YOU ARE HERE WE ARE FROM HERE Digital Cinema …...Saint-Petersburg, Russia Digital Cinema in Russia YOU ARE HERE WE ARE FROM HERE “DIGITRAINING PLUS: EUROPEAN CINEMAS EXPERIENCING

“DIGITRAINING PLUS: EUROPEAN CINEMAS EXPERIENCING NEW TECHNOLOGIES” Helsinki, Finland, 17–21 Feb 2010

Oleg BerezinNEVAFILM JSC, Managing Director

Saint-Petersburg, Russia

Digital Cinema in Russia

YOU ARE HERE

WE ARE FROM HERE

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About NEVAFILM


480566 628 685

754 792811

1 071

1 327

1 568

1 886

2 102

2004 2005 2006 2007 2008 2009

Sites Screens

S

Movie theaters market in Russia: General Figures (35-mm & digital)

37 69 97 132183 205170

326

499 679

959

1 127

21%

30%

38%43%

51%54%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

0

200

400

600

800

1000

1200

2004 2005 2006 2007 2008 2009

Sites in TC Screens in TC Share screens in TC

242,5315,8

411,8

548,0

800,9

705,9

72,783,1 89,5 103,4 118,5

132,3

$3,3

$3,8

$4,6

$5,3

$6,8

$5,3

$1,00

$2,00

$3,00

$4,00

$5,00

$6,00

$7,00

0,0

100,0

200,0

300,0

400,0

500,0

600,0

700,0

800,0

900,0

2004 2005 2006 2007 2008 2009

Box Office, $m Attendance, m Average Ticket Price

66 843 63 571 62 958

2007 2008 2009

Average Attendance Per Screen


Operatorsnumberof chains

number of sites

number of screens

total share by screens

Federal Chains 18 175 904 43,0%

Regional Chains 8 83 219 10,4%

Local Chains 52 149 324 15,4%

Independent cinemas 385 385 655 31,2%

Total Russia 463 792 2102 100,0%

Movie theaters market in Russia: Cinema operators

Rank Cinema Chain Sites ScreensShare by the

number of screens Headquarter

1 KARO Film 33 167 7,9% Moscow

2 Cinema Park 15 126 6,0% Moscow

3 Kinomax 24 100 4,8% Moscow4 Kronverk Cinema 15 97 4,6% St. Petersburg5 KinoStar 6 74 3,5% Moscow6 Luxor 13 65 3,1% Moscow

7 Formula Kino 12 65 3,1% Moscow

8 Premier Zal 40 54 2,6% Yekaterinburg

9 Paradise 8 42 2,0% Moscow

10 InvestKinoProject 6 41 2,0% MoscowTotal Top 10 172 831 39,5%

Total in Russia 792 2 102 100,0%

Top 10 Cinema Exhibitors in Russia as for 31.12.2009


Фильмы, вышедшие в прокат с декабря по июль в 2008-2009 гг.,

ранжированные по числу проданных билетов

10 000

100 000

1 000 000

10 000 000

0 10 20 30 40 50 60 70 80 90 100

рейтинг фильма

чи

сл

о п

ро

дан

ых б

ил

ето

в

2008 2009

Источник: Кинобизнес Сегодня

Суммарная посещаемость

ТОП 50 фильмов в 2009 году = +6,4%

(+4 606 586 кинобилетов)

Суммарная посещаемость

51-100 фильмов в 2009 году = -29,8%

(-3 569 848 кинобилетов)

TOP 50: Admissions 1H2008 vs. 1H2009

+6,4% (+4,6 mln. tickets)

TOP 51-100: Admissions 1H2008 vs. 1H2009

-29,8% (-3,6 mln. tickets)

Films Rank by admissions

nu

mb

er

of

tick

ets

per

film

Movie theaters market in Russia: Trend to “blocbusterization”




2003 First Digital Cinema Road-show in Russia

Feb,2nd The first Digital Cinema presentation

powered by Nevafilm

1.3K projector by Barco/Kinoton

D-Cine Premiere DP50

server by EVS Digital Cinema

Digital Cinema in Russia: Milestones


2004First Commercial Digital Cinema in Russia

Jan – Apr “Kinosphera” Cinema, MoscowJoint project by BFC-Media and Nevafilm

Projection Barco D-Cine DP30 1.3KServer CineStore Solo (EVS)

Releases “Brother Bear”, “Finding Nemo” (Walt Disney)



2006The First 2K “DCI” Digital Cinemas in Russia

Oct, 26th first commercial 2K Digital Cinema

“Zanevskiy Cascade” , St.-Petersburg

2K projector Christie CP2000

server Doremi DCP-2000

Dec, 1st “Cinema Park” St.-Petersburg

“Illuzium”, Naberezhnie Chelny

Dec, 26th First Digital Release (2K, DCI compl.)

The Night at Museum” (XX Century Fox)


http://www.kinopoisk.ru/level/13/film/178580/


2007First 3D film in wide release

Nov, 22nd

premiere Beowulf 3D (Warner Brothers)

Total releases 29



2008Sport LIVE & Concert at Digital Cinemas

Feb, 21st the first Concert Released in Digital CinemasRussian production,“Green Theater in Zemphira”

May, 1st release U2 3D

May, 14 The First UEFA licensed LIVE UEFA CUP – “Zenith” : “Glasgow Rangers”

June LIVE EURO CUP 2008

June, 17th The Rolling Stones Shine the Light



2009Digital 3D Booming

19 3D-releases

alternative content in cinemas

96 Digital Releases

Avatar 3D



Digital Cinema Screens: General figures

327

73

273

331

91

353

2006 2007 2008 2009

sites with digital screens digital screens


67%81%

98% 99%

2006 2007 2008 2009

0,2%2,0%

4,8%

16,8%

25,0%

2006 2007 2008 2009 2010F

SHARE OF DIGITAL SCREENS NUMBER

Digital Cinema Screens: 3D forever – no comments

PROPORTION OF 3D DIGITAL SCREENS

3 3 1 3

2111 8

18 23 2738

29

163

4 Q

2006

1 Q

2007

2 Q

2007

3 Q

2007

4 Q

2007

1 Q

2008

2 Q

2008

3 Q

2008

4 Q

2008

1 Q

2009

2 Q

2009

3 Q

2009

4 Q

2009

Avatar 3D (17.12.09)

Ice Age 3D (01.07.09)

Monsters vs. Aliens 3D

(19.03.09)Beowulf 3D

(22.11.2007)

Numbers of new digital screens by quarters

118,2$

54,5$ 53,2$

86,7$

44,8$

37,8$

140,0$

9,0

6,77,3

3,0

3,14,0

5,5

0

1

2

3

4

5

6

7

8

9

0

20

40

60

80

100

120

140

160

11.09.2008 26.11.2008 19.03.2009 01.07.2009 20.08.2009 09.09.2009 17.12.2009

Journey to the Center of

the Earth

Bolt Monsters Vs Aliens

Ice Age 3: Dawn of the Dinosaurus

G-Force Final Destination: Death Trip

3D

Avatar (25 days)

BO per 3D screen 3D BO vs. 2D BO per screen


Dolby67,4%

DoReMi28,0%

GDC4%

Kodak0,6%

QUBE0,3%

SERVERS 2009Y (5)

Christie53%

Barco

17%

Cinemeccanica

16%

NEC

9%

Kinoton

5%

PROJECTORS 2009Y (5)

Dolby 3D

66%

XpanD 3D27% RealD

4%

Master Image 3D1%

IMAX1%

Dual Projection1%

3D-SYSTEMS 2009Y (6)

KINO-PROEKT

13% Cinemec-

canica

11%

ASK8,5%

ASIA CINEMA

8,5%Others

15 companies

24%

BY INTEGRATORS 2009Y (20)

Nevafilm35%

Digital Cinema Equipment: Capitalistic Competition


Choice of Equipment (except IMAX):

RANK OF FACTORS

#1 Cost#2 Time of delivering#3 Terms of payment#4 Technology (DLP or Sony)#5 Brand #6 Options (localized menu, etc)

For 3D Releases

Only13%

For ALL types of Releases

56%

For 3D and Blockbusters

31%For which type of content do you

use Digital Cinema Equipment? (research at middle of 2009Y)

Digital Cinema Equipment: Customers arguments for choice and usage


14%

57%

73%

13%

67%

100%

1-299 prints 300-599 prints 600+ prints

2008 2009

90%

50%

19%5,60%

1-50 51-100 101-200 200-324

Digital film releases: Digital (Hybrid) releases vs. “35-mm only” releases

2009: % of Digital Releases vs. BOX OFFICE RANK 2009: % of Digital Releases vs. WIDENESS OF RELEASE

Total numbers of releases per year

2 1 29 63 96

286315 293

350 355324

2004 2005 2006 2007 2008 2009

Hybrid & Digital Total releases


50

14 6

10

713

Hollywood Russia Others

Hybrid (35-mm & DCP) 35-mm ONLY

2004 2005 2006 2007 2008 2009

Hollywood 2 - 1 20 40 60

Russia - - - 7 15 18

Others - - - 2 8 18

Total Russia 2 - 1 29 63 96

60

18 18

30

60

138

Hollywood Russia Others

Hybrid (35-mm & DCP) 35-mm ONLY

2009Y : Digital releases vs. ALL releases 2009Y : Digital releases in TOP 100

Digital film releases: Digital (hybrid) releases by origin

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

0 100 200 300 400 500 600


wide of release, 35-mm prints by title

AV

G B

O p

er

35

-mm

pri

nt,

$U

S

level of cover the expenses for print “35-mm print”

39 of 60 Russian films (65%) which were released only on 35-mmdoes not return even cost of 35-mm prints from Box Offices rentals!

Film releases: 2009Y: Cost-effectiveness of «35-mm only» releases


• Closing theatres in small cites

• Declining numbers of local releases

• “Pop-corn giants” domination

• and finally….

closing all theatres upon Studios discontinue release film on 35-mm tape

Transition to Digital: Scenario # 1 Stay with 35-mm technology only


• Digital “Inequality”

• Cost of Hybrid releases

• Killing “second wave” cinemas

• Discontinuing release 35-mm for “second wave”

•Different Digital and “like Digital” systems at market

Transition to Digital: Scenario # 2 Everyone is on his own


• Several public models for different players

• Fair models

• Necessity to protect local culture

• Aggregation with other media

• Model for business, society, industry,

government, etc

Transition to Digital: Scenario # 3 Generic Strategy


Transition to Digital: Major & Key Cinema Chains

Type of Theatertotal sites

total screens

Sites w/DC

DC screens

share of sites w/DC

share of screens w/DC

AVG DC per Site

Single Screens 368 368 52 52 14% 14% 1,0

Miniplexes (2-7) 368 1221 172 205 47% 17% 1,2

Multiplexes (8+) 56 513 49 96 88% 19% 2,0

Total Russia 792 2102 273 353 34% 17% 1,3

• Decision: TWO screens (3D) per site (investments return during 1 year)

• Key theatres do not have problems to order 35-mm

• Do not have any economical reasons to invest to all screens at complex


Transition to Digital: Independent Cinemas

• 3D Box Office

• Competition with big players

• Need access to “first run” prints

• Not enough money for investment in to Digital Cinema

TYPEOF

Operators

# of chains

# of cites

# of screens

total share by screens

DC sites

DC screens

share by D-cites

share by D-

screens

Share market by DC-screens

Federal Chains 18 175 904 43,0% 94 142 53,7% 15,7% 40,2%

Regional Chains 8 83 219 10,4% 23 32 27,7% 14,6% 9,1%

Local Chains 52 149 324 15,4% 44 51 29,5% 15,7% 14,4%

Independent cinemas 385 385 655 31,2% 12 128 3,1% 19,5% 36,3%

Total in Russia 463 792 2102 100,0% 173 353 21,8% 16,8% 100,0%


Transition to Digital: Major Studios

• Cost of 35-mm prints averagely less than 5% of Box office

• Need only 40-50% of market – key cinemas and chains (i.e. Majors not needs 100%!)

•No interest in small towns - no “secondary” markets: DVDs, etc

• Local offices have less interest than LA offices

• Too many cinema operators in market (450+) for offer direct VPF deals

• Major studios happy to use benefits from current situation (no VPF but DC growing)

Type of Distributors

number of titles

Digital releases

Total numberof prints

Digital prints(first keys)

Box Office, $m

Admission, m

# % # % # % # % # % # %

Majors 138 43% 74 77% 42 209 64% 3 899 86% 608,0 83% 114,6 82%

Independent 186 57% 22 23% 23 481 36% 655 14% 128,2 17% 24,5 18%

Total Russia 324 100% 96 100% 65 690 100% 4 554 100% 736,2 100% 139,1 100%


Transition to Digital: Independent Distributors

• Most interested in rapid development of Digital Cinema market

• Too many independent distributors at market

• Less money for financing any VPF, WPF, FPF, etc models

• Art-house, niches, culture, and alternative content

80%

28%

11%

3D releases Releases by Major Distributors

Releases by Independent Disrtibutors

Accessibility of Digital Screensfor Digital Releases by type of distributor (100% - all screens by date of release)


Transition to Digital: TODAY - in finding the balance of interests

President Mr. Medvedev :

«Four I» strategy :

Institutes

Infrastructure

Investments

Innovation10,4% 10,0%12,3%

15,4%

2006 2007 2008 2009

Average Interest Rate

for one-year loans

o Proposals for Film Support Fund (Russia) established by Government on 31 Dec 2009

• Direct financing cinemas in small towns

• VPF’s like models for local film support (produced with budget support from federal budget )

o Decline cost of equipment

• Import duty (now 15%)

• VAT regulation for movie theaters (18%)

• Discussion with manufactures

o Decline cost of financing

• Fact: Interest on loan money is less than any VPF

• Need of subsidiary support from Government


Transition to Digital: Education

New technologies need new knowledge!!!

EU – Russia: Digital Cinema Education Programsas good base for collaboration and cooperation

Education center in Russia: Saint-Petersburg State University of Film and Television

Summer 2008Digital Cinema Research Institute (DCRI)was founded in University of Film and TV

September 2009 Agreement of Association between Christie and University


Experience from Russia: Alternative Content

Jam Hall Cinema, 10 Feb 2010Maestro Ferrucio Furlanetto (on right)

at promo-event “Operas @ Cinemas”


IRON MAIDEN: FLIGHT 66621/04/2009 – “MAIDEN DAY” in Russia:

• 42 towns across country – one night screening• 5 000+ fans-moviegoers• 20 concerts in cinemas before screenings

by local musicians and groups

Experience from Russia: Alternative Content - Concerts


15/08/2009 ALL-RUSSIAN CINEMA-EVENT: THE LAST HERO

40 towns and >10’000 attendance3 cinemas with more than 3’000 moviegoers

Experience from Russia: Alternative Content - Cinema Event

15/08/2009 ALL-RUSSIAN CINEMA-EVENT: THE LAST HERO

Documentary film, Concerts by local talents, photo exhibitions,books and photo albums sales, plus more and more


Experience from Russia: Alternative Content - Cinema Event

La Scala series «Magic nights in Digital Cinemas»

o 8 operas series (Recorded and LIVE) from La Scala Theatreo 15 townso One title per month (October – May)o Two screening per cinema

o First at evening for commercial o Second on two weeks late at morning – for education


Experience from Russia: Alternative Content - Operas

16-pages Booklet for each moviegoer of La Scala series


Experience from Russia: Alternative Content

QUALITY no compromise with technical qualityno Blu-Rays, no DVDs

LIVE EVENTS Satellite coverage Time Zones (Russia 11 time zones!)

LOCALIZATION needs Russian subtitles “on fly” needs interface: «Projector - subtitles GEN»

25FPS Standard are issued – ok.24/25 conversion not working for music

RELEASE DAYS for first-run cinemas – Monday, Tuesday only

PROMO needs new non-expensive ideas

CONTENT only for Big Screensno documentary, no “speaking heads” shooting and sound especially for cinemas

CLASSIC EVENTS the stand alone cinema better that Shopping Mall

AB3 satellite coverage

39% 39% 36%

57%61% 61% 64%

43%

screens adm screens adm

Iron Maiden Pavarotti

Stand Alone Shopping Malls


NOVEMBER, 2010. WORLDWIDE D-CINEMA EVENT

NEVAFILM EMOTION

LEO TOLSTOY: GENIUS ALIVE

New projects from Russia: Alternative Content

The feature documentary is being produced entirely out of the film footage shot 100 years ago.

Russian-European co-production

ARRI Film & TV Services GmbH, Munich as the General Technological Partner of the project will provide unique technology of scanning and restoration

Only in Digital Cinemas worldwide on November, 16th.


MASTERPIECES OF THE RUSSIAN MUSEUM

G R E AT A R T I S T S O F R U S S I A O N T H E D I G I TA L S C R E E N S

NEVAFILM EMOTION PRESENTS

ENLIGHTENING PROJECT FOR DIGITAL CINEMAS

Goal of project

to increase interest of

moviegoers to high level arts

The short films (1-4 min) for screening

before features in Digital Cinema

Encrypted DCP format

High quality of Digital Projection

2D and 3D

New projects from Russia: Alternative Content


© Geoffrey Moore «Crossing the Chasm», MKPE, Nevafilm

2000Y

the first demo of

Digital Projection

in Russia

end of 2006Y

the first 2K D-Cinemas

in Russia

300

screens

600

screens

600

screens

300

screens

LATE

MAJORITY

EARLY

MAJORITY

EARLY

ADOPTERS LAGGARDS

«THE CHASM»

WE ARE HERE!

Innovators

2007Y – 2009Y

development of DC-market

as competition benefit

3D domination

EARLY 2010

Conclusion: «Crossing the Chasm»


Oleg BerezinNEVAFILM JSC, Managing Director

Saint-Petersburg, Russia


YOU ARE HERE

WE ARE FROM HERE

THANK YOU!

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YOU ARE HERE WE ARE FROM HERE Digital Cinema …...Saint-Petersburg, Russia Digital Cinema in Russia YOU ARE HERE WE ARE FROM HERE “DIGITRAINING PLUS: EUROPEAN CINEMAS EXPERIENCING