Mistakes are to be expected. But occasionally there are some real bloopers that deserve attention. These are projects that evolution should extinguish, so that no one wastes their time on that idea again. We think such projects are worth noting. Born out of our strong sense of civic duty, we welcome you to the inauguration of the Darwin Predictions for Digital Cinema. To qualify for a Darwin Prediction, there must be an astounding misapplication of judgment and an idea that should never be pursued again.
We think two such ideas deserve this award, and describe our winners below. Don’t smile. This is serious business.
Darwin Prediction #1: the demise of DCDC
Digital Cinema Distribution Coalition (DCDC) was born out Warner’s infatuation with satellite delivery of content. The premise was simple. Satellite distribution would be most effective if a single distribution network could supply each of the major exhibitors. Recognizing that this wouldn’t be the natural outcome when commercial interests were involved, a concept emerged in which all parties at the endpoints of the fulfillment chain would become stakeholders in a utility. Distributors and exhibitors would be the owners of the not-for-profit entity, excluding participation by other fulfillment companies. This is the thinking that led to the formation of DCDC.
With the DCIP digital cinema rollout approaching completion, DCDC signed its way into existence in April 2012 at CinemaCon, with Warner, Universal, and DCIP as the founding partners. DCIP, an entity owned by the three major US exhibitors, cannot commit its owners, however. And it’ll take the participation of more than two studios to make a satellite fulfillment utility work. As a result, DCDC is only now beginning to undergo the scrutiny that it deserves.
There are numerous parts of this deal that spell its doom. Along the way, DCDC recognized that there is more to the game of fulfillment than uploading movies to satellites. There are daily misfires to manage, backup hard-drives to create and distribute, and there needs to be a management team in place that understands how to work with the 6 major studios and exhibitors. Of course, these are the things that Deluxe and Technicolor already do. As a result, DCDC abandoned the core concept of the utility, retaining the not-for-profit status of the funding entity, but farming out the day-to-day management and operation of the company to Deluxe Laboratories. DCDC’s core value has been reduced to supplying the head-end satellite downlink equipment at the cinema sites.
If DCDC was challenged before, it is doomed today. DCDC is attempting to sign up studios to long term commitments to use the service, selling the benefit of low cost access to the sites of the top cinema chains. Participating exhibitors are asked to financially contribute to the purchase and installation of the head-end equipment. In return, they are told that the service will help automate the receipt of content from all of the major studios.
However, there are too many “ifs” for this to work, and the incentives to participate are too weak. If the exhibitors don’t sign up, the studios don’t benefit. If all of the studios don’t sign up, then the utility concept is weakened. The core premise of DCDC is that satellite delivery will always be the cheapest way to distribute movies, and that the technology is stable. But both premises are challenged. The number of versions of a movie continues to grow, increasing the total payload to be transmitted. High frame rate content, in which ironically Warner will lead the pack with Hobbit, will further enlarge the payload. Larger payloads require more satellite time to transmit, challenging the core economy of satellite transmission. And while orbiting satellite technology evolves slowly, changes in head-end technologies tend to follow the normal technology development curve, and this is the component that DCDC will invest in.
Deluxe already competes with Technicolor in satellite delivery, which adds a competitive wrinkle to this. But this move also complicates DCDC’s requirement for exhibition stakeholders to invest in their own head-end equipment, as Deluxe and Technicolor already offer direct deals to install the head-end equipment for free. In general, DCDC’s investment in head-end infrastructure is not core business to either exhibitor or studio, and the investment will eventually become obsolete, requiring more capex. The investment in capex by DCDC plus the fees paid Deluxe must be less than the fees paid Deluxe when Deluxe funds the capex itself. This is not likely to be the case. Reportedly, DCDC already has some fairly hefty salaries pegged for its top management, adding significant overhead to the DCDC deal. It is fascinating that high salaries would be built into a utility whose purpose is to eliminate competition. This underscores the last point, which is that without competition, DCDC is not guaranteed to deliver content at the lowest possible price.
If these aren’t enough reasons for DCDC to fail, then Technicolor will find them as a worthy competitor. The surprising part of DCDC is that such a poorly conceived concept could survive as long as it has. That could mean that it will continue for a while longer. But sooner or later, it will fail.
Darwin Prediction #2: MovieLabs TDL will die
MovieLabs is a group of technologists who sold the studios on the benefit of jointly seeding the development of content protection technology. This is the scope for which MovieLabs is funded. Up until recently, its efforts focused on seeding anti-piracy efforts. It’s latest effort, however, is the seeding of a central Trusted Device List (TDL). It issued an RFP to build a shared TDL in February. MovieLabs has nothing to lose by pursuing this effort, as it falls within the scope for which it is funded. But for those bidding on the RFP, and for the industry in general, the MovieLabs RFP is a waste of time.
The shortcomings of the MovieLabs RFP was covered in an earlier report. In brief, the problems faced by studios are more complex than most decision-makers might understand. To succeed in security key management, one has to insure that equipment in the field can communicate its security credentials, for which a complete set of standard protocols has yet to be developed. Once the security credentials are retrieved, KDMs must be created and then delivered, but there are no standard protocols for delivery, either.
The challenge to bidders for the MovieLabs proposal is that it requires the bidder to develop the protocols for a complete workflow. The workflow must be open, as it’s not very useful if monopolized. But once a set of protocols is widely implemented, then there’s no longer a benefit to having a shared TDL. With standard protocols, any content owner or service provider can build their own TDL, create KDMs, and distribute them as needed. With standard protocols, security key management becomes a scalable service, implementable by any content owner or service provider anywhere in the world. Thus, the bidder is asked to undermine its own ability to make money.
To complicate things, studios do not agree on how a complete set of protocols should work. Disagreement stems largely from the sense that present day solutions do not solve all of the security issues. This sense should not be ignored, and could be addressed through the introduction of a common Certificate Revocation List (CRL), a black list of equipment certs that are no longer to be trusted. CRLs are comprised of the certs of equipment that have been taken out of service, or can no longer be traced. Its existence would be uniquely valuable to the six major studios. But creation of a CRL is not included in the RFP.
If success is measured by meeting payroll, then for MovieLabs to be successful, its RFP does not have to be successful. That should raise a flag all by itself. MovieLabs is not making the effort to properly diagnose the problems in security key management. Instead, it pursues politically correct concepts, if only to keep its funding partners happy. Later, if not sooner, and if it hasn’t already quietly taken place, the MovieLabs’ RFP will die.