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10/2/2014 Countdown to digital: Conversion in Latin America varies by country

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Countdown to digital: Conversion in Latin America varies by countryOct 14, 2013

-By Roque Gonzlez

By September 2013, Latin America had almost 7,000

digital screens, accounting for 55% of the total screens

in the region. But the Latin American markets are varied

and diverse: While Mexico and Colombia have digitized

three-quarters of their screens, Venezuela has only 20%

digitization and the giant Brazil a mere 35%.

Effectively, if Mexico, Colombia, Central America and

the Caribbean as a whole are excluded, the percentageof digitized screens in Latin America falls to 35%.

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 marketsgenerally, those with a higher digitization ratiothat have increased their

share of non-stereoscopic digital screens (participation varies between 25% and 50%).

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 Cinpolis), as well as most of the national ones. The medium

and small exhibition companiesespecially those located in small towns, in the interiorstill face problems

that inhibit digitization.

The majors will stop distributing 35mm copies by early 2014 in Latin American markets with high percentages

of digitization, like Mexico and Colombia. Its important to note that VPF (virtual print fee) agreements were not

established in Latin America as they were in the USA or Europe. Hybrid agreements were arranged, and the

national exhibitorsespecially, medium and small exhibitorsand later the national film producers are the

main supporters of this effort.

Country by Country

In 2013, Colombia joined Mexico at the top of the Latin American digitization rankings: Both have digitized

around three-quarters of their screens. Until 2012, Mexico was the only country at the top.

Other countries in the region saw an important increase in the number of digital screens in 2013: Argentina,

Ecuador, 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, and national films and their market shareincreased after the launch of the Colombian

Cinema Law in 2003.

The three main exhibitors in Colombia (national Cine Colombia, Cinemark and Cinpolis) have already digitized

all their screens. A similar situation occured in Ecuador, although this market is smaller than Colombias.

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 beenincreasingbut not at the same significant levels as other countries like Mexico, Brazil, Colombia and Peru.

In Argentinas case, the increase in the number of digital screens in 2013 (around 40% of the total) was an

unplanned consequence of the factors that explain the current economic crisis: a very high inflation rate, the
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blocking of imports to protect a national industry that, by the way, 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 (61% 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 movedstrengthened by the fact that Argentina does not produce this equipment.

Despite that 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 September 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 execution of policies.

Something similar happened with the Southern Cone (Mercosur) regional film inst itution called RECAM. They

signed an agreement with the European Union, starting in 2009 and ending in 2012. Europeans providedaround 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 projects launch was announced at the end of 2008, but to this date nothing has materialized.

Venezuela has similar economic problemsone of the worlds 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 importing system is more locked than the Argentine one.

That 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 worlds tenth most important cinema market (in admissions). However, by September 2013, the

South American giant still had a low digitization percentage (around 35% of their 2,500 screens) despite publicpolicies to support exhibition including digitization.

Nevertheless, around 1,200 screens were registered in the Recinea 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 t ime, the Ancine (the Brazilian agency for cinema) is still carrying out the Cinema perto de vo

(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 admissions and the fifth in screens. It is by far the

leading Latin American cinema market. As mentioned, by September 2013, Mexico had digitized almost three-

quarters of its screens.

Cinpolis, 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 digitized around the half of its Mexican screens, and last year it sought to sell all of its Mexican

cinemas to Cinemex. However, the Mexican agency for consumer protection has impeded this sale (at leastas of September 2013).

Canacinethe trade association of distribution companies in Mexicoestimates that these three exhibitors

have invested around 530 million dollars in the digitization of cinemas in recent years.


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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 digitizedremember that the total Mexican percentage is

around 74%. 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 100%. (By

September 2013, this subregion had digitized around three-quarters of its market). Puerto Rico and its top

exhibition company, Caribbean Cinemas, are leading the digitization. Cinpolis, for its part, had digitized all ofits screens in Costa Rica, El Salvador, Guatemala and Panama by early 2013.

In general, Latin America has cinema markets showing strong growth. There is also constant and intense

construction of shopping mallswith their respective theatresespecially 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.

In summary, Latin America is preparing for full digitization, matching the pace set by the Hollywood rhythm.

Roque Gonzlez is a Unesco consultant. He has worked with Octavio Getino in Incaa, Recam, and Fundacin

del Nuevo Cine Latinoamericano. He is a PhD candidate at Universidad Nacional de La Plata and the author of

Cine latinoamericano y nuevas tecnologas audiovisuales (Fundacin del Nuevo Cine Latinoamericano, La

Habana, 2011).

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