Digital Cinema Distribution Coalition (DCDC) has become a model of distribution efficiency for the world. I’ve been approached by more than one country seeking ways to adapt the model in their own territory. Unfortunately, the model doesn’t translate well into most countries. There was a time when I didn’t think DCDC would even survive if competitors underpriced it to undermine its business. But DCDC’s strategy of reducing costs to distributors has worked very well. This report explains the model further.
DCDC began as a collaborative effort of the 3 top exhibitors in the US, and 2 studios. Because of competition law, the 6 major studios could not band together as participating operators. However, I believe all 6 studios now subscribe to the service. The major US exhibitors were needed in the formation of the partnership to guarantee that there would be a large base of users of the service who would also dedicate roof-tops for satellite receivers.
Core to the DCDC model is that it operates as a utility. It is not designed for high profitability. Instead, it is designed to provide a cheaply priced content fulfillment service to its owners and customers.
The DCDC model is not for every country. To deliver cheap pricing to its users, it must be efficient. It is efficient in the US because the US is a large country with lots of cinemas to serve. All, or nearly all, of these cinemas can be reached by satellite. In addition, there are no shared communication restrictions among the US states. Communications can cross state borders without restriction. In comparison, this model won’t work in Europe because of shared communication restrictions among European countries. To experience this, one has only to drive across a European border with a cell phone, where one will experience the dead zone at the border. Also complicating it, the model doesn’t allow access to satellite competition. This seems to work in the US, as cinema distribution is a small part of the overall market for satellite services. But that may not be true for every country. In most smaller countries, competing satellite communication providers have a difficult time accepting only one provider for the cinema market.
In the US market, DCDC was the cause of consolidation of service providers. After requesting bids from competing companies, DCDC contracted with Deluxe Laboratories to create DCPs and manage KDMs for its service, also providing backup hard drive delivery. Eventually, as DCDC gained the majority of DCP distribution in the US, the DCP distribution business of Deluxe’s competitor in motion picture fulfillment, Technicolor, shrunk. This led to a joint venture partnership of Deluxe and Technicolor, now known as Deluxe Technicolor.
Prior to being contracted by DCDC, Deluxe entered into a joint venture with Echostar to provide satellite delivery of DCPs to cinemas. In the joint venture, Echostar owned its satellites, while Deluxe installed and owned the satellite receivers in the cinemas. As more and more of the fulfillment business was captured by DCDC, it acquired the Deluxe receiver installations at exhibition sites. The acquisition did not affect Echostar, which continued to own its satellites. No doubt the acquisition was initiated by Deluxe, who needed to offload its investment in satellite receivers and associated equipment that was now being used by DCDC.
DCDC’s pricing and contractual arrangements are not hard to understand. Thanks in part to Wikileaks, example contracts are online between DCDC and exhibitors, and DCDC and studios:
These example agreements explain who does what in the DCDC model. The exhibitor provides access to its facilities for installation and operation of the service. DCDC pays for the satellite receiver installations. And finally, the studios pay DCDC to distribute their movies.