BSAC FILM CONFERENCE 2012 Thursday, 22 March THE RUTHERFORD CONFERENCE CENTRE, 76 PORTLAND PLACE, LONDON, W1B 1NT Sponsored by Below is a summary of the presentations given on the day. Chair’s Introduction Stephen Garrett, Chairman, Kudos Film and Television and Executive Chairman, Shine Pictures The Chair welcomed guests to the ninth annual BSAC Film Conference. Stephen highlighted a quote from Steve Jobs, who had grown the most successful business in history, that he felt would be useful to keep in mind over the course of the day, ‘here’s to the crazy ones, the misfits, the rebels, the trouble makers, the round pegs in the square holes, the ones who see things differently. They’re not fond of rules. You can quote them, disagree with them, glorify or vilify them; but the only thing you can't do is ignore them, because they change things. They push the human race forward, and whilst some may see them as the crazy ones, we see genius, because the ones that think that they can change the world are the ones who do’. Today’s conference would focus on how the film business was adapting to change. The business was entering a world where cinemas would be 100% digital, superfast broadband would enable new ways of delivering films and films were available globally across a multiplicity of devices and platforms. The Apple ecosystem was becoming ever more attractive to consumers as the new iPad 3 had an HD screen, which was better than most 40” TVs as well as boasting 3D capability. Change was now happening so fast one could almost see it daily, and maybe some rule breaking and more than a little creative craziness was needed to control it and make it work. The first session would consider how exhibition was adapting to the new environment, for example, by attracting new audiences with different types of programming by making film watching an event, like live music, and how the business model might change for film. Panels later in the day would examine key industry trends and the ways in which traditional distinctions between forms of media were becoming less clearly defined, and how storytelling across genres was changing. The question arose of what defined a movie? The answer used to be clear: a long form audiovisual story projected onto a screen in a cinema. The introduction of live alternative content to cinemas, BSAC Film Conference Report 2012 1 increasingly sophisticated home entertainment systems, ‘TV movies’, mini-series and series boasting cinematic production values and budgets, meant that the world was now gloriously complex and challenging. Stephen introduced the first session, which was a regular slot every year, and that informed the discussions over the day. Richard Cooper, Senior Video Analyst, IHS Screen Digest would present on the latest industry trends. The BSAC Business Briefing on the UK Movie Market prepared for this conference had become valued in the industry for the hard data it provided on the movie market. Changes were usually at its heart. Delegates were also provided with a report of three recent BSAC Business Briefings prepared by IHS Screen Digest. Stephen thanked Time Warner for their ongoing generous sponsorship without which the Conference would not be possible. Latest Industry Trends Richard Cooper, Senior Video Analyst, IHS Screen Digest Richard said the best way to understand future trends was by taking a step back in time. In 2003, the media landscape was much simpler. At that time pay TV subscriptions had accounted for around 45% of the UK entertainment spend, £8.5bn, by consumers. Around a third of the market was accounted for by VHS and the relatively newly emergent DVD. 35mm projection at the cinema accounted for around 8%. The first of the new generation of games consoles was beginning to come to the fore. A tiny percentage of entertainment spend was accounted for by mobile content. By 2007, the entertainment spend had increased by 18% to £10bn. High definition TV was becoming more common and set-top boxes were becoming increasingly sophisticated. VHS had died, and DVD was already starting to diminish in terms of consumer spending. Digital projection was starting to be introduced. The launch of two new games consoles, the Xbox 360 and the Playstation 3 were driving consumer spending in games. In 2011, those channels were even more advanced. Pay TV was dominated by delivery of high quality images and sound, and set-top boxes had become even more advanced, allowing people to record days worth of movies, not just hours. The launch of Blu-ray Disc complimented DVD, although the segment of the market that that accounted for had fallen to around 17% of total UK entertainment spending at £12 billion. Digital projection had become the norm, which had allowed for the increase of 3D. Games consoles’ share of the market had begun to diminish as devices aged. The rise of tablets and smartphones since 2007 meant they had an increasing share of the market. The entertainment landscape was increasingly complex. However, entertainment spending was still rising despite the tough economic climate. UK consumers spent more in 2011 than ever before. Following the peak in spending on DVDs in 2004, consumer spending on movies had been relatively static since 2005. The way consumers accessed movie content was changing. Between 2007 and 2011 the largest area of growth was theatrical, whilst the biggest area of decline was packaged media. The physical rental market had started to plateau so instead of the consistent declines year on year, a level had now been reached where a hard core of physical renters were maintaining the market. There was a balance now between the traditional bricks-and-mortar rental outlets, such as Blockbuster, and online physical distribution companies, such as LOVEFILM. Increases in theatrical spending were being driven by higher ticket prices rather than admissions, which were relatively static. Increases in the average ticket price had gone up in line with inflation until recent years, when the introduction of 3D films had placed a premium on tickets. A landmark had been reached in terms of consumer spending at the cinema: spending had surpassed £1bn in BSAC Film Conference Report 2012 2 2010 and again in 2011, in part due to 3D premiums. However, the proportion of the box office made up by 3D admissions had fallen in 2011. Did this mean that 3D was just a passing fad? The answer was clearly no. Of the top 10 films last year, 4 were shown in 3D. The technology was now in place so the success of 3D over the next few years would be dependent on the kind of titles which were made available to consumers. 3D had become a regular experience at the cinema in terms of consumer habit. However, it was yet to move to other forms of movie delivery. The installed base of 3D TVs was incredibly low in the UK, and whilst this would grow over time, it was not expected to drive the physical market particularly. Richard explained that reports of the death of the physical business were greatly exaggerated. He had first read that DVD would die within the next two years about three years ago. The reality was quite different. DVD remained the most popular way of consuming movies. There had been growth in Blu-rays, which appeared to be filling a high end niche in terms of the customer experience. Both of these forms had suffered from a continual decline in the average price since launch. This trend had been broken for DVD in 2011 when the average price rose for the first time, partly due to the increase in VAT, but also there had been a shift in the type of titles that consumers were buying. Consumers were moving away from lower priced catalogue product towards higher priced new release. Another key area of growth was TV VoD. Unlike cinema, growth in this area was not particularly driven by increases in price. It was driven by greater access to services with increasing subscriptions to the three dominant players in the UK: Sky, Virgin and BT Vision. In 2011, 53% of UK households had access to an on-demand pay TV platform. Over 4.5m had true VoD via Virgin Media cable or BT Vision IPTV, a further 3m have an IP-delivered VoD service (Sky Anytime+), and 5.5m had push-VOD via BSkyB (Sky Anytime). However, VoD was a small component of overall TV viewing. With the decline of VHS and the rise of DVD, consumers’ ability to record from the TV had vanished. However, over the last few years, PVRs and DVRs had brought that functionality back to the home. TV VoD was a good indicator of this kind of behaviour. The final component in the transactional movie environment was digital. Digital retail and rental had shown very strong growth over the last few years. However, contrary to expectations growth had slowed and digital looked set to fulfil another market niche. The market was dominated by three key players with device-based ecosystems: Apple, Sony and Microsoft. Digital subscription sat outside traditional transactional movie viewing. The three key players were Netflix in the US, LOVEFiLM in the UK, and Sky. LOVEFiLM launched their digital subscription service in December and Netflix launched in January 2012. Sky’s offering was predominantly open to just their existing pay TV subscribers. Netflix would be fighting something of an uphill battle against the incumbents LOVEFiLM and Sky in the UK, who had stolen the march in terms of exclusive movie rights deals.