CineEurope: Cinemas’ Position in the Experience Economy; The Move to Premium, Driven by Innovation

By Patrick von Sychowski | August 6, 2015 7:56 am PDT
Premium seating Peanuts-style (NB: not the session panelists)

This post is a transcription composed in real-time during one of the many seminars at CineEurope 2015 in Barcelona, Spain. As such we often paraphrase the presentations being given.

The session description summed up this panel well: “Experiences” are what consumers are now looking for, whether it be in travel, food or film. Cinema now sits firmly in this Experience Economy, with technology, service and marketing driving what is possible to offer to a public overwhelmed by film-viewing choices. This session will look at the latest developments in this field, how customers are responding and where these developments might lead.

Moderator: David Hancock, Director, Cinema, IHS
Panelists: Andrew Cripps, President, EMEA, Imax Corporation

Bob Mayson, Managing Director, RealD

Helen Moss, Senior Vice President, Int’l Distribution, Paramount Pictures International

Christof Papousek, CFO, Cineplexx Group

Andreas Spechtler, President, Dolby International

David – We are here to talk about premium and premium cinemas, where is it, where is it going, who is doing it, what does it mean for film. [introduces panel]  This is effectively what most of the business is talking about. Cinemas has always been about experience. When we titled this panel we brought in the term ‘experience economy’, frankly not knowing what it meant.

Last week I heard from the author of the book of the ‘experience economy’ [Joseph Pine II, who together with James H. Gilmore wrote ‘The Experience Economy‘]. In 1998 he developed the theory of ‘experience economy’, of talking things one step further than services. In his view, everyone has everything they need, so we need experiences on top of that. So the economic good that you buy is the experience. There is a certain pressure to perform here, so it better be good. When we look at premium, that is what we are looking at; to make it worth it for the viewer.

There are 1,600 premium large format [PLF] screens around the world, and 81 exhibitors have their own PLF brand. 15 other PLSs – that is the interesting bit, such as Barco Escape, Dolby Cinema, RealD Luxe. You start to get global brands the drive segmentation. Let’s start with Andrew Cripps. Q: What is premium?

Andrew – The home entertainment experiene is so much better and consumers competing on so many levels. You have to offer an all-encompassing premium experience to get them to leave their home. It is not just about the screen but the sound, the seating, because if consumers are going to get a premium price you have to deliver.

Christof – I 100% agree with Andrew. It has to be the whole theatre – you cannot have bad quality in your foyer or concessions stand. I want to add that we don’t understand premium cinema as luxury cinema because of you add a glass of champagne it has to be more.

Helen – The thing to consider about ‘experience’ is that one size no longer fits all. When people go to cinema they want to experience it in different ways. You might go with friends and want to enjoy it in 4D. Or you maybe want a small 50 seater high-end [cinema auditorium] for a date night. The experience is not providing the same on every visit, but who you go with.

Bob – 3D is part of it. Enhancing individual experience. But it is all senses that need to be delighted. Interesting that you [David] talk about the experience economy. If you flew out on [budget airline] easyJet you get to experience eeconomy. [laughs] I’ve had the priviledge of travel through Gold Class VIP auditorium and seen everything from beds to comlicated electric plants in your seats to order wine, massive wall-to-wall screens. The “Everest” screening this morning was a great example of that. There is clearly a segment of the population prepared to pay more, but you better give them a premium experience, because you won’t fool them twice.

Andreas – In Dolby we started with the consumer and asked what he really wants. When you go back and look where it all starts it is almost like a journey. Experience is a journey of the consumer [from] when he buys the ticket. The consumer has  some excitement – “I want to see that film.” When he walks into the auditorium it has to be different. The room needs to look different. So we don’t believe that customers should be able to see speakers – audiences are more impressed with sound is coming from nowhere. We see results in Netherlands with JT or AMC in the US. Data tells us that people, once they have seen it, they come back. Too early to speak of ‘trend’ but it is exciting.

Christof – We don’t have special lines or box office for Imax theatres because we want to offer a very good quality to everyone who comes to our cinemas. Premium cinem can be the thing that has to be of very, very high quality, but premium can not be chosen all the time. Some can afford it but many others cannot afford it. To speed up ticketing you have to go online and get mobile ticket to scan to get in faster. We create a screen experience where we differentiate inside but outside it is good for all. Initially we charged extra 50 cents for digital projection and we had to explain what people were seeing, but you  need to talk about the good things you are doing.

David – Is premium just about up-charge?

Bob – There is a huge marketplace in most segments of industry where people will pay for ‘better’. All of those things that enhance the senses. There is a market place for those people. Technology plays a huge part because it enables the experience. People want to feel more lost in the movie. A premium film well made.

David – Is there not a danger of saturation of ‘premium’?

Andrew – There are different classes of ‘premium’. There is First, Business and Economy. Imax is First Class. Film makers shoot with Imax cameras and we work with them to make it look as good as possible. You can do it once at premiere [i.e. screen in highest quality or even 70mm] but you have to do it time and time again. That is where we feel that Imax excels. So a film maker knows that whether it is Milan or Tokyo a film maker knows that the film will look the same.

David –  How far can this go? Is it sustainable?

Andreas – Some want to pay for it and some consumers don’t. We always need to improve the experience. It starts with the storytelling. Film that are not seen in Dolby Vision will be seen in laser and immersive sound and that will be good. We see feedback from film makers and directors and they want to use that palette and enhancement.

Christof – We equip the last three rows with soafs and charge a little bit more. But our sound and picture quality is already pretty good for most of our cinemas. We have premium seating concept called ‘Supreme’, the rest is about using the brands we implement. We c0operate with Imax in large format.

Bob – There are 81 different PLF brands and seeing that in consumers minds, where most marketing comes from distributors. Where we stepped in with Luxe is a set of minimum standards but make an affordable brand that everyone can afford. You have to be able to persuade the consumers.

Andrew – One of our customers felt he offered too many sub-brands and he decided to switch to Imax.

Helen – The mainstream market is still the bread and butter. If you look at the premium offering it is heavily focused on key cities where you have wealthier communities. The cost of moving to premium is not insignificant in terms of everything from sound to seats. I’m not sure how fast that growth will be.

Bob – Large format came from 70mm film and that is what originally made a difference for large format. Now we are back to shooting with 70mm or with special digital cameras. Differentiating the image quality is hard these days. It is tough because the quality is good to begin with.

Andrew – I would argue because we at Imax post-process every single frame to make it look good.

Bob – I know because I was the one who licensed that Kodak technology to Imax in the first place.

Andrew – That was before my time.

[At this point David Hancock stepped in and pulled Bob and Andrew apart. Well, not quite, but it felt like he might have to.]

Andreas – Together with the right sound techonlogy we feel that this is something different. We are talking to a lot of creative people and they are starting to colour grade in Dolby Vision. We hand over the tools to the creative people and not take it in-house like Imax. Grading it is 2-3 to 7-8 days.

Helen – Postproduction is not without its headaches but it is easier than before digital. The different versioning is complicated and expensive.

Christof – It is our responsibility to explain this to our customers. Like I said, you cannot fool customers. It always depends on the movie and the market. You start in the large urban market before going into the smaller cities. People talk about watching a film in a 10-plex with an Imax, even if they did not go and see it in the Imax screen.

David – Is there a premium home environment?

Andrew – Anyone who has a 75-inch screen would say that is a premium experience, so we are always competing with high end in the home. Cinema is still a social experience. People enjoy going out together.

Andreas – The room you are in, the lights go down, it is a different experience, people don’t turn off their lights at home-

David – I do.

Andreas – OK, but 99% of people don’t do. Cinema has social side and it has senses side.

Bob – We have a 100-inch LCD in our house if Andrew wants to come around. The better the experience is in the home, the more it raises awareness is for cinema. We spend lots of money doing up a kitchen yet we are out eating in restaurant three nights a week – what’s that about?

David – Because you are lazy?

Bob – I will tell my wife you said that.

Christof – Premium is part of the portfolio that you have to offer customers.

Bob – I agree with all of that. Deterioration in attendance between 16-35 age group. Bringing them into an environemnt and telling them to switch everything off doesn’t work. Cinema today is 10 times better than it was 15 years and lot of that is technology driven, but you can’t stand still.

Question from Bill Beck – Both Imax and Dolby are basing their latest premium on a dual-laser platofmr which gives 2-3x the brightness of Xenon system, yet Imax is spending those lumens on size and Dolby is spending on dynamic range. How important is the ‘L’?

Andrew – The reason we embarked on the laser, because we still have lots of film based projectors, so we wanted to to replace 15/70mm projectors it is for 80 foot and above screens. At some point it will be for smaller screens, but for the momet it is for the very big ‘L’.

Andreas – We can also go down to the smaller size, because some exhibitores want to go for smaller screen. We can do up and down .

Andrew – There are other reasons for lasers than just brightness, such as colour and contrast.

There is a last question about premium experience before and after the film screening, but the session was wrapping up and I was not able to note the reply. I don’t suspect Andrew will be invited to Bob’s house to admire his 100-inch television or try his wife’s cooking.

Patrick von Sychowski
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