Button or Slumdog at the Oscars - tough choice

I am split in my loyalties ahead of the Academy Awards. While I want 'Slumdog Millionaire' to do well for obvious reasons, I am equally happy if 'The Curious Case of Benjamin Button' walks away with an armful of statuettes, as this was a major project for our sister company Lowry Digital.

Film & Video has a very fact filled Q&A with Alan Silvers that is pre-faced thus:

Lowry Digital is well-known among videophiles as a company that enables cutting-edge digital restorations of significant films for DVD and Blu-ray — modulating grain, repairing damage, and returning important titles to show-print status. But as more and more production moves into the digital realm, Lowry is flexing new muscles. Lowry has worked on 3D features like Journey to the Center of the Earth 3D, where fine image-matching between the left-eye and right-eye pictures becomes crucial to a comfortable viewing experience — Lowry Digital Director of Business Development Alan Silvers notes that founder John Lowry is nurturing a venture, Trioscopics, dedicated to improving digital 3D. But Silvers believes what's known as "the Lowry process" has applications in the traditional feature-film workflow, especially as directors work to incorporate multiple shooting formats into a single, nuanced vision. One of Lowry's most recent projects, director David Fincher's The Curious Case of Benjamin Button, has just been nominated for 13 Academy Awards — including, crucially, a nod for Claudio Miranda's work as cinematographer.

So while I liked Anthony Dod Mantle's camerawork in Slumdog, my vote would go to Claudio Miranda - not least because we've been getting complaints from members of the audience here in our cinemas in Mumbai, objecting to the digital cinema projection because the image is (they say) dark, grainy and pixilated, not realizing that it is not the projection - which was checked by STAR-Fox staff ahead of the films gala screening, that we arranged in digital - but the artistic intention of the filmmakers.

And just so you don't think either I or Lowry have anything against our good friends at 20th Century Fox - Lowry just completed some stellar work on The Robe as well.

Update from Mumbai and Bollywood

Mumbai has been too much in the news for a rather unhappy reason lately. Fortunately our colleagues at Adlabs, as well as friends and families are unhurt, but killings were going on right outside our Metro BIG cinema and dozens of foreigners and Indians were killer and injured. The terror attacks have hit the box office, though hopefully people will find their way back to the cinemas to dream themselves away for a few hours.

This and other things mean that I will sadly have to give CineAsia a miss this year, which is a particular shame given that BIG Cinemas is honoured as International Exhibitor of the Year. But there is plenty of updates from Film Journal International on the film and cinema industry in India. Nyay Bhushan reports on how Bollywood billions: Indian distribution and production change with the times, while Kevin Lally report on how D vs. E: E-Cinema keeps foothold in India as 2K digital grows. Both articles are well worth reading.

Thank you, lastly, to all the friends and colleagues who have contacted me to make sure that we are all OK. Your kind thoughts and well wishes were much appreciated. These are unhappy times, but they do not weaken our resolve to stay on and make digital cinema happen in India.

I'm now COO of Adlabs Digital Cinema

The cat was out of the bag at ShoWest already, but it's a nice coincidence that my 100th post on this in-frequent blog is the announcement that I've been appointed Chief Operating Officer (COO) of Adlabs Digital Cinema.

The news comes in a couple of articles that give details on Adlabs' expansion into the US cinema market.

From The Hollywood Reporter:

Adlabs Films has finalized the acquisition of 240 screens across 28 U.S. cities, executives said Tuesday on the sidelines of the FICCI Frames media conference.

"We have acquired these screens that largely have the potential to cater to South Asian and other audiences in the U.S.," Adlabs Films COO digital cinema Patrick von Sychowski said. "Some of these screens were acquired from the likes of Regal and Landmark, among others."

While financial details were not given, Mumbai-based Adlabs -- which operates more than 100 screens in India -- has partnered with Knoxville, Tenn.-based Phoenix Theatres for its expansion.

From Variety, quoting my boss:

Company, part of billionaire Anil Dhirubhai Ambani's Reliance ADAG conglom, has quietly bought up cinemas across the U.S. and is poised to launch next month as a coast-to-coast mini-chain.

"It is important we are seen as an independent American chain, rather than an extension of an Indian company," said Reliance Capital senior VP Anil Arjun.

Reliance, in which billionaire George Soros recently paid $100 million for a 5% stake, has 250 screens at 28 North American locations. These include sites in New York, New Jersey, Atlanta, Detroit, Chicago, San Jose, Los Angeles, Washington State and one at Union Station in Washington, D.C.

"We've been aggregating. We've bought long-term leases to small chains or mom-and-pop operations, not necessarily the best quality, but we are spending to improve that through things like improved A/C, sound systems and concessions," Arjun said. Total cost of the acquisitions and refurbishments was not revealed.

It is tremendously exciting and a privilege to be part of a company such as Adlabs/Reliance ADAG which has the vision, ability and financial clout to push through such massive initiatives. Expect to hear more from us in the future.

Reliance's motto, from the founder Dhirubhai Ambani is "Think big, think fast, think ahead. Ideas are no-one's monopoly." They certainly do, and I'm trying to as well.

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.

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.

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.

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.

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.

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.

Sony shows off its new 4K projector

Sony has taken the wraps of the latest generation of 4K SXRD projectors and invited the whole world to come and see it. Well, maybe not the whole world, but it seemed like most of the key cinema moves and shakers came to London for the two one-day events.

Once again the event was held at the Odeon Leicester Square, but unlike the previous time Sony demoed the 4K there, this time it went much smoother. It's no secret that Sony has had a bit of a management shake up for its digital cinema business in Europe recently, but it seems like things are paying off with a good product and a clearer strategy.

There was a lot of press coverage about the event, though for all those of you that cannot read the Norwegian article, you will have to make do with the IDG/PC World write up:

The projector, which was used earlier this month to project the "Spiderman 3" movie at its world premiere in Tokyo, is a giant. It stands more than 1.5 meters high, is 1.4 meters deep and 74 centimeters wide and weighs 300 grams.

At its heart sits a 4.2kW bulb (an average household bulb is about 60W) and light from here is bounced off mirrors and through a prism to be split into red, green and blue streams. Each of these goes through a 1.55-inch flat-panel display based on Sony's SXRD (Silicon Crystal Display) technology before being combined and magnified through a lens as wide as a man's hand.

The result, as Sony demonstrated on Wednesday, is a spectacular image that's a rank above what you might be used to seeing at the movies. The projector outputs an image with 4,096 pixels by 2,160 pixels resolution, which is double that of HDTV both horizontally and vertically to result in more than 8 million pixels versus about 2 million on HDTV.

So far, so pedestrian and unspectacular. But the image that it put up on Britain's largest cinema screen looked very good. You will have noticed that the shape has changed too. Gone is what I though looked like a hulking giant black cyclopic toad and now we have something that more closely resembles 35mm and DLP Cinema projectors - if only it was a little less wide to fit more easily through the doorway of the average projection booth. It has been recommended for FIPS certification (as I discussed in the Dolby article).

What is equally impressive is the business side. Sony seem to 'get it' more than they did even 12 months ago. The pricing of the projector is reasonable at 75,000 euro (sans lens) and they are even hinting at a financing vehicle to help pay for it.

But some things remain frustratingly unchanged. The article says that "Sony launched its first 4K digital cinema projector two years ago, but it's only in use in four of Japan's roughly 3,000 cinema screens, the company said." That ignores the 11 4K SXRD projectors that have been sold in Norway - MORE THAN ANY OTHER COUNTRY IN THE WORLD (including Sony's native Japan) - of which four are in cinemas or screening rooms, i.e. as many as Japan. Do not ignore your biggest customer, however small, or risk driving them into the arms of the competition.

But, like I said, overall it was an impressive presentation and while there are issues to be resolved with the projector technically and the organisation around it, at least it shows that Sony are heading in the right direction.

Digital cinema comes to Kuwait

Kuwait looks set to be the first Arabic cinema to install a 2K digital cinema system, though Isreal beat them to it in the Middle East region. According to the press release this could shortly be followed by a complete conversion of the participating exhibitors entire cinema network:

Kuwait National Cinema Company (KNCC), one of the largest theatrical exhibition companies in the Middle East, the Chennai-based Qube Cinema, Inc. and Cinemeccanica Theatrical Equipment Co.,(Italy) have partnered to bring the first digital cinema to the Middle East and Gulf Region. A pilot DCI quality digital cinema is under installation in KNCC's theatre (Cinescape) in Kuwait City using a Qube XP-D DCI Compliant digital cinema server and a Cinemeccanica 2K digital projector.

This pilot phase will, if successful, be followed by a complete digitisation of KNCC's screens all over Kuwait and upcoming cinemas in Gulf States, i.e. Dubai, Abu Dhabi, Bahrain and Qatar. KNCC and Qube Cinema also plan to setup a digital cinema mastering unit in the region to convert Arabic content to DCI compliant Digital Cinema Packages (DCPs).

Interesting to note that it is Qube supplying the server. Although they haven't made a great fanfare about it, GDC Technology supplied the first digital cinema server to Africa (Kenya, if memoriy serves me correctly) and the likes of Qube and GDC could come to dominate 2K/DCI deployments in developing nations, given their lower costs and better understanding of these markets.

Disney goes very big with Robinsons

Thomson has put out a press release trumpeting just how wide the have released the digital 2D and 3D version of Walt Disney's Meet the Robinsons. This is how many:

Technicolor digitally mastered and distributed Meet the Robinsons for 892 screens worldwide. Domestically, the feature was distributed to 582 screens in Disney Digital 3-D (TM) and 138 screens in digital 2-D. The feature was distributed internationally to 105 screens in 3D and 67 screens in 2D. In addition, Technicolor created all traditional 35mm film prints for the release.

"Thomson is very pleased to have participated with Walt Disney Pictures to the widest digital cinema release to date," said Curt Behlmer, executive vice president of Technicolor Theatrical Services and COO of Technicolor Digital Cinema.

I beleive that the previous record was held by SPE's Casino Royal, done by Deluxe, even though it only went out in 2D and had a limited international play. It is interesting to note how few screens showed it in 2D, with digital 3D ones outnumbering them 4-1. This means that digital 3D will soon be the ONLY way to release (computer) animated films and that children will compain if they get taken to a 2D rather than 3D showing.

I'm reminded of the friend's daughter who complained that the television set upstairs was broken because she could not pause it. Digital changes expectations and consumption preferences.

Getting national(istic) about digital cinema

Even those of us ho did not attend NAB2007 and the Digital Cinema Summit could not fail to notice that Germany has been profiling itself particularly prominently this year. The Germans have been part of the digital cinema scene for a while, particularly in recent months through the work of Fraunhofer, but this is the largest concerted effort yet to group it all together under one banner. There was even a press release issued about it:

Under the heading "D-Cinema and Beyond," the full digital-cinema process chain was presented to the professional public. The event was realised by "Invest in Germany - Land of Ideas" a common project of the initiative "Germany - Land of Ideas" and the federal investment promotion agency "Invest in Germany". The presentation centred on the 5k Multi-Projection technology developed for digital cinema by the Fraunhofer Society's Heinrich Hertz Institute (HHI) in Berlin.

Source: Germany - Land of Ideas
· (Graphic: Business Wire). View Multimedia Gallery

Apart from the Fraunhofer Institutes in Berlin and Erlangen, the cooperation partners also include the camera manufacturer ARRI, T-Systems' Media&Broadcast arm as a service provider to the media and broadcast industry, and the software and hardware manufacturer DVS.

It reminded me of the effort last autumn to bring together various French digital cinema interests under the ISA banner, particularly for the screening of the 4K mastered 'Paris Je Taim' at the ETC (link to PDF), which united CN films, CST, Doremi, Eclair Digital Cinema, Open Cube, SmartJog and Thomson Content Security (but not Technicolor). And the first one ever was ofcourse the UK's Department of Trade and Industry that united Britain's various manufacturers and interest parties through the Electronic Film Group. Italy has also attempted this type of thing, but on a much smaller scale (primarily Elsacom and Marina Studios) and I guess it would be possible to include Japan's original T-Joy consortium under this banner too.

Do such groupings work? The track record seems to be that they can raise awareness in the short term and pull off individual demonstrations and events, but work less well for establishing a long term united business. Ironically, digital cinema is too small to depend on all the businesses in one country being a perfect match. The ideal grouping is often an international effort with servers, projectors, and software coming from different countries. The countries that have done best were those that had a strong government drive to push together hardware partners with the cinemas, something that appears neglected in groupings such as those of France and Germany.

Countries that did well in this early on were China and Singapore. Today the crown is carried by Norway, thanks to the D-Cinema Alliance that has managed to get all stakeholders around the table to thrash out a roadmap for the all-digital future. Just don't expect them to sponsor a breakfast or coctails in Las Vegas.