So what’s all this ‘Film Industry 2.0 No Time to Die’ I hear you ask… an advert for Bond? Not quite, but much to the dismay of Bond fans globally, this will be Daniel Craig’s last time featuring as the iconic 007. As the world came to a screeching halt with COVID-19, the film was postponed until November 2020.
In a recent article by The Guardian, the cost of COVID-19 was estimated at more than $20 billion to the global Film Industry. As such, and being a fan of spy and action films, I thought this would be a good film title and song choice to reference; as we continue to explore Digital Transformation for the Film Industry.
So, in this post, we will look at the current challenges faced by the industry today and how it can evolve to bring us amazing film entertainment for decades to come. For the purposes of this post, we will classify this as Film Industry 2.0.
Film Industry 2.0 Reflects A Changing World
Film Industry 2.0 reflects a world of changing customer needs and demands. Everything from how they engage with friends and family, to how they consume media, and how they spend on entertainment. It is all changing. Furthermore, COVID-19 has impacted us in ways that we could not have imagined. It has brought films like Outbreak and Contagion front and centre of our attention as film fiction turns to global reality. Will the knock-on effects of the pandemic lead to permanent change in how we socialise in public? Or will things go back to the way they were?
Either way, the pandemic has inadvertently presented an opportunity for the many industries it has impacted; one that has exposed the bottlenecks and flaws of their existing service and operating models. Industries have no choice but to think outside the box with regard to their business models. How will they need to change in order to survive and thrive in a new world beyond COVID-19?
The Film Industry Today
The Film Industry drives audiences at scale to see the latest films on the big screen at the cinema. These are otherwise known as Theatrical releases. The films eventually transition from the big screen to the small screen.
The initial source of revenue for new cinema film releases starts with Box Office sales. Revenue continues to be driven through the subsequent sale and rental of these films under the category of Home Entertainment. Think of it as a commercial funnel for the Film Industry.
That’s not to forget the additional revenue associated with film sponsorship tie-ins, product placements, merchandising, and music collaborations; which all contribute to an industry that generates billions annually. Revenue can live on through royalties, otherwise known as ‘residuals’ for decades to follow. For instance, let’s take Billie Eilish’s theme song to NO TIME TO DIE. Sky News reported it had over 10 million streams and 90 thousand chart sales in the first week of release. This topped all previous Bond theme songs.
The commercial funnel takes consumers through the following phases:
- Theatrical: New films released in cinema
- Physical Video: DVD and Blu Ray disc sales and rentals
- Digital Video: Digital streaming for film rental and/or purchase
- Television: Standard feature film broadcasting on television
Diving Into The Numbers
Ultimately, each step in this funnel represents a value chain of service providers. They are cashing-in through the supply chain that helps to get these films in front of our eyes; whether we watch them on the big screen, or wait for them instead to reach the small screen.
The British Film Industry (BFI) Statistical Yearbook 2019 highlights the value of the UK Film industry at £3.5 billion in 2018. This is split as follows:
- Theatrical: £1.3 billion
- Physical Video Sales: £451 million (down 10% from 2017)
- Physical Video Rental: £30 million (down 19% on 2017)
- Digital Video: £794 million (up 17% on 2017)
- Television: £894 million (value of feature films to UK broadcasters)
UK Cinema Admissions
Physical Video is in decline, yet Digital Video is growing. But what about the category of Theatrical? Is there still room for growth? Well, looking at the annual UK cinema admissions stretching way back from 1935 through to 2018; admissions were highest between 1935 to 1946, where they peaked at 1,635 million. They then began to decline. The greatest drop occurred between 1956 and 1984, reaching a low point of 54 million admissions.
Then, over a 34-year timeline from 1984 to 2018, UK cinema admissions gradually increased from 54 million to 117 million. The slight growth aside, this still only equates to only 7.15% of total admissions from when they were at their peak in 1946.
While storytelling, directing styles, production techniques and acting talent continues to evolve; looking at the numbers, it is clear to see that the cinema model for film broadcasting has become antiquated. BFI’s definition of ‘Exhibition’ also seems aligned to the status quo of cinema success spanning back 36 years to 1946:
EXHIBITIONBFI Statistical Yearbook 2019
Cinemas provide the best environment for people to enjoy films as they are intended – on the big screen, with a large audience. The performance of the commercial exhibition sector is therefore an important indicator of the vitality of film culture.
In 1946, the experiences of media, technology and entertainment were very different to those of the world we live in today. It was a year of transition off the back of World War II that lasted from 1939 to 1945. Incidentally, UK cinema admissions were at their highest during this phase, known as the Golden Age of Hollywood. This was the year of the 18th Academy Awards, where ‘The Lost Weekend’ by Paramount won the award of Best Motion Picture.
The two primary media channels for people in 1946 were Radio and Newspaper. People would have been lucky to have even just one black and white television in the household.
Due to fears that television radio signals would attract German bombers, the government suspended British Television broadcasting in World War II. 1946 was the year that television broadcasting resumed. Although the world’s first fully colour electronic television was introduced in 1944 by John Logie Baird, colour television broadcasting only became available in the 1960s. The Murphy V114 television pictured here gives us a feel for what black and white televisions looked like in 1946.
The screen for this model was only 9 inches in size, which was typical of television screens during that time. This could also explain the popularity of people enjoying the exciting large screen format of the cinema back then.
No Time To Die with Film Industry 2.0
Interestingly, in my previous post ‘Beyond Earth‘, I explored how business will adapt in the next 40 years. Yet as I write this post, the realisation kicking-in that the Theatrical category of the Film Industry reached its’ peak a massive 36 years ago. It feels like I have gone full circle here ‘Back to the Future’ style.
But while it is no time to die for the Film Industry, there is a fundamental need for change. This is in order for it to become future-proofed and to grow over the next 40 years. UK cinema admissions have only marginally increased from 2017 to 2018. It is highly unlikely the volumes will rise back to 1,635 million; not at least in the current format that exists today. The question is; what does that change look like, and how will this positively impact the audiences it serves for decades to come?
Film Industry 2.0 Consumers Expect More
Depending on an individuals’ circumstances, chances to go and see a new film at the cinema may be limited. This could be for a number of different reasons. For example, parents of young children may be restricted to going with their children during the school holidays or weekends. If they are lucky, maybe one evening after work. Provided that is, they can get someone to help cover for the kids. On the opposite side of the spectrum, others may have the opportunity to go anytime they please. Whilst others will wait until they can redeem a special offer such as with Meerkat Movies for example.
Inconsistent Service Leads To Poor Customer Experiences
Unfortunately for many, inconsistent customer service at the cinema results in poor customer experiences. In turn, this negatively impacts customer loyalty. With inconsistencies in customer service from cinema-to-cinema; you need to be pretty lucky to have a seamless experience at the cinema. How many of you would agree?
Let’s say for example you decide to book your ticket in advance. This is in the hope that you can collect your ticket from the machine, and make your way to your seat. In principle this should work, but the reality is something more like this:
- Book online
- Go to collect ticket/s at machine in cinema only to find it doesn’t work
- Queue at food and ticket counter to buy your ticket, drinks and snacks
- Wait for what feels like a lifetime since there’s a big queue with only 2 out of a possible 7 potential staff serving
- Buy tickets and food
- Told to go to another queue to fill your own drink using a self-serve drinks machine, after already having wasted 10 minutes in the first queue
- Feel stressed as you’re about to miss the start of the film
- Get seated feeling flustered
- Find the seat hasn’t been cleaned and the cup holder doesn’t work
- Someone’s head is blocking your view or that of your friend/family
- Swap seats and miss the main intro by the time all this is settled
- Distracted by others in auditorium who continue to use mobiles
Is It Acceptable?
As is the case for many trips I have made to the cinema, at least three out of the twelve listed above at minimum, seem to happen. Of course, I recognise that experiences will differ from person to person, but that’s the point. Is it acceptable to have such an inconsistent service offering when we go to the cinema?
The cinema should be a retreat where we can sit back and relax. A good experience will want us coming back for more. But it defeats the purpose of going if the experience does not even fulfil on these basic expectations.
Film Industry 2.0 Challenging The Status Quo
In an attempt to remain socially relevant, cinemas have reached a stage of maturity in their current customer experience offering. For example, we have:
- Bar areas
- VIP Seats
- 3D screens
- Lounge areas
- Digital video projection
- Immersive sound experiences
- Self-serve ticket machines
- Cinema subscription schemes
- Partnerships with coffee shops
- Online Bookings via web and apps
- National partner discount schemes such as Meercat Movies
According to the BFI, three out of the top seven cinema groups (Exhibitors) in 2018 represented 66% of the total UK Box Office Gross Revenue split as follows:
- Cineworld (24%)
- Odeon (22.5%)
- Vue (19.9%)
This accounted for £917.6 million from these Exhibitors alone. So, we have three main Exhibitors driving the bulk of Box Office revenue. Refreshment sales alone were £549 million, an increase of 2% from 2017.
- Which of these chains do you currently use, if any?
- How does your experience compare from one cinema to the next?
- What features and services would you like to see offered?
- For all the revenue being generated from these cinema groups, are they doing enough to meet and exceed your expectations when you visit?
- If given a choice, where would you prefer to watch a new theatrical film release:
- At the cinema?
- In the comfort of your own home?
- Anytime via one of your digitally connected devices?
What If The Small Screen Was The Alternative Big Screen?
It’s time to think beyond the status quo. Theatrical currently drives us into the cinema to watch new film releases; whilst on the other hand, Home Entertainment gives us a second chance to buy, rent or stream a film once it has left the big screen.
For many years however, there has been a continuous downward trend for the purchase of Physical Video. This is represented under the category of Home Entertainment. It has been taken over by Digital Video with digital streaming services. Here, video on demand helps satisfy our media entertainment needs at any time of day. This is also in the comfort and luxury of wherever and whenever, we choose to engage.
Near Cinematic Home Experiences
The near cinematic home experience is becoming increasingly more attractive. With ultra high definition large screen televisions, immersive sound systems and digital streaming services; it is within greater reach of the mass public. Whilst not everybody is in the same boat, things are certainly trending this way.
Smart Television Screen Sizes Are Increasing
In recent years, smart televisions have been increasing in size, whilst the prices have also continued to drop. I carried out a quick search on Currys PCWorld for 4K ultra HD televisions. You will see from the following screenshot that 212 options appear for sale within the size range of 50 to 75 inches or more. Clearly a big difference to the 9 inch Murphy V114 television that typified the average television screen size back in 1946.
In fact, looking through the results, the largest was 85 inches. Both Samsung and LG each had a 75 inch 4K Ultra HD model that was available for less than £850. Prices increased to £8,000 or more for the highest spec 85 inch screens. Interestingly, there are more screens available in 50 to 75 inch format compared to the 24 to 49 inch format.
If That’s Not Large Enough for You
Most people would associate projectors with the cinema or for business applications related to office presentations and events. However, projectors today are available at much lower costs in 4K Ultra HD. They can also give you the ability to project to screen sizes up to 300 inches. This makes them an interesting choice for consideration for those looking to recreate the cinema experience at home.
I had a quick look at Richer Sounds. The typical screen sizes they offer with their projectors range from 77 inch to 122 inch. These will accommodate screen widths of between 1.8 and 2.7 metres.
Screen sizes are clearly trending towards the larger size formats. These sizes seem well within the maximum available spaces that our homes will generally allow. Combined with the right sound set-up, the near cinematic home experience is possible to achieve today.
The Missing Link
The missing link however; is having the choice of whether to watch the latest film release at home or at the cinema. There is no reason why the small screen cannot serve as the alternative big screen in this day and age; to sit alongside the cinema in broadcasting new film releases on launch.
While writing this post however, Sky took the bold move to bring cinema to our homes. They made a range of movies available through Sky Store Premiere, on the same day as global premieres.
As a Sky customer myself, I had a peek and could see three new cinema releases available. They are The Invisible Man, Emma, and The Hunt, which is a great start. Unfortunately NO TIME TO DIE was not one of them. At this stage, I don’t know if this will become a permanent feature beyond the COVID-19 pandemic.
Organisations who can successfully bring a new service model or product to market first, will have the strongest chance to win market share. By doing so, they can gain a competitive edge in securing a future for themselves in that space. But for now, let’s consider this a trial run for Sky Store Premiere. There is no certainty at this stage that it will be anything more than just a temporary fix.
Film Industry 2.0 Tomorrow
This is the opportunity for the global Film Industry to come together to digitally transform its’ service model. In this way, it can future-proof itself for tomorrow and become more socially relevant in our digitally connected world. This will open the door to attract new and existing customers; who want to watch new film releases as they launch, without being bound to visit the cinema as the only way to do so. Unless the industry thinks outside the box, Theatrical will continue to lose relevance and revenue share.
Film Industry 2.0 Ideation
Here are some initial ideas to help kick-start the ideation process for Film Industry 2.0. What would be amazing, is if this helps the industry to start to think outside the box; bringing a more socially relevant, exciting Film entertainment experience to the mass public.
New-To-Cinema Film Channels
Should media companies like Sky using pay-per-view channels such as Sky Store Premiere become a permanent solution, or could there be an opportunity for Exhibitors such as Odeon, Vue and Cineworld to launch their own ‘New To Cinema’ film channels?
Innovating The In-Cinema Experience
Bearing in mind the objective here is to see Theatrical grow alongside Digital Video in Film Industry 2.0; could this present an opportunity for the Exhibitors to innovate with their service models? This is in order to provide an experience that meets and exceeds customer expectations; allowing them to remain unique, socially relevant, and to provide a compelling enough reason to keep returning.
Odeon will be used as an example reference point in context to some of the Film Industry 2.0 ideas to follow.
Let’s take a look at the Odeon Limitless loyalty card. It offers unlimited films at the cinema, exclusive member previews and 10% discount on food and drink. And if you are wondering, no, I am not a member of Odeon.
What if Limitless members could get access via Digital Video to the ‘New to Cinema‘ Odeon Channel, as part of a new VIP member option? Will this be a way to drive up-sell to existing Limitless customers; while opening the door to new customer acquisition?
It would afford Odeon Limitless members the convenience of being able to choose whether to watch the film at cinema or alternatively via Odeon Cinema channel instead. It may be they can’t always get out to the cinema. With the flexibility to choose, it will make the value of a VIP Limitless subscription with Odeon way more valuable.
By opening-up new cinema film releases to Digital Video, Limitless members will have the choice to watch these films on various digital devices available to them. This means that however they choose to engage, they are still utilising Odeon’s services.
If Odeon can get Limitless customers to use its’ services more regularly; whether that be in the cinema or at home, it is more likely to remain front of mind. It is also likely to help increase chances for the customer to remain loyal for longer. Thereby helping to increase customer lifetime value for Odeon in the process.
For VIP Limitless members in this new world; when they subsequently go into an Odeon cinema to watch a new release, what if they were also offered a more refined, unique and personalised red carpet experience?
For example, Having used their in-app ordering service, they will have already selected in advance what they want to eat and drink. The app, optimised for both smartphone and wearable devices will provide confirmation of their seat and order, understanding of seat preferences, and will also serve as the digital ticket, so that all the VIP member needs to do is show up and get seated. Food and drink will be brought to them at their seat without delay.
Redefining The In-Person Experience
In this new format, what if Odeon were able to redefine the format of in-person cinema screenings? Could it assign certain screens for VIP Limitless members? Here the augmented service could be tailored into a fantastic customer experience. One where Odeon cinema potentially invests more to ensure the combination of technology, service and cinema screen formats are redefined to offer a whole new experience. By doing so, could this help to meet and exceed customer expectations?
Top Priority After COVID-19
In this new world, what if COVID-19 led to a change in how people choose to engage in public places like the cinema? Factors like cleanliness, hygiene, air quality and how it is filtered for a safer and more trusted in-cinema experience will be top on the priority list.
In this potential scenario, members will want to feel confident in the presence of others. Therefore this factor may play a bigger role in the augmented service offering to be provided by Odeon. This would apply not just to Limitless members mind, but on a larger scale to all customers who decide to watch a film at Odeon cinemas.
Cinema Seating And Service Format
What may change for Odeon with Film Industry 2.0 in this example, is that more space is likely to be freed-up at their cinemas. This is since more people may choose to watch the latest film releases from home, or whilst on the go with their connected devices.
Odeon as part of the new service offering could think about redefining the format their screens and seating plans. Each screen could potentially accommodate a smaller group of customers per screen. With more spacing between seats, more attention given to the service, and more opportunities to introduce new technologies to enhance entertainment experience.
Surprise And Delight
Imagine a scenario where you have the opportunity to sign-up for the ultimate cinema package with your preferred cinema group, which offers you all of the following:
- Receive VIP treatment at cinema and a seamless customer experience
- Access to see the latest films both at the cinema and on demand
- 12-month subscription with options to increase to 24 or 36 months
- Discount options according to length of term you commit you
- Latest high resolution smart television/projector supplied
- Latest home audio system supplied
- Option to upgrade the equipment annually
- Free delivery, installation, collection and recycling of equipment
Think of it kind of like a mobile phone subscription where you pay a smaller fee for the technology itself upfront and then pay monthly based on a minimum term.
In this scenario for Film Industry 2.0, you will have the latest home entertainment equipment provided. This is to ensure that not only do you have the best possible experience in the cinema, but also at home. This will allow you to enjoy with as many, or as few people as you prefer.
I wonder how many of you would be up for paying a price premium for this kind of new cinema experience package?
Enabling The Ultimate Cinema Away From Cinema Experience
What if the ultimate cinema package was extended help equip and fit-out your home cinema room? We’re talking furnishings, decorating, technology, the whole 9 yards? After all, we want to have the ultimate cinema away from cinema experience right? This could give us the best of both worlds.
What would it take to enable that change? How will technology, strategic partnerships and the cinema commercial funnel need to change to help make this a reality? Is this idea really that far fetched? Collaborations outside of the Film Industry are already taking place between companies like IKEA and Sonos. As part of a strategic partnership, they have challenged the conventions of the norm and introduce an integrated Sonos audio to home furnishings. This is part of their SYMFONISK collection.
Customer Selected VIP Packages
Thinking outside of the box, what if the Film Industry were to establish exclusive global collaborations with furnishing manufacturers, home electronics manufacturers, and Digital Video providers? The objective here being to create unique VIP packages that connect to realtime services and stock availability. What if Film Industry 2.0 had a global online storefront? One that empowers customers to hand-select from a customised list of pre-curated options to create for the ultimate package. For instance, options could include:
- Cinema groups: Cineworld, Odeon or Vue
- Connected devices: Tablet, Laptop or Smartphone
- Smart television or projector brand: Sony, LG or Panasonic
- Smart television or project screen size: 50, 60, 70, 85 or 100 inches
- Home entertainment system type: 5.1 Surround Sound, Sound Bars, Sound bases, Dolby Atmos, In-wall Speakers, In-Ceiling Speakers
- Home entertainment furnishing options: Entertainment units, Sofas, Side units
- Video on demand provider: Sky, Netflix or Amazon Prime
Customer Lifetime Value
These ideas should help increase customer lifetime value by driving loyalty through a differentiated service model; one that utilises the latest technology and connected devices and in placing customer experience at the heart of film entertainment.
With it, it will require the Film Industry to undergo a Digital Transformation. In other words, a transformation that can seamlessly integrate with the new service model that can span both a digital and in-person experience. Vertical integration into the Commercial Funnel that extends into Merchandising, Hardware, and potentially even Furnishing Manufacturers to create for truly integrated home cinema experiences.
It Shouldn’t Take a World Pandemic
It shouldn’t take a world pandemic to drive change. We have seen how the global economy has been impacted by COVID-19. It has given us a new found realisation; one where companies and industries across the world are being forced to react in order to survive.
Most importantly, looking at the numbers presented in this post, the Film industry is crying out for change. Cinema admissions have dramatically declined over the last 36 years and the format is broken. In conclusion, there are clear opportunities for change, which can be tackled head-on with Film Industry 2.0. In addition, if addressed properly, it will allow the industry to survive and thrive to bring us entertainment joy for another 40 years.
How would you like to see the Film Industry transform? I for one am very excited to see how Film Industry 2.0 evolves!