Category Archives: Business

BREAKING NEWS: Wanda Breaks Embargo on Deal For 780 New RealD 3D Installations

Wanda breaks RealD embargo

CELLULOID JUNKIE EXCLUSIVE: It seems that China’s Wanda – the world’s biggest cinema operator and owner of American multiplex chain AMC – has broken its own embargo on an announcement for an expanded deal with 3D vendor RealD.

It looks like this deal was set to be announced on Monday next week (24th of March), which is the international day of CinemaCon and the day these type of deals typically get announced.

The statement (translated by Google) reads:

March 24, Wanda Cinema 3D images with the world-renowned technology provider RealD jointly announced that the two sides will continue cooperation agreement, Wanda Cinema will install 780 sets of RealD 3D equipment in the next three years, placed in Wanda Cinema The 3D movie hall. Plus 800 sets of equipment currently installed Wanda Cinema, RealD equipment Wanda total installed throughout China will be more than 1500 sets.

RealD is currently the world’s most widely used 3D cinema projection technology. As of March 4, 2014, there are 74 countries worldwide, more than 25,049 screens in 1,000 theaters install RealD 3D projection equipment. Brightness RealD 3D theater system is twice that of other 3D technologies, and have screened the film features a high frame rate.

The fact that the story (press release?) is dated March 24th means that it was most likely to be on hold until that date, but somehow the Chinese version was posted on Wanda’s website too early.

If this is the case, this is a serious slip-up as RealD is a publicly listed company and a big deal like this could give its share price a bounce. Wanda had a previous deal in place with RealD from 2010 for 500 screens.

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Taking A Closer Look At Cine Grand’s 500 Screen Deal With Time Antaeus In China

Screenshot 2014-03-11 14.45.48

“Cine Grand BV, Netherlands based Cinema Exhibition company announced their collaboration with the Beijing based Time Antaeus Group,” said the press release as did all the articles regurgitating it. The release went on to say that there is a joint plan to open over 500 screens in China over the next three years. So what is a Dutch cinema chain doing partnering a Chinese exhibitor? The answer is that it isn’t.

Do a search for Cine Grand BV online and you primarily find the press release/news articles related to the Time Antaeus announcement. Grand Cinema BV does not operate a single screen in The Netherlands, but the company is registered there (Herikerbergweg 238, Luna ArenA, 1101 CM NL-23393 Amsterdam – around the corner from Dolby International AB). A detailed search reveals that Cine Grand BV used to be registered as Inspire Multiplex B.V. (Company Number 53220188 - Strawinskylaan 3105, Atrium Amsterdam NL 1077 ZX – the business district of Amsterdam Zuid) and owns couple of trademarks in the country, including Cine Grand Class (above) and My Cinema (below), both of which have “Filing Language” stated as ‘Romanian’.

This is explained by a third trademark filing for TSAR Luxury Lounge and Cinema. This filing was done by Biris Goran, a Romanian lawyer heading an eponymous lawfirm that defended RoGroup in a 15 million euro tax case against the Romanian Customs Office and the Ministry of Finance. His/their firm is also listed as:

Biris Goran SCPA has significant IP expertise. Highlights included acting for Inspire Multiplex Private on the registration of its trade mark portfolio, and advising Red Bull Romania on IP matters and sponsorship agreements relating to advertising and promotional campaigns. Ana Maria Andronic heads the team.

Screenshot 2014-03-11 14.45.59

Eastern Europe and Middle East

Cine Grand currently operates one five-screen cinema in Romania and two cinemas in Bulgaria in Burgas and Sofia with a total of 14 screens. Having established a toehold in Eastern Europe, Variety writes, “Nirmal Anand, chairman of Cine Grand, said that they plan to open 500 screens in China over the next three years… Cine Grand currently has four screens in Ahmedabad, India. A complex with a further four is under construction in Gurgaon.” The press release also calls Mr. Anand a “pioneer in exhibition business in the Middle East & Eastern Europe.”

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Deluxe To Close Hollywood Film Lab

Deluxe Laboratories in Hollywood
Well, we all knew it was coming. With the motion picture industry’s transition away from 35mm film to digital production and distribution it was only a matter of time before the need for film laboratories would disappear entirely. The industry took a step closer toward that end when on Tuesday when Deluxe Laboratories announced the company would close its Hollywood film lab on May 9th.

Along with Technicolor, Deluxe grew into one of the largest processors and handlers of 35mm film in the world, with offices in Asia, Australia, Europe and North America. The company’s Hollywood facilities date back to the founding of Deluxe in 1919, when they opened their doors adjacent to Fox Film Corporation. Both companies were founded by William Fox, one of the industry’s first movie moguls.

News of the closure came from Warren L. Stein, Deluxe’s Chief Operating Office for North America. An excerpt of the memo Stein sent out with the announcement read as follows:

The capture and exhibition of motion pictures has transitioned from film to digital in recent years. Our processing volumes have declined sharply and as a result, the laboratory has incurred significant financial losses. This has forced us to make this very difficult decision.

Following the recently-announced closure of the Deluxe laboratory in London, our only remaining film processing facility will be the small front end facility in New York.

I would like to thank all of our employees for their incredible contribution to the success of Deluxe, their dedication to meeting the needs of our many customers and their loyalty in recent years as the business declined. Our employees have been the key to all of our successes as a film processing business.

While emotionally attached to our 100 year legacy with film, we are firmly focused on the future of Deluxe. In this historic time in our industry, we wanted to thank our customers for their business and for their trust. We look forward to servicing their needs in the entertainment media marketplace for the next hundred years and beyond!

Earlier this year Paramount Pictures made public their intention to stop supporting film and only release films digitally starting with their holiday release “The Wolf of Wall Street”. Given the number of studios that Deluxe counts as clients, this is clear indicator that, as we predicted, other Hollywood distributors will soon be following Paramount’s lead.

Deluxe provided no information on whether closing its Hollywood operations will result in layoffs and if so, how many employees would be affected. Nor did the company make clear what it intends to do with the facilities in the long run; whether they intend to sell the plant or utilize it for their ongoing service offerings.

Ironically, if that’s even the correct word, it was just this past Sunday during the Oscars telecast that most of us saw a clip of director Christopher Nolan at February’s Academy of Motion Picture Arts and Sciences annual Scientific and Technical Awards accepting an Academy Award of Merit bestowed upon “all those who built and operated film laboratories, for over a century of service to the motion picture industry”.

William Fox Studios & Deluxe Hollywood

MoviePass Adjusts Pricing For Beta Subscribers

MoviePass Banner

Just last week we wrote about how the unlimited moviegoing subscription service MoviePass benefited from being agile and developing their business in an iterative fashion. This week the company is proving just how willing they are to roll out changes to their service in an effort to build a lasting business.

This morning some MoviePass subscribers awoke to find an email from the company informing them that the price of the service was going up to USD $35 per month. To date MoviePass has charged subscribers based on where they lived and the average price of tickets at nearby theatres. Pricing levels ranged from USD $19 to USD $35. In the interest of full disclosure, I am a MoviePass subscriber living 30 miles from the center of Los Angeles (a.k.a. the suburbs) and currently pay USD $25.

However, that won’t be what I pay come April. I was one of those who received today’s email, thanking me for “continued loyalty and support”, reminding me that I was part of a select group “invited into MoviePass’s beta service” and then going on advise me of the following:

Since joining, you have been enjoying the service at a discounted rate which was set to expire at the end of your annual contract. On your next billing cycle, we will need to adjust your monthly rate to the retail price in your area of $35.

Initially I was taken aback by this 40% increase in the cost of MoviePass’ subscription price. That was until I did a quick survey of ticket prices at theatres within 10 miles of my home. The cost of tickets to a matinee, when I usually go to the cinema, ranges between USD $7 and USD $9. However, tickets for evening showings went as high as USD $15 and averaged roughly USD $13. That would mean a subscriber would have to see roughly five matinees or three evening screenings before breaking even on their monthly MoviePass subscription fee.

By noon today I had received more than half a dozen emails from our readers inquiring about the fee hike. Thus, I quickly composed an email to Stacy Spikes, founder and CEO of MoviePass with a few questions about the announcement. I was confident that he would respond fairly quickly, as is characteristic of Spikes who is a hands on manager if ever I’ve seen one.

According to Spikes the monthly rate is increasing only for those subscribers in the lower tiers for their geographic area. “We tested multiple price levels and some were in lower tier. The cost has always been $35,” he explained referring to the pricing model during their ongoing beta period. “We tested USD $19.99 and USD $24.99. We allowed members to stay at that level for a year. There has not been an overall price increase.”

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Paramount Shows Some Alternative Thinking With Super-Sized “Anchorman 2″ Release

Anchorman 2 Super-Sized

By now you’ve probably heard that Paramount Pictures is rereleasing “Anchorman 2: The Legend Continues” on 1,000 North American screens this weekend. More accurately, the studio is putting an alternate cut of the film into theatres – one with the weighty title of “Anchorman 2: The Legend Continues: Super-Sized R Rated Version”. It’s a movie so big the title needs not one, but count them, two colons.

All joking aside (pun intended), the film’s director, Adam McKay, worked with his editors to cut a whole new version of the film that has 763 new jokes from alternate takes which weren’t in the original release. Apparently, the way McKay and lead actor Will Ferrell work on set is to shoot multiple takes of their comedy bits. Ferrell, who plays the role of a scotch swilling news anchorman, Ron Burgundy, is known for improvising while in character as the camera rolls on.

McKay, Ferrell and Paramount had planned on including the new R-rated version as bonus material for the film’s home video release. The studio is going a step further by booking the movie into cinemas for a limited seven day engagement.

This is a brilliant decision on Paramount’s part; one which takes advantage of the cost structures and distribution flexibility digital cinema provides. Let’s take a look at some of the points that led me to this conclusion:

Ratings Inflation

What surprised me most when I first learned Paramount planned to release an R-rated version of “Anchorman 2” was that the original cut was rated PG-13. I always assumed that with all the beer guzzling, scotch drinking and drug taking depicted in the movie, the Motion Picture Association of America (MPAA) would have slapped an R-rating on it. In hindsight, the PG-13 cut only contains two uses of the F-bomb, buried in a sea of more milder profanity. I’m not sure why filmmakers or the studio felt it necessary to make “Anchorman 2″ PG-13 given that it’s a squeal to a 2004 cult hit “Anchorman: The Legend of Ron Burgundy“. Any 13-year-old going to see the film would have been three when the first movie was released.

In the nine years since “Anchorman” was released it’s gained quite a following thanks to home video, so maybe there are a lot of teenagers out there who watched it on DVD and are big fans. Whatever the reasoning, Paramount now has the best of both worlds. After the PG-13 version played out its run to a broad audience, the studio can serve up a raunchier movie to a narrower group of hardcore “Anchorman” fans.

Here’s a thought; why don’t studios and filmmakers purposefully create two different versions of appropriate titles more regularly? This is done on movies for special use, such as a cut to shown on airplanes. While it may not always be viable due to production and distribution costs (or worthwhile creatively) it would be interesting to see a mature audience version of certain titles that, for business reasons, are released as PG-13.

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If At First They Don’t Succeed, MoviePass Tries, Tries Again

How MoviePass Works

Say what you want about MoviePass, the unlimited moviegoing subscription service, but one can not fault the startup for yielding to overwhelming market obstacles or folding at the first sign of serious industry pushback. Instead, when encountering hurdles to their business, the company, which operates in the United States, has been quick to pivot toward a model that worked better for themselves and their customers. MoviePass proved as much last fall upon announcing one of their most controversial modifications to date.

On October 31st of last year, MoviePass sent an email to subscribers with the subject “New Features”. One of its paragraphs read as follows:

We’re also excited to introduce a new feature: The Countdown Clock. This clock counts down the time until your next available screening. You will still be able to go to a movie each day, but there will be a 24-hour period between screenings. Your MoviePass app has already been updated, and you will notice these changes the next time you see a movie.

Maybe it’s best to rewind a bit here and provide a brief description and history of MoviePass. The company first tried to launch a beta version of its service in the summer of 2012, in which subscribes would be allowed to see an unlimited number of movies for a flat rate of USD $50 per month. There were several caveats though, including the fact that subscribers could only see one movie per day, each title could only be viewed once, 3D and Imax screenings would cost USD $3 extra and all tickets had to be purchased the day of the show via partners such as MovieTickets. Subscribers would receive a redemption code (mostly via a smartphone app) that could then be used at the theatre to obtain the actual ticket.

At the time, most found the cumbersome process to be complicated and confusing, and not at all convenient. It didn’t matter though since the exhibition industry was quick to squash the idea that they’d be working with MoviePass in anyway. This seemed to torpedo the whole concept, since MoviePass needed movie theatres to accept the redemption codes at each cinema.

However MoviePass had no intention of giving up. The company regrouped and by October that same year was back with a much more appealing model; the price had dropped to between USD $25 and $35 depending on where one lived, subscribers could still only see one movie per day, each title could only be viewed once, and no 3D and Imax screenings could be purchased. Subscribers were sent a MoviePass credit card which was to be activated using a mobile app while within 100 yards of a given movie theatre. Once activated, the card worked for 30 minutes at the designated cinema and could be used at the box office just like any other credit card.

By leveraging the existing credit card infrastructure, MoviePass removed the objections of cinema owners as an impediment to entering the market. A brilliant move that also enabled the company to shrug off any dissent from studios and web ticketing vendors like Fandango who had previously viewed the company as a threat.

At the time MoviePass CEO Stacy Spikes was a guest on Showbiz Sandbox, a weekly entertainment news podcast I co-host. We talked about the company’s past and what the future held. Spikes suggested that there would eventually be different subscription levels that would include 3D and Imax films, or reduced rate subscriptions that only allowed for moviegoing on weekdays. One of the goals, he said, was to help fill theatre auditoriums for the majority of showings which are not well attended.

Spikes was also candid about the overall MoviePass business plan:

“In all subscription models there is usage versus cost variable and they all work the same way. If everybody overuses you have a problem. We have certain people, like in a gym membership, who are going to go everyday. They are going to work out at the gym everyday and they are going to have these sculpted bodies that we all hate in the summertime. But, there’s also people who underuse and they don’t use it as much and then in the middle you have seasonality. So you may go a lot during Christmas and then dip. There are different types of users that are in the system so overall there is a behavioral economics to it that balances everything out and makes for a profitable business.”

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Cineworld’s Me-Too Eastern Expansion Comes At A Price

Cineworld Logo

UK’s publicly listed exhibitor Cineworld is expanding into Central Europe through £503 cash and equity deal for Warsaw-listed Cinema City International (CCI), which will make it the second largest chain in Europe after Odeon UCI. The deal signals a strategic shift for Cineworld after a small domestic acquisition and and an abandoned south European deal, indicating that future growth lies in Central and Eastern Europe (CEE), as well emerging markets like Turkey and Russia, while box office declines in Western Europe.

The deal, subject to shareholder approval, will see Cineworld pay CCI £503 in cash and shares, of which £272m will be in cash, with a £110m rights issue launched to help fund the purchase, and giving CCI a 24.9 per cent stake in the merged business. CCI currently operates 99 multiplexes with 966 screens (giving it a 9.75 screen/site ration) in six countries in Central and Eastern Europe (Poland, Hungary, Czech Republic, Bulgaria, Romania and Slovakia) as well as in Israel. The combined entity will have  201 sites and 1,852 fully-digital screens (9.21 s/s ratio), indicating that the two are a good match in terms of mostly being new multiplexes. Shares rose by 10.27 and seven per cent for Cineworld and CCI respectively, meaning the markets largely welcomed the merger. The operator will be the largest or second largest in all territories where it is present. But at what price?

Cinema City Territory Map

Competition and change in strategy

Unlike its UK competitors Odeon UCI and Vue, Cineworld has previously been focused exclusively on UK and Ireland , where it operates five of the ten highest grossing sites (though both BBC and Screen claim that it operates all ten of the most profitable sites). Odeon had inherited sites in Spain, Germany and elsewhere through its merger with Odeon in 2004, following the acquisition of both by Guy Hand’s Terra Firma. Odeon UCI abandoned plans for a £1bn+ floatation, settling for a £475 re-financing plan instead two years ago. Reasons cited for this change included “problems in its Spanish markets, where results were weak in the second quarter after a 30 per cent fall in volumes, and a bumper crop of bigger blockbuster films set for release in 2015.” Vue had meanwhile bought Polands second largest cinema operator Multikino, having already established itself in Germany (through the acquisition of CinemaxX), Portugal, Denmark and Taiwan, before being bought by two of Canada’s largest pension funds last year.

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Krugman & Cringley on Ballmer & Microsoft’s ‘Failure’

Stephen Elop and Steve Ballmer

Nokia CEO Stephen Elop (left) with Microsoft CEO Steve Ballmer

There is an apocryphal tale of Bill Gates giving a speech to assembled Hollywood executives when he was still head of Microsoft, which ends with him telling them “and I guess you guys also have a problem with piracy.” While software piracy may have trumped film-related piracy in the early noughties in terms of lost revenue, Bill should have known that nobody puts baby in the corner when it comes to whose piracy is more important. It is a mistake Steve Jobs would not have made, but it highlights Microsoft’s stumblings in trying to become a media company. The public and the industry still see Microsoft as a software company trying to break into hardware (tablets, smartphones, etc.), whereas Microsoft has for the past decade tried as much to position itself in the media space just as much as Apple or Google. It is illuminating to keep this in mind, when talking about Microsoft’s “failure”, as we will get onto.

While it is easy to crow over Microsoft’s media failures (Exhibit #1: the Zune), it should not be forgotten that it launched the world’s most successful media centre for the living room, i.e. the Xbox. Sold as a video game machine, it today serves to stream Hulu, iPlayer, Netflix, Mubi, YouTube and countless other non-game entertainment services more than any smart-TV or AppleTV, with Xbox Live a contender to take on the iTunes store. Having achieved this in the face of intense competition from Sony’s PS3 is no less remarkable, and the Kinect is as much of a revolutionary interface as Google’s Glass or the Leap Motion. Had Microsoft decided to spend the $8.5bn it paid for Skype on a media company (Netflix? Hulu? Lionsgate?) it would have been recognised as a media player (pun intended) today. There is no guarantee though that these companies would have flourished under MS, just as it effectively killed of its first mobile phone company Danger that it bought for $500m in 2008 (not much mention of that in all the analysis of the Nokia purchase). So while Microsoft has failed to become a significant media company, it is not for lack of trying, but also something that it does not get beat up about.

With news of Microsoft’s intended take-over of Nokia’s handset business, the dissection of Steve Ballmer’s failure has taken a temporary back-seat. As industry analyst Benedict Evans observed on Twitter (@BenedictEvans), “Buying Nokia is tactics, not strategy. It prevents the collapse of MSFT’s current strategy but won’t help it succeed.” So with that in mind, what was Ballmer’s strategy and why was it considered a failure? The two best pieces of analysis have come from vastly different ends of the commentary spectrum.

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Can RealD Rival IMAX In The Premium Large Format (PLF) Market?

With Cinema Europe currently underway in Barcelona, two trends for premium cinema experiences that pull in opposite direction are hot topics for exhibitors gathering in Spain. The first is towards smaller, intimate venues that typically serve fine food and wine, as exemplified by The Electric in London or the Alamo Drafthouse in Austin, Texas. But it is the super-sizing of cinemas in a bid to compete with IMAX and its ability to charge premium ticket prices that is attracting the most attention right now. And RealD wants to be the centre of that action.

With cinema admissions in most of Europe static or even down and 3D seeing its lowest admission figures yet in the US this week, the hunt is on for how to squeeze more out of the people that still go to the cinema. This is where the success of IMAX comes into play, with exhibitors either partnering the large format (LF) player or launching their own premium experience auditoriums, to be able to charge a premium above that of 3D. The track record of exhibitors that have launched their own IMAX-like screens has been mixed, with social media in particular abuzz with patrons venting their unhappiness about large screen up-charges. This blog called AMC’s ETX ‘an Excuse To charge Extra’ and is no less kind about Regal’s RPX.

With Digital 3D being a key part of the PLF experience, RealD has spotten and opportunity to try to create a branding on behalf of exhibitors. From their press release:

At a special presentation to European cinema exhibitors at CineEurope, RealD Inc. (NYSE: RLD) today introduced “LUXE: A RealD Experience,” a premium large format (PLF) initiative aimed at unifying the exhibition community under a single brand with a goal of becoming synonymous with the ultimate out of home entertainment experience. Minimum standards will assure all “LUXE: A RealD Experience” auditoriums feature massive screens, ultra bright 2D and 3D, enveloping audio and luxury seating for a premium movie-going experience. “LUXE: A RealD Experience” auditoriums will provide full flexibility with content, allowing exhibitors to show any movie at any time for optimized profitability.

The code words are clearly audible dog whistles for cinema owners. The first sentence effectively says, “you have largely failed with your efforts of creating in-house PLF brands that can take on IMAX.” The second sentence says, “too many of the PLF auditoriums have been poor IMAX-lite causing consumer backlash.” The third sentence is the most critical, because it tells cinemas not to tie themselves in with IMAX’s restrictive licence terms – “you will have to pay a licence fee to RealD, but it will be less than what you would pay IMAX and we also won’t tell you which films to play and for how long.” Not surprisingly the effort has won the backing of the studios, who are keen on premium ticket pricing, but not on IMAX dominating the market. [NB: The first point was made even more strongly in the ScreenDaily interview, where Mayson is quoted as saying, “There are more than 50 PLF brands worldwide. We’re trying to unify those brands on the grounds that it’s easier to create awareness around one experience."]

Bob Mayson is quoted in the Hollywood Reporter on the technical specifics:

“LUXE comes in response to our exhibitor customers, who are seeing increasing demand for premium cinema offerings but really want a single identifiable brand that will be a guarantee of quality to their customers,“ Robert Mayson, Managing Director of RealD Europe told The Hollywood Reporter. According to Mayson, the technical standards, which include wall-to-wall, floor-to-ceiling screens of at least 16 meters (52.5 feet) in width; 3D sound; auditorium rakes and a screen brightness for 3D projections about twice the current norm, means LUXE will be an elite standard. “We are talking about the top five percent of cinemas, there will be many theaters that won’t have the capacity or the physical dimensions to qualify,” he said.

Note in particular the mention of ’3D audio’. RealD is careful not to pick a winner in the fight between Dolby’s Atmos and Barco’s Auro and would most likely prefer to see an open standard, as called for by NATO and UNIC [Dolby’s Artmos in its RPX screens, 3D audio will together with a big screen and bright projection be a cornerstone of the PLF experience. Though for exhibitors not willing to install two projectors, whether Sony or DLP, the equation will not truly be completed until the arrival of laser projection.

The next thing to note is the territories where this system will launch. THR identifies this as, “RealD plans to roll out the new LUXE initiative in Europe, Russia, the Middle East and Africa. Europe in particular has seen strong growth in the premium segment of the cinema market.” Screen meanwhile lists, “Russia, Ukraine, Kazakhstan, South Africa, Bulgaria, Romania and the Balkans.” The thing to note is that it is the emerging markets that are of particular focus, which is why we get a quote from “Paul Heth, CEO of Karo Film, a leading cinema chain in Russia.” These are the markets that have not attempted a PLF brand on their own and that will build new multiplexes, so that the system does not have to be retrofitted into existing multiplexes. RealD is thus unlikely to try to persuade existing cinema clients in North America and Western Europe to ditch their own in-house PLF brand in favour of LUXE.

While IMAX is built on great technology and offers (depending on the site) a terrific viewer experience, there is nothing about it that cannot be replicated with todays digital technology – unlike the analogue 70mm systems of olden days. What sets it apart from in-house PLF screens is thus one thing: branding. IMAX has done a terrific job of re-positioning its brand from 60 minute documentaries for school groups that put bums on seats Monday through Friday 9am until 5pm, to one where people book tickets weeks in advance to catch the latest Hollywood blockbuster on the opening weekend. This despite the backlash of the ‘IMAX-lite’ entry into the multiplex market a few years back. Vue Xtreme and Regal RPX have simply not been able to match the branding power of IMAX. RealD too has some cleaver technology, including launching the brighter screen this week, but there is nothing inherently unique about circular polarization 3D at the heart of their solution. The truth is that RealD too is about branding. Just like IMAX it charges a licence fee. Just not as much or with terms perceived as equally restrictive. If RealD succeeds with LUXE – and it stands a better chance than in-house PLFs – it is because the company understands IMAX and what makes it a success all too well.

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.