The Digital Switchover in the UK and the Impact on Independent Distribution Alex Stolz Estoril, 21 st November 2008

About 300 screens installed of c.3400 in UK. 240 as part of the UKFC Digital Screen Network but the intent of the network was not to assist a rollout, but rather widen choice of films. Growing awareness and urgency around the need for a digital switchover plan/solution A Virtual Print Fee (VPF) is the likely funding model At least one major exhibitor believed to be in discussions independently and directly with studios on a VPF model An industry working group has been meeting to discuss developments and options going forward the story so far…

1. The smaller exhibitors 2. Distribution 3. The race against time 4. And… a possible solution What are the major issues?

the smaller exhibitors circuitcinemasscreens% of total cinemas% total screens%total box office Apollo %2.27%1.47% nat amusements %5.60%6.93% Cineworld %21.71%25.18% Empire %4.51%4.74% Odeon %24.87%27.70% Vue %16.25%20.19% subtotal2942, %75.22%86.20% independent totals %24.78%13.80% grand total7103,390 Cinemas in the UK 2007

the smaller exhibitors Analysis carried out of independent cinemas / not viable to buy gear independently Between cinemas may not generate enough VPFs to cover equipment Small market share - studios not compelled to assist other than for political reasons

Independent distribution Independent cinemas crucial for independent distribution VPF may not take into account independent release patterns Multiple aggregators / VPF deals could penalise specialised distribution

The race against time! 2009 key year for 3D studio product Bolt (Disney, Feb), Monsters vs Aliens (Paramount, April), Avatar (Fox, December) Pressure on studios for screens / commercial exhibs also want product

A potential solution One deal for all – no cinema left behind! Widest point of release used for VPF (not first run basis) Ordered and coordinated switchover to the benefit of all Protects non-saturation release patterns

A potential solution contd Requires all (or nearly all) of industry to take part No public funds required – the UK has none available!

To be continued….