Market Insight

More digital rollout takes place in Brazil

April 25, 2013

Xin Zhang Xin Zhang Senior Research Analyst, Cinema, IHS Markit
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There has been some progress in Brazil's long gestation of digitisation of cinemas. Cinemark, the US exhibitor and the largest cinema exhibitor in Brazil by screen count (also one of the leading exhibitors in Latin America), has expanded its digital deployment with cinema projector manufacturer Barco for 400 screens in 12 countries throughout Brazil, Central and South America. Additionally, Barco has agreed a deal with another Brazilian exhibitor Cinesystem for a full conversion of its screen estate. Cinemark currently operates 495 screens across 62 sites in Brazil, and Cinesystem has 70 screens in 14 sites. At end 1Q 2013, Brazil had 841 d-screens, an increase of only 17 d-screen in the three month period. The vast majority of these screens are 3D, a sign that the full rollout is not yet underway in Brazil. There were 2,564 screens in Brazil at end 2012.

Brazil is an important country in the region for digital deployment given its size, developed cinema infrastructure and strong government support compared with other countries in Latin America (except Mexico). On the digital front, Brazil is the only country in the region where exhibitors have formed a consortium (a group of 15 local exhibitors) to negotiate the VPF with the major studios. The group has taken on local group Beyond All to assist. Having signed a letter of intent with Cinedigm, the US digital cinema third-party integrator in January 2013, Beyond All is working with the group on the VPF negotiations for approx 1,000 screens. The consortium has also engaged MKPE Consulting for the negotiation and some technical services. This deal has taken some time to achieve, but the signs are that this is progressing and Brazil should be able to carry on with its digital conversion soon. For its part, the Brazilian government has reduced import tariffs on digital cinema equipment (reducing the cost by 30 per cent), which have been a major disincentive in the wider region, and is also financially supporting the rollout with public funds. Beyond All is also known as DGT Cinema and has the backing of the six US studios. The COO of DGT Brazil is also the CEO of Bardan, a local integrator.

Pockets of Latin America are also seeing some progress. Cinema exhibitor Cineplex (owns Cineplanet and Movieland in Peru and Chile respectively) signed a deal with Barco and Bardan for a full conversion if its 28 sites in both countries. Cine Colombia is also now well underway in its digital conversion, having done deals with (again) Barco (projectors), Arts Alliance (TMS) and Auro (Auro 3D sound) in recent weeks. Latin America's digital penetration will increase significantly after all these deals are completed but a wider deal for many in the independent sector is still lacking. The digital penetration for Latin America at end 1Q 2013 is 49.2 per cent, compared with 76.8 per cent, 86.5 per cent and 79.1 per cent in West Europe, North America and Asia Pacific respectively.

 

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