No news was more stunning that Regal’s announcement in May to install Sony 4K projectors. In June, TI took the wraps off of its Series 2 design, which by design was to have 4K future capability, and announced the intent to produce a 4K chip and light engine for the projectors available for late 2010 installations.
On the technology front, the question is not 2K vs 4K, but DLP vs LCOS. TI’s DLP technology is the only one that offers true digital light modulation. LCOS, in comparison, is an analog technique for modulating light. As such, LCOS suffers all of the temperature sensitive non-linearities inherent to analog processes. In addition, the life time of the liquid crystal material with accumulated exposure to UV light is to be questioned, with such material rarely rated beyond 5 years of life. In contrast, one DLP OEM claims that its early DLP Cinema™ projectors are still operating in China after 10 years.
Regal’s switch to Sony 4K notably was not decided by its technology group. TI made several errors in recent years, the sum total of which led to the undermining of trust in TI as a technology leader. The DCI spec, released in 2005, after many earlier drafts shared within the technology community, called for higher security at the input of the projector than the Series 1 design allowed. Rather than change its design at an early stage, TI waited until 2008 to negotiate the grandfathering of the Series 1 design. The result led to the Gore board, an embarrassing measure to improve Series 1 security that is not DCI compliant and which has been shown in early installations to impact projector reliability.
The Gore board was followed by the release of a software upgrade that, completely unannounced, installed a license feature for 3-D operation. The 3-D license feature would shut down the 3-D capability of the projector 7 months from installation if a fee wasn’t paid for the 3-D license. That TI cloaked this feature as an upgrade without discussion with either the exhibition or studio community was a textbook example of how to lose trust. It is said that this was the point where Regal picked up the phone and called Sony.
Barco is one of three OEM suppliers of DLP Cinema projectors. While a relative newcomer to the cinema industry, it scored a majority of projector sales commitments from DCIP prior to Regal’s announcement to switch to Sony. It still retains a 100% commitment from Cinemark, for a projector count of approximately 3700 units.
Financially, however, the company has been challenged. While its share price at present has doubled from this year’s low, it remains 50% below the high maintained in recent years, reducing its market cap to around $300M.
The introduction of the Series 2 design requires new investment. Fortunately, the Series 2 design includes 4K capability, requiring less effort to migrate to 4K than a standalone design. Unlike the Series 1 design, the Series 2 will allow internal media blocks, also important for 4K design.
All of TI’s OEMs are projecting delivery times for 4K in late 2010. Given the number of hurdles to be crossed, including development of the 4K chip itself, the delivery date could be extended.
Christie is one of three OEM suppliers of DLP Cinema projectors. Distinguishing it from its fellow DLP Cinema™ competitors, Christie is an old player in the cinema industry having a base product line of film projectors, platters, and automation systems. Its digital projector division was purchased from Electrohome in 1999. Christie played its cards well in 2005 when scoring a partnership deal with Cinedigm (then AccessIT). This led to the present day installation count of over 5000 Christie projectors in the field, nearly 4000 of which were sold through Cinedigm.
Christie also gained through its deal with IMAX, where it provides two electronically aligned digital 2K projectors per IMAX MPX screen. A large number of these systems have been installed by AMC and Regal. With the recent 4K announcements, Christie is left out of any sales with DCIP.
The company operates a network operations center (NOC) for monitoring system health, and opened up a new enhanced facility for network monitoring in May. Christie also maintains a trained maintenance field staff for supporting not just its projectors, but for the entire digital cinema system, providing both NOC and maintenance support in Cinedigm’s Phase 1 installations.
The cost of upgrading Series 1 projectors with “Gore boards” will be most felt by Christie. With studios in disagreement as to the need for these boards (but with some studios demanding it), Christie has set aside a sizeable reserve for these upgrades.
Christie is owned by Ushio of Japan. Ushio is diversified as a manufacturer of industrial light sources (Ushio is a major supplier of bulbs for cinema projectors) and automation machinery. Ushio has a market cap of $2.23B.
NEC is a giant by any standards. It has a market cap of $7.8B. The company is well diversified, with operations in IT, networks, consumer electronics, and displays. It purchased its DLP Cinema license from IMAX & Digital Projection when these two departed ways. In July, the digital cinema sales division will be merged with NEC’s larger Display Solutions division.
In the US, NEC sells to the theatre market through Ballantyne of Omaha (aka subsidiary Strong International). Ballantyne has sales rights in North America, South America, China, Singapore, Malaysia, and Indonesia.
With the recent 4K announcements, NEC is left out of any sales opportunities with DCIP.
NEC has many resources, including its network and broadcast divisions, giving it the potential to build out additional products and services in the cinema market. But one wonders if NEC is perhaps too big for this market, with digital cinema just a spec on its balance sheet.
Sony Electronics is the only company with a projection technology for cinema that competes with TI. While TI has been attempting to get an ROI on its 2K technology, Sony currently is the only company on the market with a 4K projector, the maximum resolution allowed by the DCI specification.
Sony enters the digital cinema market as a sole system provider. Its sales approach is twofold. Sony’s Digital Cinema Solutions and Services group is a deployment entity whose purpose is to finance and install Sony equipment. While not financed to support industry giants such Regal, the DCSS group caters to smaller exhibitors. Its strategy is to install 4K at the low end of the cinema chain, in turn creating competitive pressure for larger exhibitors to buy 4K. Sony’s Digital Cinema Systems Division provides the direct sales of 4K projectors to the larger exhibitors and those who have other means of financing.
Sony’s projector has notable technical challenges. The stability of its projectors is not as solid as DLP, due to the LCOS (liquid-on-crystal) technology employed. The light levels that it can achieve are limited, as well. While it has engineered a clever solution for presenting 3-D images (in partnership with RealD), its limited light level places it at a disadvantage for displaying on big screens.
No doubt that Sony as a corporation is going through challenging times. With a market cap today of $26B, its report in May of a $1B loss had to hurt. Of course, a Playstation phone, as a competitor to iPhone, will no doubt help the bottom line much more than the sale of a few tens of thousands of 4K projectors.
For Sony, the push for 4K is far more strategic than its well-staffed cinema division might indicate. Whether or not its SXRD/LCOS projector technology succeeds, Sony wins even if TI populates the world with 4K projectors. A world of 4K projectors will generate the demand required to upgrade production workflows to 4K, and in turn, create demand for 4K cameras. Sony will make far more money selling high-margin 4K production equipment, including cameras, than it will in selling and maintaining 4K projectors.
In the past I’ve used tide behavior to describe Sony’s past activities in cinema. Right now, with digital cinema, the tide is in at Sony.