Fulfillment and satellite distribution entities abound. The players listed in this group have content delivery as their primary focus. But other entities also deliver content, including Cinedigm, Dolby, Qube, and GDC.
Digital Cinema Distribution Coalition
Digital Cinema Distribution Coalition is a joint venture of Warner Bros, Universal, and DCIP. The joint-venture’s goal is to build and operate an electronic distribution utility for digital cinema content. In 1st quarter 2008, it issued an RFP for satellite distribution services. Nothing has been heard from the JV since.
WB is not new to the idea of owning a B2B distribution channel. With Pathfire (now owned by DG Fastchannel), it built and continues to operate a sophisticated satellite distribution network to service the B2B distributions to its television stations.
It is unlikely that DCDC will get participation from other studios. By the time the cost of satellite distribution appears to be a target for savings, the 2008 study will be dated and will have to be repeated. Then there’s the unlikely event that all six studios will agree on a single utility, preferring instead to keep competitive services at play. Besides, it is not the studios that will feel the pain of supporting multiple satellite delivery companies – that will be felt only by exhibitors.
In an ideal world, DCDC as a utility would make sense. But in the real world, that is not the case. The question is whether the JV members have yet realized this.
Deluxe Digital Media
Deluxe chose early on to stay out of the digital system provider game, sticking to its knitting and servicing its studio clients. The wisdom of this approach is only now being mimicked by its competition. But it couldn’t stay entirely out of the exhibition side, with effort now underway in building out a satellite distribution network for digital content.
Deluxe Digital Media was at one time the largest mastering house for digital cinema content. While it may not be able to tout that title today, it remains one of the top mastering houses in the industry. And it retains its title as the largest film printer in the world.
Deluxe acquired Efilm in 2004, and was itself purchased by Ron Perelman in 2005, who also owns and co-chairs Panavision. While film distribution profits will predictably decline over the coming decade, Deluxe’s strong ties to the studios gives it considerable edge as it undertakes new ways to service its customer base.
Microspace is a satellite communications provider for business communications, digital signage, and digital cinema. It is wholly owned by Capitol Broadcasting Company, a privately owned company that owns and operates radio and television stations.
Private ownership by CBC has not allowed Microspace to take on equity partnerships in the industry, even though such partnerships could insure a successful entry into the cinema market. Instead, Microspace chose to invest its own capital in satellite receiver infrastructure in cinemas, with over 3500 screens in North America.
Microspace’s approach will work as long as its services are price competitive. But it is a risky game. It does not have the depth of business relationships that older players such as Technicolor and Deluxe have. It does not provide a full service, one-stop-shop operation, which would include hard drive duplication and delivery as backup. As competition grows, its margins will likely shrink.
Its path leaves it without an exit plan for its cinema operations. Microspace is unable to take on an equity partner. Its network operation center (NOC) and satellite uplink in Raleigh cannot be sold without selling the rest of its business. This leaves only the field infrastructure available for its cinema business. Such a sale would result in a poor return for all of its effort.
If one were to add up the numbers, Technicolor Digital Cinema has probably spent more money over the years on digital cinema than any other venture. Circa 1999, it purchased Real Image, followed by a joint venture with Qualcomm, neither of which produced an ROI. In 2005, Technicolor negotiated VPF agreements with studios, alongside Cinedigm, but in execution, limited its installations to 300 “beta systems.” As it built out its satellite distribution network, it also built a world-class theatre management system (TMS), attracting Regal Entertainment as its primary customer. But even that effort was not to mature. In January of this year, parent company Thomson pulled the plug on all exhibitor-facing operations. As a result, the 300 screens of equipment are being sold off, and the TMS is up for sale.
Technicolor competes with companies such as Deluxe in content mastering. In satellite delivery of content, it competes with Cinedigm and Microspace.
Technicolor’s owner, Thomson Multimedia, is selling its 50% stake in Screenvision, NCM’s major competitor in cinema advertising. Technicolor distributes ad content for Screenvision over its distribution network, although this business could change when the unit is sold.