2009 was TI’s year of blunders. An internal cutback in DLP business development took place in January, largely due to the loss of sales in its DLP TV division as consumers switched to flat panel LCD and plasma sets. Included in the cutback was a reduction of staff in its DLP Cinema development group. Prior to the cutback, the company made the fatal decision to update DLP Cinema projector software with an unannounced feature that would shut down 3-D capability in the projector by the end of the year unless a 3-D license was purchased. (Notably, this would occur just prior to Avatar’s release.) It tried to keep knowledge of the license under NDA. But once this knowledge leaked, its largest customers lost faith in the company. In May, Regal announced its decision to switch from TI projectors and instead install Sony 4K projectors.
Regal’s news reverberated deeply. TI, already under pressure, had previously announced its decision to revoke its 3-D technology license, but made the error of not going back to Knoxville to repair the damage with Regal.
In June, TI took the wraps off of its Series 2 design, which it had been working on to meet DCI compliance. (TI’s installed base of some 15,000 projectors are not capable of meeting DCI compliance – the long delay in meeting compliance resulting from another poor decision by TI.) Fortunately, by design, the Series 2 projector was to have future 4K capability. To keep Cinemark from joining its DCIP partners in moving over to Sony, TI had to develop plans to produce a 4K chip. The joint announcement of the 4K chip, and Cinemark’s intent to use it, was made end of June. TI is targeting the availability of prototype 4K light engines in late 2010.
Cinemark’s business was critical to TI for internal reasons. Both TI and Cinemark are headquartered in Plano, Texas. The CEO’s of each company live on the same street. Had TI lost Cinemark, heads most certainly would have rolled in the DLP Cinema group.
These aren’t TI’s only blunders, however. It spent several million on development and inventory of the so-called “Gore Board.” By all accounts, the Gore Board was an embarrassing measure to improve Series 1 security. It is not DCI compliant, and the first release to the field impacted projector reliability. The board was the result of a botched negotiation with Sony and Fox over TI’s roadmap to DCI compliance. It was an unnecessary expense to the company, and circumvented development on the more important Series 2 design.
Unfortunately for TI, the industry is now more aware of the lack of skills in its DLP Cinema management team than ever before. Given that TI has made no effort to improve the quality of its management team, its OEMs would be wise to take all R&D for the projector under their own roofs. TI would be far more competent as just a chip maker for this industry. The questions are to what extent must TI continue light engine development to meet licensing terms with its OEMs, and can its OEMs design their own future light engines without adding cost to the projectors?
Barco is one of the three OEM suppliers of DLP Cinema projectors. While a relatively new player to cinema, it scored the majority of projector sales commitments from DCIP prior to Regal’s announcement to switch to Sony. It still retains a 100% commitment from Cinemark, with a projector count of approximately 3700 units. The company has aggressively worked to grow its business around the world, with sales in Europe, South America, and Asia. Barco also provided Cinedigm’s rollout with vendor financing of approximately $9M through Cinedigm’s Phase 2 B/AIX division.
Christie is one of the three OEM suppliers of DLP Cinema projectors. The company has been a long term player in cinema with a line of film projection products. As a sign of the times, Christie announced the termination of its film products line this year. 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), providing vendor financing through Cinedigm’s Christie/AIX Phase 1 unit. 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 scored a deal with IMAX, where it provides two electronically aligned digital 2K projectors per IMAX MPX screen, including IMAX’s digital 3-D screens. A large number of IMAX MPX theatres have been installed by AMC and Regal. The company also announced earlier this year its partnership in China with Time Antaeus Media Group. (Note that Doremi also has announced a partnership with Time Antaeus, and that the entity has not announced signed deployment agreements.)
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 some studios demanding installation of the board, 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 $2.4B.
NEC Display Solutions, a wholly owned subsidiary of NEC Corporation, is the new home for NEC’s digital cinema product line. NEC purchased its DLP Cinema license from IMAX & Digital Projection when these two departed ways.
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.
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. NEC has certainly raised the possibility in its past. But the will to do so remains to be seen.
Sony Electronics is the only company with a projection technology for cinema that competes with TI. Sony currently is also 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 install Sony equipment financed through VPF subsidies. The DCSS group caters to smaller exhibitors, and now has a presence in both the US and Europe. Sony’s Digital Cinema Systems Division provides the direct sales of 4K projectors to large exhibitors such as Regal and AMC, 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 also limited. 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 with big screens.
The question that looms over Sony is its commitment to cinema. Its SDDS digital sound on film fiasco is still a strong memory in this industry. Sony has done much to overcome this, and its commitment to Regal is not one it can easily pull out of. It has invested significantly in digital cinema, beyond the 4 x HD video wall applications originally advertised for its 4K projector, making effort to improve its design for cinema use, developing a server capable of DCI compliance, and adding 3-D capability.
But for Sony, the push for 4K is part of a strategy that goes beyond its well-staffed cinema division. 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 future 4K cameras. Sony will make far more money selling high-margin 4K production equipment than it will in selling, financing, and maintaining 4K projectors. While it is in no position to pull out quickly, its longevity in cinema exhibition remains to be seen.