addition to deals announced earlier this week with Peru’s Cineplanet and Colombia’s Royal Films, the companies also have commitments from exhibitors across Brazil, Chile and Central America.
Which was followed by the ‘activation’ of the AAM VPF program in November of last year. AAM’s main announcement at CinemaCon 2014 was that 61 screens across Uruguay were joining those already signed up in Columbia, Peru and Chile.
Yet based on reports from exhibitors and installers in the region, the AAM and Quanta-DGT alliance has yet to actually begin their conversions or place substantial equipment orders.
If Latin America is a hardware play for GDC, then it is now mainly a software and service gambit for AAM. The same can be said for Cinedigm, but the company has moved away from its digital cinema roots and is now primarily focused on film and television rights.
UPDATE: With just over 3,000 screens left to digitise, AAM and Doremi are said to be at the forefront, with close to 70% market share. Industry insiders estimate that Doremi has about half of that number signed up and in being installed. As one source told us, “Like the US, the majority of what is left are one-four screen independents trying to figure out if a VPF actually works for them.” It would appear that if there were ever any rich pickings in South America, those days are now well and truly over.
Yet for all the announcements there are fundamental problems across Latin America that mean many countries and smaller circuits will soon find themselves out in the analogue cold.
While a few countries and major circuits like Cinemark and Cinepolis will largely complete the conversion to digital this year, many others will have no obvious means to do so for years. This will have catastrophic results if the supply of 35mm film prints dries up, both for local film productions but also for cinemas that rely on Hollywood prints for the majority of their revenue.
The main issue is that Latin America is not one continent when it comes to cinema, but a number of regions whose difference means that it shares more characteristics with Asia than with North America or even quasi-homogenous markets like Western Europe.
For a good historical overview we refer you to this article by Roque González. Though published in November 2012, much of it is still true. Here are some factors to consider when thinking about Latin America and VPF.
- MEXICO has more in common with Canada than with its fellow Spanish-speaking brethren and is often considered within the North American sphere in this regard. With highly developed multiplex chains like Cinepolis is best positioned to have taken advantage of historic VPF deals, though smaller cinemas are highly likely to suffer;
- BRAZIL was hampered by onerous import duties. Historically in place to stimulate domestic industries like TV set manufacturing, they led to a black market of digital cinema projector imports. Recognising the problem, the government has eased some levies and introduced loan schemes, but these still do not benefit all VPF deployment entities uniformly. Add to this the issue of Portuguese language support;
- ARGENTINA & VENEZUELA continue to suffer from rampant inflation, low value currency and credit controls that make imports of equipment nearly impossible. That foreign distributors find it difficult to get the money they’ve earned out of these countries doesn’t help the situation;
- CARIBBEAN is distinct from the rest of Latin America, given its many non-Spanish speaking territories and closer cultural ties to Europe and North America. Of course, then there is also CUBA that was never going to see as much as a VPF cent to help convert its cinemas;
- CHILE, URUGUAY, PARAGUAY, BOLIVIA, PERU & COLOMBIA fall into the middle bracket that makes them the best candidates for the likes of GDC and AAM, though here too smaller cinemas will suffer disproportionately as few can tap into the VPF funding. Most of CENTRAL AMERICA will follow a similar pattern.
First… and last?
There is a tiny irony in that the first territory anywhere in the world to switch 100% to digital cinema lies in Latin America.
Years before Norway switched over all of its cinemas to digital, the only cinema on the islands that the Argentines call the Malvinas went digital. Better known to the rest of the world as the Falklands Islands, this outpost of what remains of the British Empire was the first anywhere to do away with analogue 35mm prints when it got its DP1500 projector in the summer of 2008.
It looks like its next door neighbour could become one of the last.