Merry Christmas and a Happy New Year

Peace and Happiness to you all. As always, thank you to the many people who have helped and inspired me this year and I look forward to seeing you all in 2008, which promises to be an exciting year for digital cinema. No predictions here, but maybe in January. Thanks to I Can Has Cheezburger for the photo.

Incredible !ndian cinema goes US

No sooner did I write the previous post about the cinema situation in India then the news breaks that my client Adlabs has acquired 200 screen in the US. While it is not the first time an Indian exhibitor buys into the US market, this deal dwarfs the acquisition of FunAsia's four sites in Texas with 17 screens by Pyramia Saimira a few weeks ago. Not only that but to put the size in perspective, Landmark Theatres operates 232 screens in 58 locations, while Muvico has 14 cinemas with a total of 259 screens. Both of these are US exhibition house hold names and so too soon will be Adlabs.

As of yet there is not detailed information about what the locations are. Also, I have not seen coverage yet by either Variety or Hollywood Reporter, which I find perplexing, but maybe they are pre-occupied by the WGA strike. Here is what DNA India has to say about it:

Making its first international foray, Adlabs has entered into multiple agreements with existing theatre owners in the United States to operate some 200 screens.

Precise details on this arrangement have not been made public yet as the deal has been executed by an Adlabs official in charge of developing international operations. The company refrained from divulging details stating it will be made public in due course.

Following the deal, Adlabs will have a footprint across the US covering 28 cities including the key markets in east coast (California is full of Indian techies), midwest and west coast (New York and New Jersey has a substantial Indian population).

These cinema theatres will be showcasing mainstream Hollywood films in addition to movies in the Indian languages viz., of Hindi, Tamil and Telugu.

I would expect more details to follow soon. If Pyramid Saimir is prepared to spend $75m to grow from 17 to 75 screens, you can bet that Adlabs will not settle for just 200. Also too soon to talk about digital, other than that I can assure you that whatever they may or may not launch will definitely NOT be e-cinema.

Consider this the first move, with more to come. True to their motto, there's never a dull moment when you are with Adlabs.

Incredible !ndian cinema market

CineAsia is over and while it looked like an interesting programme and first year in Macau, I was unable to attend. What struck me about the details of the events, though, was that there was absolutely nothing about India in the whole three days - unless you count Real Image co-sponsoring a breakfast and the screening of 'Elizabeth: the Golden Age' (directed by Shekhar Kapur).

You might think that I have a thing about India at the moment, but it was Variety that recently began an article with the observation that "India is 'in the midst of a revolution' that will see the fastest theatrical growth in Asia in the coming five years." (Boom time for India's film industry - Country spends $2 billion on movies each year). This is based on a new report by Dodona examining the trends on the Asian sub-continent:

Dodona describes the Indian movie industry as "the largest in the world and one of the most fascinating." Growth is being powered by demographics and an explosion in numbers of multiplexes and digital cinemas.

"On the basis of current plans, in 2011 half of all the screens in the country will have been built or re-equipped within the past five years. Even at its height, the European and North American multiplex boom did not match this scale of investment," report author Katharine Wright said.

Based on my observations on the ground I definitely agree [and an apology to Dodona for previously getting my facts wrong on their Euro digital cinema reports]. But don't take my word for it. Here is what Adlabs and PVR have to say about it in their own words, from a Q&A in moneycontrol.com article ('What are PVR, Adlabs Up to?'), about how they will grow through acquisitions and newly built multiplexes over the coming years:

Q: A few issues the market is quite excited by about - the Adlabs now; one, there is rumour that you could probably looking at Sringar Cinemas for a buy out, is that true?

Venkat Devrajan, CFO, Adlabs Films: Whether it’s organic or inorganic, (we are) ultimately looking at the plan at which Adlabs is today. With 111 screens in the next 24 months, we are looking at at least 400 screens to rollout. So within that space whether any company comes by or we do it on our own as an execution project; at the end of the day it’s number that counts and that is what our plan is.

That's quadrupling the size of India's largest cinema circuit in just two years! If cinema growth like that doesn't take away your breath away, nothing will. And these are not idle boasts. And the growth of the multiplexes is transforming the entire Indian cinema landscape, as this article ('Multiplexes fast gobbling up India's single hall theatres') from The Economic Times makes clear:

From one multiplex in Saket, south Delhi, in 1997 their number today has crossed 400 across the country with about 20,000 screens, redefining the way films are viewed.

PVR Ltd, which brought this concept to India, has a total of 95 screens in 22 multiplexes across India, Fun Cinemas has 50 screens in 11 cities, Inox Leisure Ltd. has 19 multiplexes with 65 screens and Adlabs Cinemas has no less than 100 screens in 22 cities.

"Up to 97 per cent of urban youth prefer to watch movies in multiplexes," says a report recently released by the Confederation of Indian Industry (CII).

"I can't even recall which was the last film I saw in single screen movie hall. The experience of watching a film in a multiplex compared to a stand-alone cinema hall is beyond comparison," Smriti Singh, a college student, told IANS.

And that's even before we get to digital, whether you are talking about e-cinema or true digital cinema. India is unique in having succeeded in having effectively establishing an alternative standard to DCI (UFO's MPEG-4 and E-City's MPEG-2) for all major releases, and even the odd Hollywood title (Snakes on a Plane, The Messengers). But that's a long posting for next year.

While a lot attention is being lavished on film and exhibition in China, it is easy to forget what a tightly controlled market it is and the risks that Hollywood studios and other Western companies face in dealing with the country. Not only have exhibitors like Warners effectively been forced to withdraw, but now Hollywood films face an un-official three month ban. From Variety:

In its most drastic measure ever against Hollywood, Chinese authorities have banned the release of American pics for at least three months.

Ban began Saturday and will continue until the end of February at least, but Chinese sources say it could continue until May.

Central-government order came from echelons higher up than the State Administration for Film Radio and Television or the Film Bureau, which normally handle movie industry policy and application. Ruling likely emanated within the Propaganda Ministry.

The Asian and Chinese arms of the studios have not been given any release slots in the first two months of 2008.

Unlike China, it is not restrictions or quotas that is keeping Hollywood films' market share low in India but the phenomenal success of the local market Hindi films (aka 'Bollywood'), Tamil, Telugu, Malayam language films and other local Indian film productions. Western films do show, but they just cannot compete with the success of the latest Shah Rukh Khan release. And Hollywood has started to take notice. The Sony produced 'Saawariya' recently outperformed Tom Cruise's 'Lions for Lambs' at the global box office. Not bad for a three-hour song-and-dance adaptation of a Dostoyevsky short story. Incredible !ndia indeed.

Lastly, the vertical integration and emergence of film exhibitors as producers and distributors means that the ground is set for digital cinema in a way that it can never be, because of the enforced separation between cinema owners and the Hollywood studios. The impact of this vertical integration and the emergence of producer-distributor-exhibitor power houses is examined in Glamsham.com's 'Multiplexes and the dawn of a new era':

The trend has also to be seen from the perspective that there would not be any acrimony about sharing of the revenue in the first week when the film is released. This trend is already there in Hollywood and it has slowly started gaining momentum in India. It is a healthy trend, as it would bring in further transparency into the business of filmmaking. The participation on the part of the cinema owners has increased as the investors into the shares of these companies have provided the capital for the same.

Next year I hope to be able to go into more detail about the digital changes taking place and facing India. So for now, Namaste to you all. It's 10pm and I'm off to the Adlabs Metro cinema, "Bollywood's most famous red-carpert theatre" (pictured above), where there is digital work to be done.

ODS piracy - or, How much does Arts Alliance care about Copyright Protection?

When it comes to ODS piracy, it seems that some people are just too dumb to learn from past mistakes. Or maybe they don't think that protecting the intellectual property of alternative content is as important as that of regular Hollywood films.

I can find no other explanation for why the recent alternative content screening of The Who's 'Amazing Journey: The Story of The Who', including a live Q&A with the band's surviving members appears to have been transmitted UN-ENCRYPTED over satellite, just as the recent Genesis concert was also transmitted free for anyone with a dish a receiver to download recently.

With the revival and re-formation of vintage rock bands like Led Zeppelin and The Police, the level of interest in the special screening of 'Amazing Journey: the Story of The Who' was always going to be high, particularly as the survivors of the band were introducing the film and giving a live Q&A discussion afterwards. Tickets were selling well despite the relatively high price of £12.50.

Below is how Odeon, who was the exclusive exhibitor partner in the UK, described it on their website.

The high profile event received a lot of publicity, such as this article from UK music magazine Uncut, describing the evening:

The capacity audience included members of Keith Moon and John Entwistle’s families as Daltrey and Townshend answered fan questions put to them by Top Gear presenter Jeremy Clarkson.

Also taking part in the Q&A session that was webcast to 16 countries worldwide, were Amazing Journey's director Paul Crowder and producer Nigel Sinclair, whose Spitfire Productions also worked on Martin Scorsese’s Bob Dylan doc, No Direction Home.

The event was organized by Arts Alliance Media (AAM), who were so proud of what they were doing that they put out a press release to mark the event. From it we learn that:

Making the event possible is Arts Alliance Media, who have maximised the ODEON digital projection infrastructure to bring this star-studded event live via satellite from the ODEON Kensington to 14 cinema venues across the UK, as well as MEC Vienna, Austria and UCI/Kinowelt Dusseldorf, Germany.

Paul Chesney, AAM’s Director of Business Development added, “This kind of alternative content helps cinema owners to attract a broader audience, whilst bringing people back to the cinema. Music events are ideal for broadcast at exhibition locations and we are delighted to be working with Universal and Odeon on this prestigious occasion.”

There's just one thing that AAM forgot in the hoopla of beaming this out to the world, which is that if you transmit valuable content you make damn sure you keep it safe. In the case of satellite you encrypt (scramble) the content, so that it can't just be picked up by anyone pointing their satellite dish at the skies. Or did Arts Alliance and their OB/satellite partner think that nobody would anticipate which 'bird' it would be sent over? Given all the advance publicity for the event, it was not difficult for amateur satellite enthusiasts to find it.

For full details, all you had to do was to log onto the discussion forum of German home-cinema website Beisammen.de and follow the thread called Live aus London in HDTV: Weltpremiere "The Who"-Dokumentation (05.11.) (You don't even need to speak German to work out what that means.) Here is what poster 'HD-Freak' had to say about it:

Das hat man selten: Live aus London ist jetzt die Weltpremiere des neuen Doku-Films über "The Who" zu sehen. In HDTV, 720p

Thor 1°West, 11486V; 13333, DVB-S!

Nicht zu fassen! Da sagt man den Kino-Besuchern bei der Begrüßung noch, sie könnten danach die DVD kaufen und jetzt zeigen die den Film in HDTV! Herrlich!

As the poster notes, there's no small irony in telling the audience members who have just paid £12.50 that they can buy the (standard definition) DVD on the way out when the 720p HDTV 5.1 surround sound transmission is available for free for anyone to capture off satellite to keep, share and re-distribute.

Scroll down and you find out that this was a world premier and that the DVD will not even be available on Germany until 7 December. But true German The Who fan's won't have to wait that long because the film is already available on peer-to-peer websites such as this one:


Although I'm guessing that this is a DVD rip, it is only a matter of time before the 720p HD version finds its way onto the net because some one somewhere recorded it off satellite, because the people responsible for organizing this event either didn't care or decided to ignore the danger that sending content un-encrypted entailed.

If I was Odeon or Universal Pictures I would be hopping mad, as this is content that their customers are expected to pay good money for (£24.99 full price for the 2-disc DVD, to be precise). There is also no small irony in the fact that AAM has signed a VPF deal with Universal, which would entail it distributing heavily encrypted DCPs of the latest Universal films, it appears not to have taken the most basic of precautions in sending a high def version of a Universal Pictures ODS ('other digital stuff') event to cinemas all over Europe. So much for these type of events "bringing people back to the cinema."

I have become particularly sensitive to the issues of protecting sensitive content when transmitting it over satellite, most recently as a result of the trials that the NORDIC 2.0 project has been conducting with Telenor Satellite Broadcasting. But more about that another time.

Thanks are due to my Inside Man who alerted me to this, but who shall remain nameless so as to protect him from the fall out that this ought to cause.

My digital cinema perspective on India

I have been in India for one month now and this an incredibly exciting time to be here. The Sensex just crossed 20,000 - it took 20 years for it to pass 10,000 but barely 20 months to double that. Mukesh Ambani has overtaken Bill Gates as the world's richest individual. Were he to re-team with his younger brother Anil (who controls the Reliance ADA Group, which in turn controls Adlabs) - they would be worth more than $100bn between them, easily making them richer than the Walton family. Booming times indeed. And on the digital side things are no less breathtaking.

This past weekend I was asked to take give a presentation and chair a discussion on digital cinema at the India Broadcast Expo 2007. I provided some global numbers from Screen Digest and DCinemToday on where global roll-out stands, as well as getting into the nitty gritty of DCI, compliance, VPF, ODS and more. We then had a very stimulating panel discussion with the top names from India's D-Cinema and e-cinema sectors. A very sharp journalist from IndianTelevision.com was there, asked pertinent questions and had published an article on the event the same evening:

Cinemeta Entertainment CEO Raj Grover said, "We intend to get into metros and tier-I, tier-II cities across the country. A chain of about 50 cinemas is in the pipeline across Gujarat, wherein we are acquiring single theatres, thus taking up their complete management rights. Currently, we are in the process of choosing the right format and standard for projection."

Real Image which started off as audio and post-production has also become a significant player in South India, thanks to their Qube technology. Director Senthil Kumar said, "Although digital cinema is in the transition phase, it is driving local and national advertisers to this medium. It's helping them target audiences better. This meanwhile, is also helping us evolve a territory specific business models like we have done in Tamil Nadu."

UFO Moviez CTO Makarand Karanjkar however adopted a different stance. He said that UFO is an infrastructure provider and a facilitator between the distributor and exhibitor to make their business viable, cutting down costs significantly for them. "We figured out the business model first and then made the technology work for us," he said.

I couldn't have summarized it better myself. A lot of the discussion centered on India's e-cinema model, though Karanjkar insisted that it was 'digital cinema' as far as they were concerned and that the quality and security was on par with what DCI had come up with. (I had to bite my tongue at this and other occasions, as my main task was to moderate the discussion.)

Equally interesting is the fact that given the severe under-screening of India, IBE Expo convenor Anil Chopra predicted that we could see the growth of 100,000 new cinema screens to meet demand and that digital (e- or d-) had the potential to 'leap frog' by going straight for digital distribution.

There can also be no denying the success that UFO Moviez (not to be confused with the unidentified flying object spotted over Kolkata this Monday morning) has made of e-cinema in India. The Economic Times of India has a long article ('Reviving cinema halls') that gives a good perspective on just what they have achieved, noting that:

Digital prints have played a huge part in the growth of the industry and is one of the critical reasons that most of the big ticket movies can release with a bigger print run., While so far, UFO’s biggest print run had been 360 prints with Heyy Babby, Om Shanti Om (OSO) and Saawairya are expected to cross that. “Between the two we should release at least 650-700 prints if not more.

Though the theatres get booked only a few days before the release, OSO will be at least 350-400 and could go up to 500,” adds Mishra. From the 300 released last Diwali between Don and Janneman, it’s a big jump. Like Mishra points out, the fact is that digital prints are not only matching the analogue ones, but at times crossing them as well.

So while we laud what Christie/AIX has done to kick start digital cinema in the West, in India digital distribution of film to cinemas is already overtaking 35mm! Not just that, but in a more adulating article e-cinema is even credit with saving the environment. With a title like 'Digital cinema reduces carbon dioxide emissions, too' you would expect the interview with Raaja Kanwar to highlight the green credentials of UFO, and it does:

Digital cinema’s contribution is not merely restricted to commercial benefits. It has brought about long lasting positive impact on the environment as a whole. The technical solution has helped the Indian film industry curb environmental pollution.

Indeed, if you put up a dim image on a 50 foot screen with a single-chip DLP projector from Panasonic you are not going to consume as much power as a 35mm projector or a 2K DLP Cinema projector. But you are also not giving the audience a true quality experience.

These efforts have not gone entirely un-noticed in the West. MPAA's Dan Glickman is in town and lauded the efforts of India to stamp out piracy. As reported in the Hollywood Reporter:

Glickman lauded recent anti-piracy developments in India, such as the adoption of a resolution in the state of Maharashtra that makes video piracy an offense that carries a minimum sentence, but he added that "much more needs to be done."

According to MPA data, India's domestic industry suffers more from piracy here than do imported films, which account for just 20% of pirated goods. Despite the recent growth in theatrical revenue for Indian films overseas, MPA data indicates that in the U.S., home video revenue for Indian films has declined by 75% over the past three years because of rampant piracy.

Later in the article gets around to digital cinema, or the UFO version of it, noting that:

India also is home to the world's largest network of digital cinemas. Mumbai-based UFO Moviez operates more than 1,000 screens, but most are not compliant with the Hollywood studios' Digital Cinema Initiative guidelines. Dubbed versions of Hollywood titles therefore are not released on this system, given that there are only six DCI-compliant screens in India.

Instead of writing "most are not compliant" with DCI guidelines they should have written 'none are compliant' because they distribute in MPEG-4 format and only Sathyam has six 2K digital cinema screens in Chennai. On the tricky issue of why the Sony Pictures-produced Saawariya is being released on 250+ non-DCI screens, Glickman is forced to cop out with a "This is a commercial decision by the studio, and we really can't comment on this."

The reason is because there is no true 2K alternative in India. Yet. But that will change.

Yesterday the founder of Adlabs, Manmohan Shetty and his daughter Pooja, announced that they were stepping down two years after selling a controlling stake to Reliance. That's the very rich company I mentioned at the start of this blog. They don't enter a market unless it is to be Number One. They have already made Adlabs India's largest cinema chain. Next on their agenda is digital. Like I said, these are very interesting times to be here.

Greetings from India! (No time for Show East)

The uncertain future of third party digital cinema funding in Europe - part II

...or, There's Gold in Them Thar Digital Hills, But It's Not the Propspectors That Will Profit From It.

This is the second installment of my thoughts about the role of third party companies in the digital cinema transition in Europe. Here I will attempt to set out what the implications are of third party players being effectively sidelined from financing the transition to digital for European cinemas, what role they could and should still play and well as taking a stab at who the likely winners in this process will be.

The worst thing that could happen for third party players would be for the European Investment Bank (EIB) to become involved in the digital cinema transition. Despite its name, it is not an investment bank in the traditional sense and as such is not presently involved in any financing discussions that I am aware of. As the Wikipedia page makes clear:

The European Investment Bank (the Banque Européenne d'Investissement) is the European Union's financing institution and was established under the Treaty of Rome (1957) to provide financing for capital investment furthering European Union policy objectives, in particular regional development, Trans-European Networks of transport, telecommunications and energy, research, development and innovation, environmental improvement and protection, health and education.

The EIB is thus not interested in the funding or conversion of one or more cinemas chains in a particular EU member state. Digital cinema conversion would have to be a European Union policy objective for the EIB to get involved. And as there is no country or organisation that is pushing it forward - UNIC is too weak and the Franco-German axis under Merkel-Sarkozy has other priorities - I do not see it happening.

What this means is that each country will have to find its own way to digital cinema. Some will do it better than others, some will do it faster than others, some will manage to 'save' smaller cinemas, while for others it will shake up the exhibition sector completely. What it also means is that there is potential for third party players to have different roles in different territories. I am not precluding that they will be part of the financing of some of the installations that will take place. But as I outlined in the previous post, I doubt that they will end up playing a large role in the roll-out once most European territories take a serious look at how to switch over all of their cinemas to digital. It is this solidarity approach that mainly precludes the participation of third-party players, as they will not be able to strike VPF deals that cover small and marginally profitable or even unprofitable cinemas.

Where does this leave third party players? For a start they still have a large potential role to play in the transition in terms of providing installation and support services. There are over 30,000 cinema screens i Europe. If we assume a five year transition, that will mean 6,000 screens converted per year or 500 a month. Such an exercise will require major logistical support from companies with experience. Here too, however, third party players will have to form strategic alliances with the manufacturers (in the US it is Christie rather than AccessIT in the Christie/AIX partnership that have driven the 'locust' approach of conversion, whereby teams descend on a town with multiplexes and convert all te screens in one go witgh insect like efficiency) and existing installation companies. Going your own way as Arts Alliance Media did when it ended the partnership with Sound Associates after the first phase of the DSN installation is risky because established installation companies have something that new third party players don't, which is well established relations with the cinemas. In in the exhibition relations, it is always personal.

However, installation will require hiring, training and using an army of engineers who will not be needed once the installations are complete, unless you move them to the next territory. While service of digital equipment appears to be at a premium of 30 to 40 per cent compared to 35mm, this will still not be a large enough business to sustain third party players or all those engineers in the long term, hence most installation work can be expected to be subcontracted.

This is also why third party players are branching out into mastering (Technicolor, AAM, XDC), satellite distribution (AccessIT), advertising (AccessIT, Technicolor), alternative content (AAM, AccessIT), software development (AccessIT) and other anciallary services. But the truth is that without VPF deals the third party players are financially doomed and it has everything to do with accounting practices and exist strategy. Here is how.

Take the UK Film Council's Digital Screen Network. This would seem to be a straight forward enough deal. The UKFC has £12m to spend on converting 240 screens. Cinemas apply to join and AAM are hired to carry out the installations and maintain the network. Cinemas that join the DSN apply for funding from the UKFC, pay that money to AAM who install the equipment. AAM then pays the vendors for that equipment. Except that's not how it works. AAM secures a loan with Barclay Capital which pays for the equipment. It then keeps the money from UKFC, paid via the cinemas, making sure that it pays interest on the loan each month. Read the fine print on the contract the cinemas sign with AAM and you will see that the equipment is collateral for the loan and legally belongs to Barclays, at least until the loan is paid off. What it means is that AAM now has a digital cinema network that they effectively run and control (or at least did, until they had to swap out the QuVis servers for Doremi, making it possible for anyone to distribute DCPs and KDMs directly to the cinemas) but more importantly, they have a war chest of around £10m to help fund future digital cinema plans.

It is important to stress that there is nothing illegal or un-ethical about AAM handling it this way. It is all strictly above board. In fact, it is the way that a lot of financial activity works these days. As long as they keep paying off what they owe Barclays everything is fine. I'm not telling you anything that isn't common knowledge in the industry. However, it also means that AAM cannot do anything with the QuVis servers they swapped out - because they belong to Barclays and not AAM! They cannot be sold, rented or dumped into a landfill. My guess is that they are sitting in a warehouse somewhere collecting dust. But the UKFC's DSN is not the standard way for financing digital cinema deployment. And this is where things get REALLY interesting.

Equipment such as digital cinema projectors and servers need to be paid for up front. Manufacturers don't like to be promised a share of VPF for however many years to come. So third party players like AccessIT and AAM do deals with banks and lenders such as GE Capital and RBS, who do similar deals for airplanes, truck fleets and other big capex projects. These deals are under written by the equipment and the VPF deal securing the loan. Over time the VPF deals are used to pay off the loan, with the third party player keeping a slice of the VPF deal above and beyond the additional maintenance costs, which is their profit. But where third party players make things interesting is where they start counting the VPF as income for the company. Not a fee that is used to pay off the equipment cost, but an income.

Your gut reaction will probably be that VPFs are not 'income'. And in one sense you would be correct. They are a time limited fee that distributors have agreed to pay towards the cost of the digital cinema equipment, facilitated by the third party player. But for accounting purposes they can be counted as an income to the company. And the reason for that is that the value of a company is determined in multiples of the annual revenue, as well as how profitable that company is. So if I'm Acme Digital Cinema and I have lots of VPFs passing through my account on paper I am very valuable. Which brings us to the exit strategy.

Leaving aside Technicolor, whose exit strategy is that they don't want to exit the market, Acme Digital Cinema has one of two exit options. The first is to get sold to another company or to float on the stock market. If you are already on the stock market, you want to increase your share value or even move to a better stock market (as AccessIT did when it moved to NASDAQ). When I joined Deluxe people were still speculating and asking me how long before Deluxe bought AccessIT, though most people seem to have accepted by now that Deluxe are sticking with its stated aim of not getting involved in deployment side of digital cinema.

So while mastering, advertising, etc. might provide a small profit to third party players, even put together these anciallary services are too small to increase the perceived value of the company as much as VPF deals do. There is thus no small irony that some of these niche pursuits might be more profitable than skimming off VPF deals, but they are still less interesting to third party players because of how markets work. Of course, any accountant going through the books of Acme Digital Cinema will spot that the VPF deals have a fixed end date. But Acme would argue that by this stage they will have grown the business through other means and be dominant through first move advantage. Prior to Enron and Sarbox accounting practices would have been much less transparent and more suspect.

I for one don't know what AAM or XDC's owners' ultimate goal is. But I suspect that they are not in this for the long haul, by which I mean more than 10 or 20 years. As investors or VCs they want to see a pay-off and an exit. And an exit is best when the company's share price peaks or it is at the height of its perceived value.

There is no reason for cinemas or anyone else to cry foul over this. In fact, cinemas should know this better than most. In the UK most cinemas right now are owned by investment vehicles. The loans that were raised to buy them were secured by real estate deals (ownership or lease of the properties they are in) and a guaranteed income based on content supplied by other companies, primarily blockbusters and advertising. But having a direct VPF deal in place means that the new (perceived) income goes towards increasing the (perceived) value of your investment, rather than someone else's investment in a third party player. Now you see why cinema owners resent the paychecks and share options given to the managers of the third party players get. It is not the VPF itself, of which the third part player will keep relatively little, that matters, but the flow of VPFs through the third party player that counts.

So what can and should the third party players do? Just as with any big infrastructure or IT project, such a computerizing patient records for all hospitals, once a governments decide that it needs doing, it will not do it itself but subcontract that work through open bidding. That's what the UKFC did with the DSN, awarding it not to the company promising to do it cheapest (the funding was fixed) but to the company they thought would do the best job. (And just for the record, I think that they absolutely made the right choice.) Third parties don't like open bidding and would prefer to do deals directly with distributors and cinemas but they may have no option but to go down this rout. And while many companies get rich off government contracts, it also introduces a whole new level of accountability and accounting limitations. It also means installing digital in those pesky and small unprofitable cinemas located in villages far off the beaten track that drive up installation costs and put a damper on profit margins.

Despite all this there is a role and profit for third party players to be had in the digital future. Unfortunately for them it is not what they think or are planning for. Over time, what was AAM's greatest success, i.e. securing the VPF deal, risks becoming an albatross around their neck. As I wrote earlier, the terms of funding digital switch overs in places like Norway (whose example I believe more and more European countries will follow, with variations for funding mechanisms) precludes AAM for implementing its VPF deal there. In contract, XDC are lucky enough (though maybe they themselves don't see it that way) not to have a similar VPF deal in place. Yes, there are many jokes being made about the number of times XDC's business model has switched. But in the Darwinian market place, having flexibility and being able to adjust to changing market conditions is a pre-condition for survival. Sooner or later XDC will get it right, because they have enough funding to keep trying got a long time yet. Staying the course with the VPF model, however, does not allow that sort of flexibility.

So if not third part players, who will profit from the digital switch over? Here I must declare an interest and not just because I always joke that the only people to make money from digital cinema are consultants and conference organizers, but because I had the privilege to work for two of the companies that I believe have steered the right course heading into digital cinema.

Essentially, it is the comapanies that ignore the lure of the VPF and focus on the ancillary services.

This means companies like Unique Digital, whose Norwegian sister company Unique Promotions recently became Unique Cinema Systems, after merging with two of Norway's largest cinema service, installation and consulting companies (check the link and, yes, she really works there, they didn't just get her to pose for the photo in the NOC). As far back as three years ago when I joined Unique we saw the writing on the wall that the future did not lie in selling digital screen advertising servers and a switch was made to supplying software and solutions that fit in around the cinemas and cinema advertisers' needs and worked with whatever digital set up they had in mind.

It also means companies like Deluxe, which stuck to what they do best, though even for them it could end up being a semi-Pyrrhic victory if they end up with a larger slice of a smaller pie for digital compared to 35mm. It means installation companies like Sound Associates, who will be essential to upgrading cinemas to digital and then keeping them supplied with spares and . The winner will thus be relatively small companies that stick to what they know and grow with the exhibition market and its changing needs.

In the California gold rush it was not the prospectors who got rich or built up a long term business, but the companies and men smart enough to sell them pick axes and shovels or even shipped their laundry to Hawaii. The cinemas and distributors know where the gold is and in the great rush to them thar digital hills they won't share this wealth if they can help it. But even if they are to prospect it themselves, they will still need to buy that shovel from someone.

The uncertain future of third party digital cinema funding in Europe

...or How I Stopped Worrying and Learned to Love State-Led Digital Cinema Funding Initiatives.

Having attended a number of national and international conferences and events around Europe there are growing signs that third party middle men are increasingly likely to be sidelined in Europe's digital cinema transition. I realize that this is a pretty strong statement, so here is the evidence that I have come across in as much detail as I can and am allowed to give.

Norway - I keep banging on about this one, I know, but given that they are still the likeliest candidate for being first in switching over all of their cinemas to digital they are well worth watching. With the government having pledged to support 50 per cent of the cost of the conversion, with 15 per cent coming from cinemas, 35 per cent from distributors and no cinema left behind, there is no room in this funding equation for any 3rd party financiers. The funding vehicle will instead be set up by FILM&KINO and in order to qualify, cinemas cannot dip into any other pot of money, be it from Arts Alliance, XDC or anyone else. This goes for municipally owned as much as for private cinemas. So far, so obvious, but what about the rest of the Europe that does not have such a unique cinema structure and big pot of money to spend on them?

Germany - A few weeks ago I attended and spoke on the 'Kino mit Zukunft' (Cinema with future') panel arranged with the FFA. What was interesting was the difference between what was said in public on the panel, which was detailed and interesting, and what people were prepared to tell me off-stage and off the record. Germany has far reaching plans for how to help the cinemas go digital and they are looking to apply the 'Norwegian model' but in reverse. I'm afraid that I can't go into more detail than that at this time, but I hope more will be revealed elsewhere soon.

This is very advanced thinking and the key is that the money is raised through the cinemas with upfront loans to pay for the cap-ex, but it would not involve third party financing. This was largely echoed at the IBC conference where at the D-Cinema Conference Day a presentation was given by Chris Koppelmeier (you can download it other IBC presentation for free as MP3 files here) left no room for third party funders in his overview of the German situation, even if it did not give the most up-to-date status of the plans. Having previously championed the 'Solidarity' model for conversion, it is perhaps no surprise that Germany should follow Norway's lead in planning for a conversion that would by state and exhibitor led, rather than by third parties and financial markets.

Remember too that German is still stinging from the media stock market crash that coincided with the bursting of the dot.com bubble that dragged down a lot of cinema and production companies only a few years ago. They have thus little wish to leave the digital transition to the vagaries of the market.

France - Another interesting presentation at the same IBC session was given by Lionel Bertinet from the CNC. Although he did not go into the level of financial detail and analysis that hid German colleague did, his message was all that more starker. On a slide titles 'The Answers and the role of the government' it stated that "A collective approach is needed." But this was followed by the even stronger statement "There will not be an answer from a third party financier." The means would be an adaptation of CNC public fund, if I understood him correctly. He did concede that pure public financing was not the answer either, but the tone had been set.
I tried to ask him and his German colleague what if any role, in that case, they saw for third party operators, such as those on the panel with him at IBC. The question effectively got swept under the carpet, but when I spoke to him afterwards he conceded that there wouldn't be no role, i.e. there would be some role, for the Arts Alliances, AccessITs and XDCs of this world. But the feeling was that they would not be driving the digitization of Europe. [What that 'other role' will be and the implications that has for third party companies I will get into a later companion post to this one].

UK - It is no small irony that when David Hancock gives his very good presentations of the digital cinema numbers around the world he qualifies the UK's lead by pointing out that it is a 'distorted' market because of public funding underpinning most of the deployments, which are the UK Film Council's Digital Screen Network. Unlike France, the UK is not known for state intervention, particularly when it comes to the film and cinema industry, which it sees as an 'industry' rather than as 'culture'. There was a feeling that now that the DSN is fully deployed and operating very weel, the UKFC had got the snowball rolling and could expect the industry to step in and finish what Pete Buckingham and Steve Perring had started. But that does not appear to be the case.

At the recent meeting of the UK Digital Cinema Group (now taken over by the DCMS from was the DTI) Pete Buckingham spoke ardently and passionately about the need for a digital switch over (DSO), whereby cinemas are migrated to digital much like terrestrial television is being switched to digital in the UK, rather than what he called digital deal making (DDM), whereby this third part operator does a deal with those cinemas and some distributors. Market failures would thus be remedied by a softly-softly public approach and assistance. This is in line with previous ideas that had been floated about the UKFC or a related entity facilitating the switch, much like the the Cinema Buying Group is preparing to do in the UK.

Third parties were already in danger of losing out in the UK because major cinema chains like Odeon-UCI, Vue and others are negotiating directly with distributors about a bilateral VPF deal that would not involve third parties. Given that most UK exhibitor operators are owned by banks or VC it should come as no surprise that they are not keen on other banks or VC getting in on the action.

But let's turn the situation around and look at it from the perspective of the third party companies themselves. Arts Alliance Media are currently top of the class, having announced Europe's first VPF deal at this year's Cinema Expo. But looks closer and talk to industry insiders and this claim-to-fame starts looking distinctly thin. It was set to be announced as far back as ShoWest and being pushed into announcing it with just two Hollywood studios and no exhibitor takers does not look like a position of strength. Remember that Christie/AIX had commitment from three studios within the space of one month and provisional deals with the others before the end of 2005 (yes, it really was two long years ago). I'm sure that AAM will get more distributors on board and sign up cinemas too, but unless they have a Carmike moment, their deal will not impress anyone for long. More importantly, they will have to explain how their 7,000 screen deal holds up on a country-by-country basis when territories start to fall of the road map as government initiatives are unveiled.

What then of AccessIT? Having said on stage several times that they would start international deployment before the end of 2006, they appear now to have changed plans and are focusing on the next 10,000 screens in the North American market instead. Internationally they are selling their software and possibly looking for partnerships, but are not out there signing VPF deals. This is a smart move, in my view. The international market is risky and costly, whereas they have a head start in the US and do well to consolidate this position before DCIP get rolling.

XDC meanwhile have the advantage of already being in Europe. In fact, in lots of European territories. And therein lies part of the problem. The company does not have any one territory where it is particularly strong. It's home market Belgium is out, as Technicolor snatched Kinepolis way from them (more on that later) and while they are big in German speaking territories such as Germany, Switzerland and Austria, this territory is so large that even big numbers do not add up to enough. If you discount Luxembourg XDC lacks critical mass in any given territory and is even getting dragged down somewhat by the e-cinema legacy of Sweden's Folkets Hus 1.3K deployment. XDC has a lot of funding and good will from their investors, so I would not write them off, but they too need some variant of VPF deal to prove that the digital cinema know-how that they have built up can be put to good use. (My sources also tell me that they are having 'issues' with the MPEG/JPEG hybrid server, so I'm sure a lot of focus goes into that at the moment).

Technicolor. More than a year has passed since Technicolor announced it's deal with Kinepolis to convert all of the Belgian exhibitors screens to digital. So far, no VPF deal has been announced and the deployment has been limited to 30-odd Dolby servers. Technicolor also appears to have lost the appetite to announce deals with any other exhibitors until it can sort out Kinepolis. Proud though they might have been to have got Kinepolis on board, I'm sure the Technicolor people recognise now that announcing an exhibitor deal prior to having a VPF deal is putting the carriage before the horse, Unless they want to fund the equipment and installation out of their own pocket, that it. So not only has Technicolor's Kinepolis deal stalled but at IBC word reached me that Denise Hsu, VP Business Development at Technicolor and in charge of the international digital cinema deployment plan has left the company (though if she really has left, then she appears not to have updated her LinkedIn page yet). One of her Technicolor colleagues working with her is said to have left as well. To have the key person responsible for international deployment (see my blog post about her speech at IBC last year) quit before it's even got underway means that she has either got an incredible job offer elsewhere, so good that it is worth giving up being in charge of the single greatest transformation of Technicolor's history, or that she lost faith in the task. Similarly to AccessIT, I'm guessing that Technicolor is focusing on the North American market but they cannot announce that they are walking away or have given up on the Kinepolis deal.

It thus seems that while none of the above companies are drowning, they appear to do little more than treading water in Europe at the moment. In my next post I will look more closely at the role they could still play in the deployment of digital cinema, but why this still spells bad news for them, as well as looking at who will really profit from state-led European digital cinema conversion plans.

Microspace reveals US and European ambitions

It is often the case that small and smart companies profit in major transitions such as the digital cinema conversion. Microspace is shaping up to be just that, having doggedly persisted where larger corporations like Boeing and Elsacom have had little impact. Now it looks set to be in 500 North American locations by the end of 2008, which is impressive if you consider that this represents ten times that number of screens. But the company's ambitions do not stop there, according to this article from THR:

Meanwhile, the company is looking to grow in new markets. "We are looking to Europe being our next area of expansion," said Curt Tilly, Microspace's manager of digital-cinema distribution.

Methods of delivering digital-cinema content include shipping hard drives and satellite distribution. "For a small number of locations, satellite delivery for any industry doesn't make a lot of sense," Tilly said. "Our rough break-even point, we think, is about 400 locations. We can go back to the studios with 400 locations and say that we can be more cost-effectlve than the process of duplicating drives, shipping drives, tracking drives and getting them back. There are also advantages with security; satellite delivery is getting more secure than a hard drive.

It will be interesting to see how they tackle a heterogeneous market like Europe. 400 might not sound that much, but taking into account the different release windows, lack of pan-European exhibitors of sufficient size (even Kinepolis and UCI aren't big enough) and different wishes from different studios and their service companies (Fox still aren't keen on satellite last time I checked).

Microsapce will also face competition from European competitors. Just don't expect them to be Astra or Eutelsat. The European Microspace is out there, but keeping a low profile at the moment.

The perils of not encrypting your ODS content

Maybe they figured that no one would be interested in it once it was not live. Maybe they thought that the file would be too big for anyone to re-distribute. Maybe they just didn't think that anyone would be interested in Phil Collins.



Whatever the reason, it appears that the Genesis live concert that was beamed to cinemas in UK (Vue) and Sweden (Folkets Hus) and Spain and Ireland, was sent over satellite UNENCRYPTED in full 720p 5.1 channel glory. And, yes, someone pulled down the signal to their home for free and recorded it.

Here is the website that describes how it happened (it is in German, so here is a Google translation into English). The technical level of detail is impressive:

Bertragen wurde das Konzert in Kinos in England, Irland, Spanien und Schweden. †Bertragungsdaten: HDTV 720p - 16:9, mpeg2, Dolby Digital 5.1 EX. - Bilder vom Mitschnitt der LiveŸbertragung fŸr die schwedischen Kinos, unverschlŸsselt (!) auf Thor (1¡W 11531V 13333 7/8), gesamt 17,7 GByte, ca. 160 Minuten. Zu Anfang gab es die Einblendung des Genesis-Logos und ein kleines Video mit diversen Covern der Studioalben der Band gefolgt von einigen Backstageaufnahmen.

Even at 17.7Gb I'm sure it is only a matter of time before it appears on P-2-P file sharing sites before too long. High def porn and 'Serenity' already is.

Jack Valenti, we hardly knew you

I once bumped into Jack Valenti in a corridor in Bally's hotel in Las Vegas during a ShoWest. What intrigued me was that he was merrily munching from a bag of popcorn. Forty years of working for Hollywood and he still hadn't tired of the white stuff! Though he was more of a friend of the studios than cinemas - not surprising as the former paid his wages - it is appropriate that his memorial service was held at the ArcLight Cinema Dome in Los Angeles. Both the LA Times and New York Times were there to record the event.

For someone so much in the industry's eye it turns out we knew very little about the man himself, at least based on what his daughter had to say about him. From the NYT:

Ms. Valenti said her father had called her “my tumultuous daughter,” and there was much history, and much love, between them. “I was a moody and emotional kid,” she said. “But thanks to my lovely team of therapists, that he shelled out for, I’m able to embrace our past.”

Her father was also the kind of man, she said, “who shows up at his daughter’s birthday party at 1 a.m. so he can give her a hug.”

Saying her father had “more energy than me and all of you,” Ms. Valenti lamented what her father would miss: movies, elections and “the conversations about how incompetent the president is.”

“I hope I’m not betraying his confidence,” she quickly added.

While in the La Times Hollywood's Who's Who line up to pay tribute without getting too sentimental or reverential:

"He was the human equivalent of the iPhone," Steven Bochco, the creator of "NYPD Blue," said during the service. "He was a small, sleek package with irresistible features."

While he will never live down his 'VCR-Boston Strangler' comment even in death it is good to hear him getting recognition for the work he did for the likes of Friends of the Global Fight. A little bit of Hollywood history dies with him.

Korean TV show goes big in Japanese cinemas

With Transformers upon us, The Simpsons Movie just over the horizon and Sex & the City big screen adaptation confirmed, it's interesting to see television shows in their original format making it onto the big screen. The show the single-handedly made Korean culture a hit in Japan will be re-screened in cinemas in Tokyo, according to Screen International article:

A special version of Korean hit television drama Winter Sonata will be screened at Toho's flagship Roppongi Hills cinema in Tokyo.

All 20 episodes of the series will be shown on Tuesday mornings from July 10 to September 11, featuring extra footage only shown once previously on NHK's BS satellite channel and unavailable on DVD. BM Inc is handling the theatrical distribution of the series.

As Roppongi Hills is one of Tokyo's key multiplexes, Winter Sonata is fighting for screen space against Harry Potter And The Order Of The Pheonix, a live-action feature based on hit TV anime Saiyuki and the latest installment in the popular Pokemon franchise, all opening on July 14. Seven of the cinema's nine screens will show the episodes on July 17.

All of the multiplex's nine screens had show the last episode of Japanese TV drama Hotelier (a re-make of a Korean series by the same name) and set a one-day record of 2,000 admissions. This is said to be "part of an increasing trend of TV viewership in cinemas" in Japan.

I do not know what they charged for tickets, or even if they could - the article reveals that the screening had sponsors - but it is interesting to see this happening in the home country of high definition, which has been slow to embrace digital cinema.

How to make European cinema sexy

Post-Expo summary of European situation

I'm too lazy and busy to do a post-Cinema Expo summary, but fortunately FJI's new digital cinema editor Bill Mead has already done the work for me in this article. It is an excellent snapshot of where things stand in Europe:

Nowhere else in the world is the digital-cinema rollout more complex than in Europe. Compared to the U.S., where similar virtual print fee (VPF) arrangements have prompted an initial first wave of installations from exhibitors, Europe has more difficulty finding the common ground among the exhibitors, distributors, and digital-cinema providers on which equitable financial sharing arrangements can be built. In Europe, as elsewhere, the question of "who will pay" has evolved into a series of follow-up questions about how to develop equitable cost-benefit sharing deals that are fair today and are sustainable in the future.

Europe is a diverse market. Not only are there cultural factors but business and economic factors contributing to rollout complexity. There are more than 800 distributors operating in Europe and the mix of Hollywood studio and locally produced content varies by country, typically averaging around 70% imported titles. 35mm prints tend to be crossed-over between theatres more than in the U.S., so any print savings have to be spread across multiple theatres. There are also more theatres which are either part-time or with a relatively low annual number of admissions. Overall lower screen counts result in lower economy of scale from creating digital copies.

The article doesn't include details of AAM's two VPF deals, but I'm sure that will come in a future issue. For now, hats off to FJI's new digital cinema editor for a strong start. Andreas Fuchs has pulled the heavy European digital cart at FJI all by himself for too long.

Good article on Technicolor's digital effort

Business Week has a good article on Technicolor's efforts in the digital cinema space. It gives both historical and current market context:

Technicolor, which was bought in 2000 by Thomson (TMS ) of France for $2.1 billion, is up against an aggressive new entrant, Access Integrated Technologies (AccessIT), as well as Digital Cinema Implementation Partners (DCIP), a joint venture of the three biggest theater chains, Regal Entertainment (RGC ), AMC Theatres, and Cinemark (CNK ). This summer could be the tipping point in the digital transition, as the number of U.S. theaters capable of showing movies in digital form finally exceeds 10% of the 35,000 U.S. screens. "This is a disruptive technology environment," says AccessITCEO A. Dale "Bud" Mayo.

Technicolor was founded in Boston in 1915. Swashbuckler Douglas Fairbanks was enchanted by the possibility of making a pirate movie in color and relied on Technicolor's cameras to shoot The Black Pirate in 1926. The company received important boosts from Jack Warner, Warner Bros. co-founder, and Walt Disney. By the 1940s the phrase "Color by Technicolor" in a film's marketing campaign could boost ticket sales as much as 30%. But in the '50s, Eastman Kodak Co. (EK ) introduced a less expensive film stock that could run through any camera. That forced Technicolor into the business of processing film and manufacturing prints.

This month marks the anniversary of the Technicolor-Kinepolis announcement and to date only some 30-odd screens in Kinepolis' chain have been converted and no VPF deal has been announced for Europe. It is too soon to write off this deal, but it does illustrate the hurdles that European digital cinema business plans still face.

'Grease' director goes 3D for mobile phones

'Nightmare Before Christmas' took the honour of first re-rendered 2D-into-3D away from 'Grease', which appears stuck in the Dimensionalization(tm) equivalent of development hell. Yet the director behind the film, Randall Kleiser, appears to have caught the stereoscopic bug (along with Lucas, Cameron and half of Hollywood). The Hollywood Reporter has a story that he and his business partner have patented a technology for stereoscopic display in electronic screens:

Director Randal Kleiser and inventor Michael Mehrle are introducing a technology designed to enable the viewing of 3-D content on such mobile devices as PDAs and iPods without the use of special glasses.

Their startup, Neovision Labs, has developed this unique technology called iFusion, which is patent pending.

In addition to offering a new capability to consumers, Kleiser, whose credits include "Grease" and "Honey I Blew Up the Kid," and Mehrle believe this unique technology has the potential to help forward the 3-D movement by giving the studios a venue in which to repurpose their 3-D-produced content after its theatrical release.

It is not aimed at cinemas, but they are already going digital 3D anyway, but for the great market beyond:

The attachment would be secured over the device screen. Mehrle said the attachment would be marketed as an accessory for hand-held devices and would list for about $50.

This technology does not convert a 2-D film to 3-D; rather, consumers would download 3-D content to the device for viewing. The content could be animated or live-action films produced in 3-D or films that were produced in 2-D and later converted to 3-D (like "Tim Burton's The Nightmare Before Christmas"). In addition to features, 3-D shorts, 3-D special-venue films and other such content could be used with the system.

The content has to be specially encoded for this application. "Basically, it's zero added costs. You can do it on a laptop," Mehrle said.

Kleiser said he hopes this development would help grow 3-D production. As a director, he is excited about the possibilities that 3-D offers to filmmakers. "The director wants to make the audience feel visually like part of the story; that's what 3-D does," Kleiser said. "Directors have another tool that they can use for dramatic emphasis. (Images) could come out of the screen into their faces, the way we would use a close-up."

Let's see if 'Grease' in digital 3D comes to a cell phone near you any time soon.

Fithian slams Arts Alliance's VPF plan

No one goes to the ICTA seminar expecting fireworks, but that's what we got this Sunday morning.

The normally sedate technology seminar tried something different when it invited the heads of NATO and UNIC. Having first talked about windows and piracy (sorry, 'movie theft'), we soon got on to everyone's favourite topic - digital cinema.

Without mentioning Arts Alliance Media by name - he is much to smart for that - John Fithian slammed the VPF business plan that was set to be unveiled the following day by AAM. I don't know if he had heard them trailer the announcement at the RAAM conference the previous week but he didn't need to as the details were all over the trades. Here is what the Hollywood Report wrote:

"At CineExpo we will be announcing that we have a VPF deal for Europe," AAM's Fiona Deans told delegates at the RAAM Digital Cinema conference in London on Thursday. "It might not be what everyone wants, but we think it is a fantastic opportunity for cinemas to digitize with distributors contributing."

It certainly wasn't what Fithian wanted to hear. Here is what he said at the ICTA event.

"Just because someone announces a deal with a couple of studios for a handful of territories doesn't make it right and doesn't mean it is happening."

He went on to characterized it as an 'attempt to fragment the market' and even called it 'bullshit' (yes, really).

What he must have particularly objected to was the following bit from AAM:

In a bid to encourage early adoption, Deans warned that the VPF deal wasn't "for an unlimited number of screens."

"We have a fixed number of screens that we can roll out to," she said. "And once those screens are signed up, we will have to go back to the studios and see whether they want to keep contributing at that level. This is obviously an incentive for people to start talking to us sooner rather than later."

Fithian was not swayed by this argument, calling for exhibitors to 'look at the fundamental economics of the deal.' He drove home the point by saying that "third-party integrators who go around and threaten to 'come and get it now because it will run out soon' have flawed economics." His words, not mine.

Fiona may just be echoing what some studios have been saying but it is not impressing the most important representative of the cinema industry. And what NATO believes, UNIC and European exhibitors are not likely to argue with it. Let's not forget that it was Fithian who helped kill off the premature original Technicolor digital cinema plan (PDF) in 2001.

It will be interesting to see how AAM will respon to this at tomorrow's Cinema Expo panel. I for one am expecting more fireworks.

China makes real on its digital cinema promise

I've always joked that the easiest way to make digital cinema happen is if you can write it into your Five Year Plan ('Comrades, a digital cinema within bicycling distance for every farmer, worker and soldier!' as Mao might have said). And for a while China was at the forefront with digital cinema through the government-led 100 digital screen test network.

Unfortunately the timing was such that the deployment that started in 2002 took place in the middle of the 1.3K to 2K transition and the growth stalled after the first 100. In the last year, however, there are renewed sign that China might once again take a Great Digital Cinema Leap Forward. The latest piece of news is that China Film Group and the somewhat unlikely partner Shougang Steel are to build 2,000 digital screens. This is what the Hollywood Reporter had to report on it:

Dubbed China Film Group & Shougang Digital Cinema Building Co. Ltd., the joint venture, first unveiled to local media last week, believes the use of digital cinema technology will help stem some of China's rampant movie piracy problem.

Last year, about 93% of the discs sold in China were illegal copies, costing moviemakers upward of $2.6 billion in lost ticket sales, according to MPA estimates.

"The goal of our cooperation is to build digital cinemas across the country," Han Sanping, CFGC's board chairman told the official Xinhua news agency. "We will build about 2,000 new digital screens before the end of 2008."

But it looks like the construction might stop before it's even began due to the fact that a construction ban kicks in ahead of the Beijing 2008 Olympics. But it is a much needed growth for the exhibition sector in China. From the same article:

China now has about 3,000 modern movie screens, only 124 of which were digital in 2005, according to a recent report from the Nielsen Co. and Screen Digest. The number of digital screens in China rose from just 93 in 2004, with growth led by China Film, with 91 digital screens, and Stellar Film, with 27.

China Film's digital screens account for roughly half of their total 180 screens, a total that makes it the second-largest distributor in the country after Shanghai United Cinema Circuit, the report said.

What will they show on the digital screens? Well, in other Chinese digital cinema news ScreenDaily reports that Shrek 3 will get a digital-only release on 150 screens in China, which means that Hollywood titles are starting to return in digital after the studios put a halt to digital screenings, again because of piracy issues.

See 4K for yourself at Los Angeles' Landmark Westside Pavilion

Marc Cuban's Landmark cinemas gave Sony cause for concearn a year and a half ago when they announced at CES that they had chosen DLP Cinema projectors as the preferred technology, having previously sworn by 4K. They later said that they were still committed to 4K and that committment has been proven with the opening of their new showcase cinema in Los Angeles.

This is what the Hollywood Reporter had to say about it:

The debut of Landmark Theatres' new flagship complex called the Landmark, which opens Friday at Los Angeles' Westside Pavilion, prompts a closer examination of 4K resolution digital cinema, which represents four times the picture information found in today's commonly used 2K digital cinema resolution.

The Landmark opens with three theaters equipped with Sony's SXRD 4K digital cinema projectors. These -- and one at the Landmark-owned NuArt -- represent the only screens in Los Angeles that offer 4K projection for paying audiences.

Landmark already has ordered about 25 4K projectors from Sony, which is the only manufacturer offering 4K digital cinema projectors to theater owners. In addition to Los Angeles, there are installations in Landmark theaters in Atlanta, Boston, Chicago, Dallas, Indianapolis, New York, San Diego, San Francisco, Seattle and Washington. Plans are to also install 4K technology in Baltimore and Denver.

They make a lot about the audience being given the chance to see the 4K quality for themselves, though at present this seems confined to a few trailers and special footage from Sony Pictures, while they wait for films shot using the new 4K cameras. But read to the end of the article and you discover that "The Landmark opens with a total of 12 auditoriums, three with 4K projection, three with Panasonic 2K digital cinema projectors and all 12 with film projectors. "

Never mind that Panasonic don't make 2K projectors in the commonly accepted sense of the word (2048x1080 DLP Cinema chips, as opposed to 1920x1080 standard DLP), it's 35mm that still rules the day. In the meantime, Landmark is having an open relationship with Sony and TI.

Kuwait - latest country to be "first" to switch to digital cinema

The list of countries planning to be 'first' to switch over all of its cinemas to digital is growing. Kuwait now joins the ranks of Ireland, Luxembourg, Singapore, and Norway in this non-Olympic competition sport. This is what an article Kuwait on the cusp of a D-cinema revolution from ArabianBusiness.com has to say:

Kuwait is set to become the first country in the world to boast an all-digital cinema (D-cinema) network, under an auspicious plan by the country's dominant cinema chain, Kuwait National Cinema Company (KNCC).

KNCC, which operates the Cinescape chain in Kuwait, recently contracted Indian company Real Image Media Technologies (RIMT) to develop a pilot D-cinema project installed in its flagship Kuwait City cinema multiplex. The project involved the installation of Real Image's Qube high definition XP-D DCI compliant digital cinema server and a Cinemeccanica 2K digital projector.

I'm not sure what they mean with statements like that the installation "surpasses the 2K quality standard agreed upon by the Digital Cinema Initiative (DCI)." (Do they mean 4K? I don't think so.) The article is right, however, that Kuwait like much of the Middle East is a unique market in that it has films from Hollywood, India (Bollywood) and Arabic Countries. As such, the deal is a coup for RIMT.

However, I'm less sure of the 'first country' thing. For a starter, I'd be tempted to take a handful of 2K projectors to Andorra claim to have switched over an entire country to digital. Kuwait, Singapore and Luxembourg are independent states, but they are also those odd questions in Trivial Pursuit's Geography category. The article itself tells the full story of the numbers, in that "KNCC plans to digitise 40 existing cinema screens and establish a further 50 digital theatres across Kuwait over the next 12 months." For it to count I'd say you need to get up to at least 100 for it to count.

So it's still a race between Ireland or Norway - and my money is firmly on Norway being first.

Pirates 3 tops Spider-Man 3 as widest digital release

My friends and colleagues at Deluxe were as always too modest to shout that the digital cinema release of 'Spider-Man 3' was the largest ever, hitting over a thousand digital screens across the world. That record was, however, short lived, as 'Pirates of the Caribbean: At World's End' looks set to go even larger. This from a press release from an article in the Hollywood Reporter:

"At World's End" will be the first feature to be released on more than 1,000 digital cinema screens domestically and will be the first movie to bow on more than 400 screens internationally, Buena Vista Pictures domestic distribution president Chuck Viane said.

As of Monday, "Pirates" was set to open on 1,064 digital cinema screens domestically and an additional 410 internationally. Viane said the number could rise before this weekend's release.

"It went up 20-something (screens) in the last few hours," he said.

There are 3,229 domestic digital screens. Precise international figures weren't immediately available, but the pace of digital installations in the U.S. and abroad has quickened dramatically during the past 18 months amid major rollout financing.

What with 'Spider-Man 3' still playing in plenty of screens and 'Shrek 3' also occupying its fair share, this record is all the more impressive.

Why the smallest cinemas matter

I spent the past weekend attending the annual get together of Våra Gårdar, whose 70-odd cinemas account for just one per cent of Sweden's box office and is run by the temperance movement, in Leksand, Dalarna. Was a mad, desperate or starved of sights of the Swedish countryside to be attending an event like this. None of the above.

At the moment the battle is on for how to finance the digitisation of the largest cinema chains in Europe. An old friend joked about how in the next few months the eager European third
party integrators will step off a plan from LAX, waving the VPF (virtual print fee) document above their head and proclaiming 'Digital Cinema in our time!' But the trick is not how to make a deal with the Hollywood studios but how to make a deal on the local level, most importantly of all, one that takes account of all cinemas, large and small.

I joked a while back about the need to launch a 'No Cinema Left Behind' plan for digital, which has been taken up in the US when J. Wayne Anderson was elected MD of the Cinema Buying Group, L.L.C. (CBG). But so far that has not been headed. Sadly there does not seem any concerted effort to do this, either at a national or pan-European level. Instead we still get the occasional misguided call for 'European' digital cinema standards (whatever those are).

The truth is that those that best understand how to save the small cinemas are the people who run the small cinemas themselves. It was these people that I had the privilege to meet, talk to and get to know in Leksand, which also happens to have one of the most beautiful cinemas in the whole country (sorry, no picture). Despite the town just having 5,000 citizens, gets first run films such as Spider-Man 3 and Pirates 3. The team from Fox Sweden were even there to hand out donuts from the Simpsons Movie mobile. And as further recognition of the big-small importance of the event, also attending was Sweden's Minister of Culture, the head of Swedish Television, and the new head of the audience department for the Swedish Film Institute. I won't go into detail about everything that was said, including an off-the-record lunch with the Minister, but I think Sweden has the ability to tackle this issue head on. The answer is not just to try to throw money at the problem.

As a bonus on the trip I also got to visit the only Scandinavian cinema museum, located two hours outside the capital Stockholm but well worth the trip. Have a look for yourself at Biografmuseet, even if it is in Swedish and fall in love with the very idea of cinemas and realise why it is worth saving in the digital age.

Dolby's server good enough for FIPS

With MPEG-2 soon a distant memory for Hollywood-quality digital cinema servers, the next big hump is FIPS compliance. The magic number to learn is 140-2 and servers that have Level 3 validation will soon be the only ones good enough to play Hollywood content. Dolby is one of the first manufacturers to claim to have achieved recommendation for it, according to their press release:

InfoGard Laboratories, an accredited Cryptographic Module Testing Laboratory under Lab Code 100432-0 of the National Voluntary Laboratory Accreditation Program, submitted the recommendation for the Dolby Digital Cinema server to the National Institute of Standards and Technology (NIST) for FIPS 140-2 Level 3 validation, as outlined by the Digital Cinema Initiative (DCI) specifications.

Through this achievement, Dolby Digital Cinema has moved further toward comprehensive DCI compatibility.

...

Achieving FIPS Level 3 compliance would mean that the Dolby Digital Cinema server meets the highest level of protection required by DCI to prevent thieves and hackers from accessing the "master-quality" motion picture files used in digital cinema systems. FIPS are security standards developed by the NIST and cover detailed specifications for physical and mechanical design, electronic circuitry, software, interfaces, and algorithms.

Though they have not put out a dedicated press release about it, Sony have achieved this too. At their presentation earlier this week, they told the brave souls that stayed for the in-depth techy talk just what the testing involved. Amongst other things the testers would insert inflatable balloons that would then be expanded so that the casing is dented enough to insert a hand, finger or instruments. It would seem that both Dolby and Sony are thus balloon-safe.

Bill Mead gives d-cinema global overview

For those of you that missed Bill Mead of DCinemaToday fame give his presentation of the state of digital cinema around the world at ShoWest, now is your chance to catch up. An article published in Film Journal International gives a condensed version of the talk. It is worth quoting the first few paragraphs:

By this spring, approximately 3,000, or three percent, of the world's estimated target screens (100,000-plus) will have been equipped with DCI-specified digital projectors and servers. Of the early adopters, approximately two-thirds are in North America, with the rest spilt between Europe and Asia. Significantly, most of the installation occurred in the past 12 months, making 2006 stand out as the pivotal year in the digital conversion timeframe.

Almost 50% of the world's d-cinema installed base can be attributed to one organization, Carmike Cinemas of Columbus GA, who early in 2006 made the extraordinary commitment to equip all of its 2,300 screens with digital projection. Working with Christie/AIX, North America's leading d-cinema systems provider, Carmike has already converted over 1,350 auditoriums to digital. Christie/AIX is a partnership formed in June 2005 between projector manufacturer Christie Digital and d-cinema business provider AccessIT of Morristown, New Jersey.

The United States had an astounding growth in 2006 of over 400%, from just over 500 to over 2,000 installations by year's end. The rapid pace was driven by the maturing and acceptance of digital conversion plans, the convergence of various proprietary formats into the soon-to-be-ubiquitous DCI JPEG2000 MXF format, and an ample supply of U.S. digital titles. By mid-year 2006, virtually all Hollywood studios were making their major "tentpole" titles available in the DCI format, with over 100 titles distributed in the U.S. in 2006.

It gives the facts straight and without editorialising, plus you don't have to put up with the non-working A/C system that those of us who sat through the one hour presentation had to suffer. But it was well worth it.