Digital cinema server manufacturers have their challenges. DCI continues to tweak its specification and test plan, requiring changes to designs. And the nascent 4K market will create a new market for media blocks that install within the physical boundary of the projector, requiring new designs.
The goal of achieving DCI compliance is complicated by the DCI’s security requirements. With the specification self-described as voluntary, it was the issuance of the original Compliance Test Plan (CTP) that told vendors what they needed to meet. In a somewhat controversial move, DCI recently added more tests to the CTP, adding to the feature set that manufacturers would have to meet. Some of these new features force questions of certain SMPTE standards, which have problems that will now need to be addressed.
DCI does not describe the feature set of the TMS. Only NATO’s Digital Cinema System Requirements does this. But few TMSs actually attempt to meet the requirements. A number of server companies offer a simple TMS simply to appease potential buyers of their servers.
The implementation of accessibility features for the disabled will become a major addition to servers over the next 12 months. SMPTE 429-2 calls for “labeled audio,” which allows the server to direct hearing-impaired and narrative audio channels to audio outputs 15 and 16, regardless of the sound format used. Closed caption standards will be complete by then as well, and should become a standard feature in servers. The demand for accessibility will be high as exhibitors strive to comply with anticipated changes in US ADA law.
Datasat Digital Entertainment
DTS Digital Cinema, a division of DTS, was sold to Beaufort in May of 2008. Beaufort, in turn, was majority-owned by Phil Emmel of Datasat in the UK. Earlier this year, the company jettisoned the Beaufort name and is now known as Datasat Digital Entertainment.
As part of the $3.25M sales agreement, the company was to pay an additional $6.75M in May 2009 (see DTS 8K for 15 May 2008), and divest itself of the name “DTS Digital Cinema” by April 2009. Notably, the company continues to use the DTS Digital Cinema name on products, and DTS has not shown any further revenue from the sale other than that collected in 2008.
Datasat has more than its share of challenges. Upon takeover, the company either let go or otherwise lost top execs Bill Neighbors, Don Bird, Susie Beiersdorf (now consulting for Sony on digital cinema sales), and Michelle Maddalena (now in charge of film licensing for Dolby). Its European operations have thinned as well, with UK Managing Director Tony Nowak among the departed. Remaining staff were elevated to senior positions, with no new executive capability added.
DTS did not complete its asset purchase of Avica prior to the sale. In the end, Datasat sold its rights in jointly developed technology with Avica to Digital Cinema Systems Corporation, aka Digicine. Digicine is acquiring the remaining assets of Avica and now producing the next generation of the server.
In search of a server to sell, Datasat first entered into an OEM deal with Doremi for a DTS Digital Cinema branded version of its server. Earlier this year, Datasat switched to an OEM deal with Qube, whose co-branded server it now sells. Datasat also acquired an early-stage TMS from DTS, which it has since improved and added to its product line. The company retains its DBS exhibitor management system, and continues to sell and support the older DTS cinema audio products.
Despite its efforts to build a presence in the digital cinema market, the company’s primary revenue continues to be film licensing. It’s unlikely that its current path will enable it to replace those revenues. The industry has yet to hear the long-term business strategy for Datasat.
Digital Cinema Systems Corporation, aka Digicine, came into being to absorb the jointly developed assets by DTS and Avica, which were not wanted by Datasat after its acquisition of DTS Digital Cinema. Digicine is in-process of purchasing the remaining assets of Avica.
The Digicine Filmstore server quickly came to market and was approved by Disney. The core design philosophy continues that of Avica, providing unique value-add software with commodity hardware. The server hardware is provided by Dell. The media block is also 3rd party. (I’m told it’s used in several server products.) The software is uniquely Digicine’s.
Installations have already taken place in the UK and Ireland. The software strategy is interesting as it should play well in a media-block-in-projector world. After all, one can think of a few world-class software companies that built their fortunes by using commodity hardware. Digicine is a young company, and too early to tell how it will perform.
Dolby Laboratories’ contribution to cinema sound is legendary. It is a strong company, with a market cap of $4.2B, and has weathered the recession well. Several important changes took place in Dolby in February of this year. Ray Dolby stepped down as chairman. Bill Jasper retired as CEO. (Bill’s retirement had been planned for several years.) Kevin Yeaman, formerly CFO, stepped up to take the CEO title. A financial type in the CEO role is not new for Dolby: Bill Jasper’s first role at Dolby was as CFO.
Historically, cinema products comprise approximately 70% of product sales for Dolby. In cinema audio, Dolby has long been the market leader, dominating industry sales and installations. Digital cinema has been more challenging. Through what can be viewed as a series of missteps, Dolby allowed cinema newbie Doremi to enter the market and install thousands of servers over Dolby’s hundreds.
Under strict interpretation of SOX rules, Dolby was unable to recognize revenue on digital cinema server sales until the 2nd fiscal quarter of this year. In doing so, Dolby claims to have met DCI requirements. However, DCI’s latest change to its Compliance Test Plan may have complicated this. Dolby is the only public company to report digital cinema server sales, and as such is visibly affected by the meddling that continues to occur with DCI specifications.
The openness of digital cinema prevents any one company from developing a gatekeeper technology. However, while 3-D delivery to the server is standardized, 3-D optical encoding and decoding through glasses is not. In 3-D, Dolby has found its place where unique technology can shine. Dolby 3-D faces challenges with screen size limitation and cost, but with diligence, it would seem that these obstacles could be overcome.
For example, it is rumored that improvements in technology can significantly reduce the cost of Dolby 3-D glasses, possibly to a figure under $5. Ecological concerns over disposal of competitor throw-away 3-D glasses could push the industry towards reusable glasses regardless of system, which, if the cost of glasses comes down, could level the playing field for Dolby. It will need a better playing field, as of the approximately 2400 3-D screens in the US, Dolby only has around 400 of them. According to various reports, Dolby has a much higher percentage of the 3-D market in other countries.
Dolby has the ability to build its brand in 3-D starting with the cinema. It is no secret that the company is working on 3-D solutions that it can brand and license for consumer applications.
The next phase of digital cinema will be the move towards internal media blocks in projectors. In particular, 4K media blocks must be internal to the projector. Dolby’s engineering process has been historically slow, and how quickly it responds to this new market requirement will have a major impact on sales. Once again, Doremi has jumped ahead of Dolby, this time with a pre-announcement of its 4K media block.
Dolby has been a strong player in the area of accessibility for the disabled. It has led the SMPTE effort towards establishing a standard protocol from server to 3rd party closed caption system, and has worked closely with USL in establishing the protocol specifics in prototype systems.
Dolby is not a company to discount. While its current position as a weak #2 in digital cinema is not great, it is also not decisive. The replacement cycle for digital cinema equipment will insure that sales opportunities continue to exist. Dolby has come up strongly from the rear before in cinema, and can do so again.
Doremi can pride itself on being the last server company to enter the digital cinema market, and the first to wildly succeed. Its success has been nothing less than spectacular. As a small and nimble company, it has shown incredible deftness at not only saying “yes” to every request from studios, but in executing those requests.
The downside to Doremi’s eagerness to please is that it has often been accused of having buggy software, requiring weekly updates. In addition, the company’s adherence to standards and DCI compliance is considered by many to be lax. Impressively, Doremi appears to have managed such complaints well. Of the 6300 digital cinema systems in the US today, it would be a reasonable guess to say that Doremi is installed in 5000 of them.
To underscore its continued success in winning sales, Cinemark’s recent announcement to use DLP 4K also pointed to Doremi as its server of choice.
The company announced that it will supply internal media blocks in projectors, with engineering samples available 3rd quarter 2009. (While the term IMB is often used, IMB stands for Image Media Block, not “internal.”) Doremi has patented a novel process that allows it to upgrade a 2K media block for 4K capability. This could be an attractive feature for sales, although it remains to be seen how often the upgrade is actually employed. In truth, it will be the cost of upgrading the projector’s light engine to 4K that will determine if one undergoes an upgrade or simply buys a new projector.
Doremi has taken steps towards implementing accessibility features, but it has not always followed standards. The company can directly drive a WGBH Rear Window closed caption system from the server, which for film systems can only be driven by a DTS device. While an interop effort exists among several manufacturers for implementation of the draft SMPTE protocol for closed captions, Doremi is not participating.
On the feature side, Doremi successfully incorporated digital image filters to support Dolby 3-D as well as Real D ghost busting. It demonstrated a prototype of its 3-D subtitle rendering capability at ShoWest. Prior to Doremi’s demonstration, subtitles were rendered exclusively in the projector. However, upgrades to projectors are difficult, while upgrades to servers are part of the course of doing business for Doremi. The company also offers a TMS for use with its servers. This is a barebones TMS, with no capability for managing VPFs.
Doremi is privately owned, with its biggest challenge being diversity. Doremi makes servers for the cinema and broadcast market. Digital cinema sales, however, swamp its broadcast sales, which brings to bear Doremi’s biggest challenge: its growth. As a step towards meeting this challenge, the company moved to larger facilities a few years ago. With the economic downturn, it scrapped plans last year to move to an even larger facility, and instead is expanding its current facilities through on-property construction.
GDC Technology has long been the Asian leader for digital cinema servers, and was the first to install digital cinema servers in China. Its president, Dr. Man-Nang Chong, learned early in the game the value of having a presence in Los Angeles near the Hollywood studios, even if not focused on the US market. GDC has played its cards well in this regard, and earned its position as a respected player in the market.
GDC this year signed deployment agreements with the usual five studios, moving the company into the new role of deployment entity. No doubt this will strengthen GDC’s position in the Asian market.
In addition, the company was quick to step up and announce its development of a 4K media block following TI’s 4K announcement. On the features side, the company offers Real D EQ (ghost busting) and WGBH closed caption drive. GDC is participating in the closed caption interop effort using the draft SMPTE protocol. It has not announced the capability of adding subtitle rendering to its servers, either 2-D or 3-D.
GDC also sells its own TMS for use with its servers. The TMS can directly source content to its servers without first ingesting the content to the server’s internal storage. Now that GDC is also a deployment entity, one can expect its TMS to become a full-featured product, supporting remote inventory management and VPF management.
Qube Cinema, a division of Real Image Media Technologies in India, offers both “E-cinema” and digital cinema servers. Its E-cinema products are targeted for preshows and exhibition of non-DCI compliant content. The company has achieved significant penetration in India, but also has installations in the US, Portugal, Puerto Rico, and the Czech Republic. No information is provided as to which installations are e-cinema, and which d-cinema.
The company formed an agreement with Datasat to supply servers co-branded as Qube and DTS Digital Cinema. DTS provides sales and marketing in the US and Europe. This should be a good arrangement for both companies, with DTS having an established presence in the US and Europe with no server to sell, and Qube in need of the marketing support that Datasat promises to provide.