As the saying goes, “good ideas are a dime a dozen.” The theme has played out in countless circles, most recently amplified by the story surrounding the founding of Facebook, where Zuckerberg successfully executed an idea that supposedly originated with the Winklevoss twins. The moral of the story: execution is everything.
Over the past year, a surprisingly similar drama has been unfolding in Australia, between Digital Cinema Network (DCN) and Omnilab Media. The situation has made its way to the courts, so this report will limit its commentary accordingly.
The two groups once intended to work together to bring digital cinema to the independent cinema owners of Australia and New Zealand. One group an equipment dealer, and the other in the content distribution and management business. One group brought knowhow to the deal, and the other brought money. One group operated by the Gardiner brothers, the other a major corporation with $100M in annual sales and 500 personnel.
As with all relationships, this presumably began with the best of intents, only to later learn that the business is not what they thought. Studios pay VPFs to recoup manufacturer base prices, not marked up equipment costs, which imposes a different business model than equipment dealers expect. And money can buy knowhow, which complicates a relationship where the monetary investment isn’t equal. The intended partnership failed to form when commercial terms between the parties weren’t agreed. To DCN’s dismay, Omnilab pursued the negotiation of VPF agreements that were supposed to have been a joint effort. As a result, DCN filed a lawsuit against Omnilab in September of last year.
The lawsuit is gaining legendary scale. To build its position, DCN has thrown a very wide net. Top studio executives have been subpoenaed to testify by means of overseas video interview, certainly not what one would consider a career-building move. While Japan recovers from a terrible natural disaster whose horror has been magnified by human technology, the radioactivity generated in Australia over VPFs for independents has no natural cause other than blind and overly confident personalities.
There is a sad misunderstanding at the root of this disagreement. The core of which is that digital cinema deployment entities are profit centers. Add to this the mistaken concept that studios choose winners in the deployment game. In fact, deployment activities are only a door-opener to potentially profitable ancillary activities. Just ask Cinedigm and AAM about the challenges of building a profitable business as a deployment entity. And studios do not pick winners. That job is left to exhibitors. If exhibitors do not back a deployment entity, there is not much point in studios spending resources to negotiate deployment agreements. Significantly, the Independent Cinemas Association of Australia (ICAA), having to choose, has thrown its support behind Omnilab as the entity with the resources to execute.
The idea of a deployment entity whose purpose is to help independent cinema owners is certainly not unique to Australia. And the parties involved would not be the first in digital cinema to learn that there isn’t much profit to be made in operating a deployment entity. It is this challenge that makes execution all the more special, and less so the idea of creating such a business. Could it be that digital cinema has its own Winkelvoss brothers?
