Digitisation in Latin America: A countdown *
by Roque González
By the end of 2013, Latin America had almost 8,000 digital screens, accounting for 63% of the total screens in the region. But the Latin American markets are varied and diverse: while Mexico, Colombia and Central America and the Caribbean - as a whole - have digitized three-quarters of their screens, Venezuela has only 20% digitization and the giant Brazil a mere 41%.
Effectively, if Mexico, Colombia, Central America and the Caribbean are excluded, the percentage of digitized screens in Latin America falls to 44%.
The influence of 3D on Latin American digital screens is still important, but much less so than it was only two years ago. And there are markets - generally, those with a higher digitization ratio - that have increased their share of non-stereoscopic digital screens (the percentage varies between 25% and 50%). There are also some few attempts at film transmission via satellite to the theatres (Mexico is in the lead in this incipient process).
The biggest Latin American exhibition chains are already 100% digitized, or about to achieve that goal. This is true for the multinationals (e.g. Cinemark and Cinépolis), as well as most of the national ones. The medium and small exhibition companies - especially those located in small towns, in the interior - still face problems that inhibit digitization.
The majors will stop distributing 35mm copies by early 2014 on Latin American markets with high percentages of digitization, like Mexico and Colombia. It's important to note that VPF (virtual print fee) agreements were not widely established in Latin America, as they were in the USA or Europe. Hybrid agreements were arranged: the major exhibitors (e.g. Cinemark, Cinépolis or Cine Colombia, among others) negotiated directly with Hollywood, whilst the national exhibitors - especially medium and small ones - and later the national film producers are the main financial supporters of the digitisation. The few companies managing VPFs in Latin America are mainly Arts Alliance Media, GDC and Bardan, among others.
Country by Country
In 2013, Colombia and Central America and the Caribbean - as a whole - joined Mexico at the top of the Latin American digitization rankings. They have digitized around three-quarters of their screens. Until 2012, Mexico was the only country to be included in the top ratings.
Other countries in the region saw an important increase in the number of digital screens in 2013: Argentina, Ecuador, Chile and smaller markets like Bolivia and Paraguay. But the origins of these increases are different.
In fact, the constant growth in Colombian digitization is consistent with the rise of the whole Colombian film market: in the first decade of the 2000s, the total number of screens doubled and admissions and box office increased significantly, while national films and their market share increased after the launch of the Colombian Cinema Law in 2003.
The three main exhibitors in Colombia (national Cine Colombia, Cinemark and Cinépolis) have already digitized all their screens. A similar situation has occurred in Ecuador, although this market is smaller than Colombia's.
The case of Argentina is different: although this country doubled the number of digital screens in 2013, its exhibition market has been stagnant for about 15 years, at around 800 (plus or minus 100). Admissions and box-office numbers were also stagnant until 2009, although since then these two variables have been increasing - but not at the same significant levels as other countries like Mexico, Brazil, Colombia and Peru.
In Argentina's case, the increase in the number of digital screens in 2013 (which account for about 45% of the total) was the unplanned consequence of the factors that explain the current economic crisis: a very high inflation rate, the blocking of imports to protect a national industry that, in any case, barely exists, and restrictions on currency exchange for Argentinians meant to stem the flow of money out of the country.
The Argentine government created an undervalued official dollar rate (around 50% cheaper than the dollar market value). Argentinians can import and spend abroad through electronic transactions based on a "cheap dollar": this is an indirect subsidy to the richest sector of the society, which stimulates the importation of foreign products and puts national manufactures at a disadvantage.
This was the case for the importation of digital projectors and cinema equipment to Argentina in the last year: despite the government restrictions on imports, the goods eventually arrived on the market, a move strengthened by the fact that Argentina does not produce this equipment.
Despite the fact that Argentina is one of the few Latin American countries that has public policies to support digitization in exhibition (the other is Brazil), by December 2013 not one screen had been digitized with state support. Soft loans to encourage digitization were announced in 2011, and launched in 2012. Nevertheless, because of Argentina`s very high country risk rate, and the subsequent very high interest rates, the loans in this country are not very "soft." Another reason for exhibitors' resistance to these policies perhaps resides in the unwieldiness of the Argentine bureaucracy and the poor implementation of policies.
Something similar happened with the Southern Cone (Mercosur) regional film institution called RECAM. They signed an agreement with the European Union, starting in 2009 and ending in 2012. Europeans provided around two million U.S. dollars; Argentines were in charge of the implementation. One of the main objectives was to build a network of 30 screens in Argentina, Brazil, Paraguay and Uruguay to show films from these countries. The project launch was announced at the end of 2008, but to this date nothing has materialized.
Venezuela has similar economic problems: one of the world's highest inflation rates and the prohibition of currency exchange for nationals. Nevertheless, local business people cannot benefit from a "cheap" official dollar, as happens in Argentina: the Venezuelan import system is more tightly locked than the Argentine one. This is the main reason why the Venezuelan exhibition market has the lowest Latin American digitization percentage (just 20%): they virtually cannot buy the projectors and equipment for their theatres.
Brazil is the world's tenth most important cinema market (in terms of admissions). However, by December 2013, the South American giant still had a low digitization percentage (around 41% of their 2,700 screens) despite public policies to support exhibition, including digitization.
Nevertheless, around 1,200 screens were registered in the Recine - a special regimen based on import-tax exemptions for projectors and exhibition equipment run by the main state fund for cinema, Fundo Setorial. The government estimates that these screens will be soon digitized.
At the same time, the Ancine (the Brazilian agency for cinema) is still carrying out the "Cinema perto de voçê" ("Cinema near you") plan, which supports the building of theatres in suburbs and small villages in the interior. All of these screens must be digital and DCI-compliant.
Mexico is the fourth-biggest cinema market in the world in terms of admissions and the fifth for screens. It is by far the leading Latin American cinema market. As was mentioned, by December 2013, Mexico had digitized more than three-quarters of its screens.
Cinépolis, the most important exhibition company in Mexico and the fourth biggest in the world, has screens through all Latin America and also has locations in the United States and India. This Mexican exhibitor has already digitized all of its screens in its mother country.
Cinemex is the second-largest exhibitor in Mexico and the sixth in the world. This Mexican company has digitized around 70% of its screens.
Cinemark has digitized around half its Mexican screens, and this year the American company sold all of its Mexican cinemas to Cinemex. Cinemark aim to expand their position in Latin America and in many of these countries, the company is included in the top rankings; in December, it opened its first screens in Bolivia.
Canacine - the trade association of distribution companies in Mexico - estimates that these three exhibitors have invested around 530 million dollars in the digitization of cinemas in recent years.
Around 11% of Mexican medium and small theatres will be out of digitization, and the business, if there is no state support. That is the conclusion of the Mexican Association of Independent Theatres, an organization consisting of 50 company exhibitors (totaling 300 screens, almost the same number of screens as Cinemark in Mexico). These screens are 27% percentage digitized - remember that the total Mexican percentage is around 75%. The Association is asking Mexican state agencies for soft loans, and they estimate their cost at 21 million dollars.
Meanwhile, in late 2013, Central America and the Caribbean (as a whole) will be digitized at nearly 80%. Puerto Rico and its top exhibition company, Caribbean Cinemas, are leading the digitization process. Cinépolis, for its part, had digitized all of its screens in Costa Rica, El Salvador, Guatemala and Panama by early 2013. Cinemark have also digitised all their screens, not only in this region, but all their Latin American screens (except Mexico).
In general, Latin America has cinema markets showing strong growth. There is also constant and intense construction of shopping malls - with their respective theatres - especially in Peru, Colombia and Chile. Many of these new shopping centers are being built in the interior for populations that have not enjoyed any movie theatres for decades.
In other countries with smaller markets (with just a few dozen screens), the percentage of digitization is higher than the Latin American average.
To sum up, Latin America is preparing for full digitization, matching the pace set by the Hollywood rhythm.
* Article based on the one published by Film Journal on October 14, 2013: "Countdown to digital: Conversion in Latin America varies by country"
Tables and graphs have been added by MEDIA Salles on the basis of data provided by Roque González (RoqueGonzalezConsulting.com).
Roque González is a Unesco consultant and the Latin American reporter for the European Audiovisual Observatory. He has worked with Octavio Getino in Incaa, Recam, and Fundación del Nuevo Cine Latinoamericano. He is a PhD candidate at Universidad Nacional de La Plata and the author of Cine latinoamericano y nuevas tecnologías audiovisuales (Fundación del Nuevo Cine Latinoamericano, La Habana, 2011).