25% of small cinema theatres in Catalonia could close due to the digitalisation costs

Barcelona (CNA).- The transition to digital technology is hitting independent exhibitors in Catalonia very hard. They say they are not receiving enough funding to finance the digital equipment which is an essential tool for being competitive. If a cinema decides to maintain the 35 mm format, very shortly it would not be able to find film distributors as the industry is promoting digital technology almost exclusively. Those cinemas dedicated to showing classic movies which are not available in digital format, face closure and the independent sector does not have sufficient resources to finance these investments unaided.

The advantages of digitalisation

Digitalisation of cinemas does come with various advantages. First of all, the price of film copies would decrease from 1,200 euros for a 35 mm copy to only 250 euros for a digital one. As the analogue tapes consists of only one soundtrack where only one language can be recorded, the cinemas have to decide in which language they want to project the movies. If a cinema decides to show the movie both in Catalan and Spanish, they have to occupy two auditoriums because they need two tapes: one for each language. With a digital projector however, the movies are shown through a disc, just like a DVD, so that the projectionist can easily switch from one language to another and add subtitles. In this way it is possible to show the same movie in different languages at different times, occupying only one auditorium so that the cinemas are able to offer a more varied program. This is an attractive solution especially for a bilingual community such as Catalonia.

Another important advantage is the improvement of picture quality compared to the analogue format – although for some cinema-goers the digital picture quality can be considered as a negative point. Some cinema audiences consider that the “cinema feeling” also depends on the grain structure that is typical for 35 mm copies as well as other characteristics that point to the texture and therefore the physical existence of an actual film. Digitalisation also offers further commercial options such as the possibility to rent auditoriums with digital technology to companies or private persons who bring their own presentation on DVD, thus increasing the income of cinemas.

High costs overburden independent cinemas

The biggest problem is the high costs that accompany the process of digitalisation. The film distributors demand certain quality norms for the projectors. So, whereas the cost of an analogue projector is about 20,000 euros, a 2D digital projector can cost around 80,000 euros and a 3D projector even up to 180,000 euros, although no one knows for how long the digital projectors will be able to function. An analogue projector lasts for decades. The investment in a 3D projector can however pay off for the multiplex cinemas as the audience is willing to pay a little more for a 3D showing.

The small cinemas cannot shoulder these costs without difficulties. As in the case of the Cinema Méliès in Barcelona, jobs have to be cut to compensate for these losses. This means that for example only one person is responsible for the two projection rooms and the ticket sales.

The Cinema Méliès, named after Georges Méliès, the French film pioneer, is a small urban cinema with two screens which shows movies in original language with Spanish subtitles. In June 2011, the cinema was struck by fire that destroyed both auditoriums. The cinema reopened only on January 5^th of this year. In the context of the current difficulties for small cinemas in Catalonia, this reopening represents a ray of hope. The fire led the owner Carles Balagué to make the step of digitalisation. Both auditoriums are now digitalised, although the Méliès used to be dedicated to show a mix of contemporary and classic movies which are shown in 35mm. But with the arrival of the internet which makes the whole range of movies for cinema-goers online available, this idea had to be set aside for the moment.

Carles Balagué told CNA that the Méliès financed its new digital projectors through a soft credit from the Catalan Government guaranteed by a bank and through the money which the company had obtained. In spite of this, “we are still waiting for some help from the European Union or the Institute of Cinematography and Visual Arts (ICAA).” The ICAA is the public body responsible for regulating and financing cinematographic activity in Spain. Balagué says “the difficulties of a small business are manifold because of the lack of an integrator, the figure that facilitates the financing and the technological change. At the moment, the small companies are like orphans waiting for this fundamental figure.” The ICAA and the European Union do not give enough financial support for example as far as distributors’ fees to exhibit their movies in digital technology are concerned. The film distributors actually have an interest in supporting the cinemas during digitalisation because at the moment, they have to work with two tracks at the same time: they have to offer 35mm copies as well as digital copies which cause higher expenses.

The Spanish digitalisation model “is non-existent.”

At the 15^th Europa Cinema Conference in Paris in November 2010, Christine Albanel, the French Culture Minister, had stressed the important role cinemas play in urban cities: “The support of cinema digitalisation in Europe is legitimate and must be backed through political assistance and the public funds of each EU state.” Furthermore, the European Commission had proposed that the European Investment Bank (EIB) could finance the digitalisation for those cinemas that do not have sufficient revenues.

Pilar Sierra, manager of the Catalan Institute for the Cultural Companies (ICEC), which depends from the Catalan Ministry of Culture, told CNA that he Ministry had planned to earmark a financial aid for 2011, in cooperation with other Autonomous Communities in Spain. However, at the end, they have not been granted. “In 2011, a subsidy of 200,000 euros for small cinemas had been announced to digitalise the auditoriums, computerise the box office and the programming. In 2010, the subvention had amounted to 400,000 euros”, Sierra explains. “For 2012, the ICEC had planned funds to grant interest-free credits for the digitalisation amounting to 3 million euros, but up to the present day there is no money and we don’t know if this loan will be realised at last.”

In other European countries, the process of digitalisation is not as slow and difficult as it is in Spain. “The Spanish model is non-existent as we don’t have any regulations yet. We are light years away from France, the United Kingdom or even the Eastern European countries. Right now, any model would be good as we don’t have one”, complained Balagué. For instance, a successful model applied in France or Germany is that of the Virtual Print Fee (VPF). Claude-Eric Poiroux, the General Director of Europa Cinemas, explained this to the European Parliament in July 2011: “Exhibitors may obtain from distributors a financial contribution based on the savings they incur from virtual prints, either directly or indirectly through third-part investors. This (…) system is a rapidly growing solution which permits the sector to finance itself, as the savings incurred on the one hand finance investments on the other.” But the problem is that in small markets such as Catalonia, the prints in circulation are too few to finance digitalization.

One out of four Catalan cinemas faces closure –a threat for the diversity of the cinematographic landscape

Therefore, the most worrying question is if small cinemas could disappear due to these difficulties in the process. Carles Balagué fears that this could happen within the next two years: “At the moment, the situation of the independent cinemas is closer to closing than to continued employment.”

The Catalan Cinema Committee already warned in August 2011 that one out of four cinemas could close if they do not receive financial aid. The Committee is part of the Spanish Federation of Cinemas (FECE) and is recognised in Catalonia as the spokesman for the sector. It fosters relations with the autonomous administration which, through the Catalan Institute for the Cultural Companies (ICEC), is competent in matters of culture.

512 cinema auditoriums exist in Barcelona Province, over 700 in the whole of Catalonia from which 175 are threatened with closure. Only 25 % are digitalised in Catalonia at the moment, according to the Employers Association of Catalan Cinema. Screen Digest, a media-focused research company, estimates that across Europe between 5,000 and 6,000 cinemas face closure.

Pilar Sierra from the ICEC told CNA that there are three intermediary integrators for digitalisation: Ars Alliance Media (AAM), Ymagis and xdc. In Catalonia, most cinemas carried out their digitalisation through AAM and Ymagis. But to take advantage of these integrators, cinemas have to reach a determinate turnover ratio. “Aside from those 25 % screens already digitalised, there are other 50 % that do have the necessary turnover ratio to sign with an integrator and they cannot access any credit, so they are not able to digitalise their theatres. Therefore it is so important to implement the 3 million loan from the ICEC”, explained Sierra.

It is doubtful whether the spectators will even notice the difference in the picture quality or not. Balagué also thinks that “although there is the advantage of speed and image quality, the new system has a bureaucratic framework of passwords and codes which can cause programming problems.” As long as ‘real’ film exists, Carles Balagué will keep a 35mm projector ? for at least two more years. If everything goes well, the cinema Méliès will be showing classic movies again this summer. But sooner or later, the contemporary movies will only be available in the digital version. If the independent exhibitors do not get supported by resource-sharing measures soon, Balagué fears an impoverishment of the variety of cinema in Catalonia: “It is clear that the cinematographic offer will take a turn for the worse without the presence of independent cinemas.”