While the players listed in this group have content delivery as their primary focus, other entities also deliver content, including Cinedigm, Dolby, Qube, and GDC.
Digital Cinema Distribution Coalition (DCDC)
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. Little has been heard from the JV since.
While an interesting concept, it is unlikely that DCDC will get participation from multiple studios. DCDC’s partnership with DCIP is also in question. There is little benefit to exhibitors to invest in a distribution utility unless all studios participate. Full participation would simplify internal operations for exhibitors by reducing the distribution infrastructure to one operator. Partial participation brings no advantage to exhibitor operations.
Perhaps DCDC’s biggest competitor is emerging high bandwidth terrestrial networks such as Level 3’s MPLS offering. As last mile technologies such as WiMax or specialized high bandwidth wireless links emerge, the desire for a digital cinema satellite distribution utility may become moot.
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. While the company has discussed plans to build out a satellite distribution network for digital content, it again has wisely held back as new technologies emerge. (See the discussion of terrestrial technologies under DCDC.)
Deluxe Digital Media is a major mastering house for digital cinema content. It retains title as the largest film printer in the world. In 2004, Deluxe acquired Efilm. Deluxe itself was 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 to digital cinema has been risky. It is in a price competitive game, and does not have the depth of business relationships that players such as Technicolor and Deluxe have. It has been forced to expand its services to include hard drive duplication and delivery as backup, which is outside of its core area. As competition grows, its margins will shrink. Microspace already admits to feeling pain, and is holding back on further expansion of its network.
Unless it can take on an equity partner, its path has left it without an exit plan for its cinema operations. Its network operation center (NOC) and satellite uplink in Raleigh cannot be sold without selling the rest of its business. This leaves available for sale only the field infrastructure that it has installed. 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 its parent company, Thomson Multimedia, is in financial straits. Thomson filed for Chapter 15 bankruptcy protection in December. Earlier this year, in January, Thomson pulled the plug on Technicolor’s exhibitor-facing operations. As a result, the 300 screens of equipment are being sold off, and the TMS is up for sale. About half of Technicolor’s installations are in National Amusements, which itself recently sold a large number of complexes to Rave Motion Pictures. No announcement has been made as to how Technicolor’s assets in Rave’s new theatres are to be handled.
Technicolor competes with companies such as Deluxe in content mastering. In satellite delivery of content, it competes with Cinedigm and Microspace. These operations were not affected by its pull-back of digital cinema operations.
Screenvision is up for sale, with Thomson selling its 50% stake in the company. Technicolor distributes ad content for Screenvision over its network, although this business could change once Screenvision is sold.