AAM, QuVis and Doremi; the awkward menage a trois.

You would never guess the significance of the technology u-turn that Arts Alliance's rejection of QuVis servers in favour of Doremi players represents from their up-beat press release (Arts Alliance Media Purchases Doremi Cinema's DCP-2000 Digital Cinema Servers), nor from the bland re-write that is the article covering the deal in Screen Daily (Doremi servers to power UK Digital Screen Network).

When Fiona Deans is quoted as saying, "We are delighted to be able to install the Doremi server in cinemas, and believe it underscores the advantage to cinemas of working with a third party integrator who is committed to evolving with the market and providing the best possible technology solutions," it reads between the lines as "we have no choice but to get rid of the QuVis servers, but this underscores how lucky DSN cinemas are that we will shoulder the considerable financial cost of having bet on the wrong digital horse."

This deal has multiple implications, not all of which can be explored fully here.

It is difficult to see where QuVis go from here digital cinema wise, apart from possibly doing an Avica and selling whatever IP assets they have. As one industry contact noted to me, "QuVIS continues to demonstrate the risks of complacency and the danger of failing to heed customers." He was being charitable.

Put simply, QuVis lost the DSN contract because they made Fiona and Thomas look stupid. And neither Fiona nor Thomas like to look stupid. By firing their only European client support rep, this is the sort of telephone call I imagine QuVis' action must have triggered.

Kenbe Goertzen (CEO of QuVis): Don't worry, Fiona, we can handle all the support from here in Topeka just fine.
Fiona Deans (AAM's Director of Digital Cinema): We're not in Kansas, Kenbe.

QuVis were already under fire from Hollywood studios for being slow to implement watermarking and USB interface (both of which are flagged heavily as benefits of adopting Doremi in the press release) and the time had come for AAM to cut their losses and bit the bullet.

QuVis thus looks set to join the growing list of other digital cinema server casualties: Grass Valley, Tektronix, Boeing's ICE, the Thomson/Technicolor JPEG2000 server that never left the lab, NEC's own-brand server, Avica with more yet to come. I have always said that this market is too small to support more than at most three players, so expect more to be out before the end of 2007. At the moment only Doremi, Dolby and Qube appear to have wind in their digital sails.

For Doremi this is a glorious start for 2007. Not only does their server rule the US, now they have in one fell swoop conquered their home market as well. XDC might swap out their MPEG for JPEG servers faster than Doremis replace QuVis servers, with a greater installed basis as well (100 XDC installations in Germany alone). But what matters more here is perception. When things go wrong, who do you turn to? Your trusted friends at Doremi, that's who. I'm sure they offered AAM a good price, heck, perhaps even a two-for-one deal. They know that it will cost AAM dearly enough anyway to completely re-engineer their back office software, re-train projectionists, adapt service and support, carry the burden of dual inventory of physical distribution media, not to mention to re-master all those films that were encoded in QuVis' proprietary QPE format. AAM's website proudly proclaims:

# of digital screens installed in UK: 136

# of films played on UKFC’s Digital Screen Network: 075

Each one of those screens and almost all of the films are now a cost liability to AAM. There's no need for Doremi to rub it in by offering only a small discount.

QuVis and Doremi will have to co-habit awkwardly for eight to nine months. AAM will continue the roll-out as per previous plans, but with Doremi servers, until all installations are in place by May. Then they will go back to the older sites and swap out the QuVis servers for Doremi players. They have no choice but to do it this way, or they will not meet their deadlines and contractual obligations to the UK Film Council. But apart from being costly, this also risks alienating cinema owners in the transition period, not least when they discover that Hollywood studios - and their specialty film divisions - will support DSN screens with Doremi players, but not always ones with QuVis. Upgrading QuVis players with watermark and USB ports only adds to the costs in this situation.

What no-one is saying yet is where this leaves Norway. AAM has replicated the DSN on a miniature scale with the Kristiansand D-Kino Allians (KDKA), complete with QuVis servers, Christie projectors and films distributed in QPE in ten cinemas in parts of Norway. The venture has just appointed its third head, after two resignations in less than a year. Will AAM treat Norway as a third world market for dumping legacy equipment on or will they upgrade to Doremis there as well? We will soon know.

The real winner in all this, however, is the UK Film Council. They were smart enough never to rely on or sign direct contracts with any technology vendor, but to appoint a third-party integrator. They also made clear from the start that there was a risk involved and that this integrator might be forced to swap out the servers half way through. How prophetic, I now think, as I look back on the meeting with Pete and Steve when this was said. Fair warning all around and AAM walked into this with eye wide open. Hats off to them for acknowledging that they made a bad bet and are now correcting the mistake, even if their press release puts a more positive spin on what is a costly change of plan.