Hollywood unites on satellite movie delivery – but is it too late already?

With the overwhelming majority of multiplexes in the US converted to digital, the largest cinema chains have now reached agreement with the majority of Hollywood studios for the satellite delivery of DCPs. The Digital Cinema Distribution Coalition (DCDC) has added Walt Disney, Paramount Pictures and Lionsgate to co-founding studios Warner Bros and Universal Pictures. DCDC was formed in 2012 between DCIP (the digital cinema arm of the three largest US exhibitors AMC, Cinemark and Regal), Warners and Universal, with Deluxe/EchoStar handling the integration, in what was crucially billed as a “not-for-profit” venture. “Our goal is to drive the cost of distribution as low as we can get it,” DCDC spokesman Randolph Blotky tells The Hollywood Reporter. “We’d like to drive it to zero over the course of time.”

Satellite has long been seen as the most obvious way for distributing DCPs to multiplexes, at least for North America with its large geography and homogenous film distribution schedules. Several ventures had earlier promoted this concept, most notably Boeing Digital Cinema, but faced resistance from Hollywood studios that did not want a gate keeper or for a third-party operator to set up a business where previously only a strip of film separated them from the exhibitors. By being a joint studio-exhibitor operation that is non-profit, as well as run by the established service provider Deluxe, the DCDC arrangement seems the most palatable to all parties involved. Yet closer scrutiny of the deal raises several questions.

While THR’s headline states that ‘Five Studios Sign on for Satellite Movie Delivery’, it is in fact just two new studios (Paramount and Disney) joining the existing pair, with Lionsgate still only a mini-major. Absent are both 20th Century Fox and Sony Pictures, who also happen to be Deluxe’s two largest studio clients. Fox has an on/off relation to satellite delivery, having ruled it out in the early days, but allowed for tests with the likes of Boeing.  While these two may come on board later, it is notable that even a not-for-profit satellite solution could not persuade all studios to join in. One could even ask whether satellite delivery of DCPs is an idea whose time has passed.

DCDC’s origin was a proposal from Joe Fabiano, then with Pathfire, which was in bed with Warner Bros (Television) at the time. Six to seven years ago satellite made sense over hard drives, but hard drive *hardware* costs have dropped faster than satellite bandwidth costs, which are fairly static. The only costs associated with HDD that have not gone down are logistics and handling. This means that exhibitors have more to gain than studios, since it removes the need to ingest and handle hard drives. At the same time, fibre optic and even wireless bandwidth capacity has increased while costs have fallen, which is why in territories such as Europe and parts of Asia, these channels are looking more compelling than satellite. It may also be that the two holdout studios simply do not want to commit themselves to one fulfilment technology. While satellite delivery makes sense for smaller sized DCPs (animation – hence Disney), it would take something like two days to deliver ‘The Hobbit’ in HFR 3D with Dolby Atmos over satellite. Satellite may be coming, but HDDs are not going away. The real winner from this will be NCM, DCIP’s sister company for cinema advertising, which needs a better fulfilment vehicle with the transition from small MPEG to J2K DCPs. Sending hundreds of ads over satellite still makes more sense than sending half a dozen feature films DCPs.