Logic is Paramount as a Studio Buys-In Directly

Last week we were graced with an exceptional write up on the Celluloid Junkie Blog of Paramount's announcement of VPF agreements for the masses [Agreement subject to details on contract, your milage may vary. Don't bother applying if you are not in the North American area, above the Rio Grande.]

This week we are graced with a version of Paramount's actual Digital Cinema Agreement Draft. Here's a brief clip from Section 6, Part a)

Exhibitor further acknowledges that for each of the Films released by Distributor, ...,Distributor will select the distribution pattern and select the Complex(es) and Screen(s) that Distributor believes in its good faith business judgment to be appropriate for its Film, considering all relevant circumstances and nothing shall interfere with decisions made by Distributor’s sales personnel.

Wow~! One thought that this type of demanded control was a reason that the Technicolor agreements didn't go through several years ago.

3. INSTALLATIONS:
(a) Exhibitor shall install at least fifty percent (50%) of the number of screens in each Exhibitor’s Complex(es), ..., no later than six (6) months from the Effective Date of this Agreement.
(b) Exhibitor shall install one hundred percent (100%) of the screens in each Exhibitor’s Complex(es), ..., within three (3) years from the Effective Date of this Agreement.

Now we are talking. No more lingering around. And what about 3D?

(c) Notwithstanding ... Exhibitor is allowed to install as few as one (1) 3D screen in each Complex(es) as listed on Exhibit “B”.

The legalese is enough to melt the pixels from your computer screen. But given what they are trying to do, and the realities of money, it seems like a good document to launch a conversation from. There are a few twists about DCI Specification that are noteworthy should any exhibitor decide to stick their neck out and buy equipment before a spec is formalized or compliant product is available...Which. Is. Everyone., since, as we remember, the companies who will test for compliance were only recently announced and have not completed one test yet.

Exhibitor shall ensure all equipment ... required by the DCI Spec will be compliant with the DCI Spec.

To the extent a hardware or software component necessary for such equipment to fully comply with the DCI Spec is not commercially available at the time of installation Exhibitor will not be obligated to develop any such components and may complete installation of such equipment as is. When the technology necessary to make Digital Systems compliant with the DCI Spec becomes commercially available from any manufacturer and whether or not any such equipment is available from the manufacturer from whom Exhibitor originally obtained the equipment,

You can smell that there is a kicker coming, can't you? Fortunately, the streets are not as likely to be littered, as they were after the JPEG transition, with equipment that didn't make the spec before their business model failed. It is still a risk, because...

..., Exhibitor will by the later of six (6) months after such availability upgrade or the next available window in which upgrades are permitted after such availability upgrade (it being agreed and understood that such windows generally occur between January 15 and March 31 and between September 1 and October 31, or as otherwise generally accepted in the industry), upgrade all Digital Systems to bring such Digital Systems into compliance with the DCI Spec, the costs of which shall be paid for by Exhibitor.

Well, we know that an Exhibitor is going to pound the manufacturer for some kind of guarantee that the equipment they purchase is going to get through the certifying process. And, any manufacturer is going to have to jump through those hoops. There is one hopeless TI hoop that is being allowed for, but that is the topic of another post...the good news is that (at least from Paramount's viewpoint) there is no reason to string a pointless technical exercise on the back of this contract. 

As we digest this contract, we'll make some more comments. Enjoy reading it yourself and mention your favorite parts...for example, I'll close with this one, important only because we see that the parties of the first part are learning as they experience frustrations from the parties of the second part.

In the event a key fails because Exhibitor failed to provide current information (e.g., a “server swap”), Distributor will charge a fee of one hundred dollars ($100.00) for each and every time Distributor is not informed.

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Agok Again~!

Money, Diverging Standards, 3D and Other Problems. Those are the topics of this report.

Money Problems...What a surprise. Diverging Standards...I surprise myself for thinking it would be otherwise. And 3D...still being promoted as the great hope, the technology that will save an industry. There are numbers to look at in every regard. Let’s gets started.

The good news is a press announcement from Arts Alliance pushing several good points. In fact, too many for one press release. It should have had pictures and graphs. One suspects hidden meanings. First on their list is the triumph of finding two sets of financiers; one just in time, since they really needed to continue the digital cinema roll-out at CGR Cinémas in France. For a few months they had been stuck at a little over 100 (the press release says 125). One has suspected that they were left without a paddle by one of the big-shot banks which had gotten their wings clipped. (For some reason, they didn’t send out a press release about it.) But now they are saying that they have 20 million euros for completion.

20 million euros~!~!~! 300 systems~!~!~! Yet again, I am agok. The Arts Alliance Press Release went on and on about everything, but didn’t do the math. Let’s see. 20 million divided by 300 is 66,666. That is astoundingly close to the 65,000 per system that Cinedigm put forth in their press release last month as well. Except, of course, that the euro and the dollar are not trading at parity. Can that be the new cost/system number? Did we miss that press release...seems so recent that it was still over 100,000 per system.

(One hears that the Cinedigm financing came from vendors...one vendor? multiple? so, is the 9 million in trade and no cash? Who can tell? Please do~!)

Great. More research projects. Where are the products made and shipped from? Would that make a significant difference in the integrators price? Do EU taxes plus shipping make up for the difference? More on this later.

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As Jack Benny used to say: Whell~!

One would have thought that there would be announcements and angst. Announcements for 1,000s of systems per month, and angst for supply problems...can't get that many lenses that quickly, can't get that many engineers and technicians that quickly.

What we get is an announcement for a 137 here, and a 180 there. Congratulations are actually in order, that anyone has gotten even that far in this environment. It is not surprising that it is the old hands, XDC and the newly named Cinedigm (formally AccessIT), who were trusted enough to get the cash, which in turn, allowed the orders. Fortis Bank has gone through a lot of troubles in the last few months, but XDC and Fortis were able to put a deal together that puts 100 million euros into the hands of XDC. And Cinedigm got 8.9 million dollars from un-named sources.

Reading through press releases is an imprecise art, but I stare at the Cinedigm numbers and am agok. The release <http://investor.accessitx.com/releasedetail.cfm?ReleaseID=351951> says that the credit facility will be used to fund the launch of 137 systems for Premiere Cinema. Good for them and good luck to us all. But as much as 8.9 million dollars is, that is less than $65,000 per system; all of Cinedigm's overhead for getting this loan and the next, all the overhead of site surveys, plus the paperwork and drawings which follow, the communications with each cinema, checking and 'discussing' with each cinema - making certain that the changes get done – power and air conditioning, new audio wiring, the famous telephone line and aDSL line which the cinema has to get installed, all of the technician time and the organization to get the techs and the equipment there on the right day...Oy~!

And, that doesn't mention the equipment. Wow. $65,000 for less than 150 systems. Imagine the meeting at the vendor's places after those requests are made. Cinedigm will be asking for prices that were probably talked about when 10,000 piece orders were contemplated. This will have to include the projector, the server, a central server no doubt and the Cinedigm Theater Management System. The freight bills alone will be significant.

One presumes that 3D equipment is an additional expense borne by the cinema, along with such items a the BluRay devices (when will the first professional units show up?) and back-up satellite equipment, and matrix systems to put any signal on any projector.

One presumes that Cinedigm will welcome the deal, regardless of how much it actually cost. Their profit is in the back-end, especially in the alternative entertainment which they are put together through their associated companies' efforts. One notices a recent Turner Sports/NBA announcement on their site , promising live 3D NBA action on Saturday nights in 80 cinemas or 160 screens.
The XDC announcement is just as opaque, except that they are clear that the process is; get the VPF agreements, get some cinemas interested and signed or close to signed, then go to the bank with that deal in hand. Then, like Cinedigm, make an announcement about the money. A small difference between the two; Cinedigm says they have the money deal signed, XDC says that the ink on the paper is drying, but that the deal needs a few more approval steps.

But the deal says that Fortis is keen on the deal and the more recent announcement from XDC is a deal for 180 sets of DCinema systems with the Portuguese chain Zon Lusomundo (an implication that the money came through), and 193 screens for the Cineplexx Chain in Austria. (N.B.–contract value is 24 million euros, which is $32.4 million...over 3 times the $9.8 million value of the Cinedigm financing. Granted, these are not similar deals and no one knows what kind of back-end XDC has in the profits of the Cineplexx deal...though, they have been known for back-end profits on other deals. Still...)

Just a slightly tangential note on the banking situation that stands like a ghost behind all this. Fortis is a surprise player, only because they have been involved in a bit of a snag these last few months. Fortis was a Belgium/Netherlands bank, formed during a brief post-Napoleonic moment when these countries were joined. Fortis had recently bought the bank group ABN Amro, along with Spain's Banco Santander and the Royal Bank of Scotland. They divided the assets and went their merry way. Now that some parts of the ponzi scheme known as modern banking have been exposed, it appears that Santander got the more stable bits and RBOS and Fortis got the adventurous but unstable bits. As Fortis started to buckle under the load, the Netherlands nationalized the Fortis Bank portion that was in Netherlands (for 26 billion euros) and the Paris bank BNP took over the Belge and Luxembourg parts of Fortis (for 14 billion euros.)

All this took place during the week before 6 October, and the Fortis/XDC release is dated the 13th...and is now followed by the action in Portugal. So it looks like people kept their eye on the ball and made it happen regardless. This is in contrast to the DCIP/Hollywood Studios deal which was announced and then got lost in the financial malaise that is now the US.
As a last side note, I am unable to wrap my head or enough time into figuring out the Bank of Scotland/Royal Bank of Scotland situation...and which one did the financing of some dcinema systems...all which seem to be stalled for the last few months. Both banks were in severe trouble and needed government help recently. The google record is confusing and without inside info, I am confused.

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All Silent, except the 100s

As Jack Benny used to say: Whell~!

One would have thought that there would be announcements and angst. Announcements for 1,000s of systems per month, and angst for supply problems...can't get that many lenses that quickly, can't get that many engineers and technicians that quickly.

What we get is an announcement for a 137 here, and a 180 there. Congratulations are actually in order, that anyone has gotten even that far in this environment. It is not surprising that it is the old hands, XDC and the newly named Cinedigm (formally AccessIT), who were trusted enough to get the cash, which in turn, allowed the orders. Fortis Bank has gone through a lot of troubles in the last few months, but XDC and Fortis were able to put a deal together that puts 100 million euros into the hands of XDC. And Cinedigm got 8.9 million dollars from un-named sources.

Reading through press releases is an imprecise art, but I stare at the Cinedigm numbers and am agok. The release <http://investor.accessitx.com/releasedetail.cfm?ReleaseID=351951> says that the credit facility will be used to fund the launch of 137 systems for Premiere Cinema. Good for them and good luck to us all. But as much as 8.9 million dollars is, that is less than $65,000 per system; all of Cinedigm's overhead for getting this loan and the next, all the overhead of site surveys, plus the paperwork and drawings which follow, the communications with each cinema, checking and 'discussing' with each cinema - making certain that the changes get done – power and air conditioning, new audio wiring, the famous telephone line and aDSL line which the cinema has to get installed, all of the technician time and the organization to get the techs and the equipment there on the right day...Oy~!

And, that doesn't mention the equipment. Wow. $65,000 for less than 150 systems. Imagine the meeting at the vendor's places after those requests are made. Cinedigm will be asking for prices that were probably talked about when 10,000 piece orders were contemplated. This will have to include the projector, the server, a central server no doubt and the Cinedigm Theater Management System. The freight bills alone will be significant. 

One presumes that 3D equipment is an additional expense borne by the cinema, along with such items a the BluRay devices (when will the first professional units show up?) and back-up satellite equipment, and matrix systems to put any signal on any projector. 

One presumes that Cinedigm will welcome the deal, regardless of how much it actually cost. Their profit is in the back-end, especially in the alternative entertainment which they are put together through their associated companies' efforts. One notices a recent Turner Sports/NBA announcement on their site , promising live 3D NBA action on Saturday nights in 80 cinemas or 160 screens.
The XDC announcement is just as opaque, except that they are clear that the process is; get the VPF agreements, get some cinemas interested and signed or close to signed, then go to the bank with that deal in hand. Then, like Cinedigm, make an announcement about the money. A small difference between the two; Cinedigm says they have the money deal signed, XDC says that the ink on the paper is drying, but that the deal needs a few more approval steps. 

But the deal says that Fortis is keen on the deal and the more recent announcement from XDC is a deal for 180 sets of DCinema systems with the Portuguese chain Zon Lusomundo (an implication that the money came through), and 193 screens for the Cineplexx Chain in Austria.  (N.B.–contract value is 24 million euros, which is $32.4 million...over 3 times the $9.8 million value of the Cinedigm financing. Granted, these are not similar deals and no one knows what kind of back-end XDC has in the profits of the Cineplexx deal...though, they have been known for back-end profits on other deals. Still...)

Just a slightly tangential note on the banking situation that stands like a ghost behind all this. Fortis is a surprise player, only because they have been involved in a bit of a snag these last few months. Fortis was a Belgium/Netherlands bank, formed during a brief post-Napoleonic moment when these countries were joined. Fortis had recently bought the bank group ABN Amro, along with Spain's Banco Santander and the Royal Bank of Scotland. They divided the assets and went their merry way. Now that some parts of the ponzi scheme known as modern banking have been exposed, it appears that Santander got the more stable bits and RBOS and Fortis got the adventurous but unstable bits. As Fortis started to buckle under the load, the Netherlands nationalized the Fortis Bank portion that was in Netherlands (for 26 billion euros) and the Paris bank BNP took over the Belge and Luxembourg parts of Fortis (for 14 billion euros.) 

All this took place during the week before 6 October, and the Fortis/XDC release is dated the 13th...and is now followed by the action in Portugal. So it looks like people kept their eye on the ball and made it happen regardless. This is in contrast to the DCIP/Hollywood Studios deal which was announced and then got lost in the financial malaise that is now the US. 
As a last side note, I am unable to wrap my head or enough time into figuring out the Bank of Scotland/Royal Bank of Scotland situation...and which one did the financing of some dcinema systems...all which seem to be stalled for the last few months. Both banks were in severe trouble and needed government help recently. The google record is confusing and without inside info, I am confused.
 

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20,000 Explosion...now 28,000

Infrastructure for Digital Cinema facilities is the main focus of this forum. Normally, this means the ancillary equipment, (boxes, cables, software) and the talent required to get the entertainment from the distributor to the projector.

But, one cannot let pass without comment, the largest infrastructure event in DCinema's evolution.

The Players:
Digital Cinema Implementation Partners - DCIP; the combined forces of the AMC, Regal and Cinemark cinema chains, with approximately 14,000 screens, 45% of the US market (and 55% of ticket sales.) This group has an earlier partnership that brought digital advertising to the theaters, and another ongoing venture named Digital Cinema Distribution Coalition (DCDC) with Warner Bros. and Universal to provide an entertainment distribution network.

Warner Bros. is missing from the list of studios who have signed a VPF agreement with DCIP. So is Sony. Some press articles said that they are both working on a seperate deal with DCIP. Sony, being a manufacturer and studio is in a different position than the others, so this is understandable. Warners, no one can figure out. The rightfully say that they have done as much anyone to get digital cinema evolving, but except for XDC, they haven't signed a VPF deal.

The studios that are in this set of accords are Twentieth Century Fox, Walt Disney Motion Pictures, Paramount Pictures, Universal Studios and Lionsgate Films.

[Edit: Sony DCSS has announced a VPF deal with Fox, Paramount and Sony Pictures. The release doesn't specify a number. It appears that Sony is offering their own financing package. And, there is another announcement from Kodak that they have a VPF package for 8,000 screens with Paramount.]

The financiers for the DCIP packages are J.P. Morgan, the investment banking arm of JPMorgan Chase and The Blackstone Group. GE Financial, with 80% ownership of Universal and the financier of the earlier largest deployment of DCinema systems (by AccessIT/Christie) was not mentioned.

What is mentioned in the press release is that these seperate long term agreements are for 20,000 screens in North America, while DCIP's website establishes the partners with only 14,000. Cinemark does have 1,030 cinemas in Central and South America (11 of which have been deployed with DCinema systems according to Bill Mead's article in Film Journal International.) What are the implications of adding 6,000 additional screens to the numbers? except that DCIP will offer its integration capabilities to other chains. The press release uses the phrasing “to nearly 20,000 movie theatre screens across North America, including...” the 3 partners.

NATO issued a release applauding the DCIP Agreement (which possibly should be referred to in the plural, since the DCIP release mentions ‘agreements’ and ‘seperate agreements’ several times...except in the heading.) NATO continued by expressing encouragement for “similar deal with smaller exhibitors.”

This confuses a previously understood situation, in that the smaller exhibitors were assisted by NATO in forming the Cinema Buying Group. This group then selected AccessIT as the vendor to equip and service their installations. AccessIT had 3 weeks previous announced agreements with Disney, Fox, Paramount, and Universal for 10,000 US and Canada screens worth of VPF. (A long term deal with Lion's Gate was announced the following month.) Why is NATO encouraging a similar deal for small exhibitors when small exhibitors have access through AccessIT, who provide several layers of benefit to both the exhibitors and studios?

There are other interesting implications and questions that this deal brings up.

With 4,500 North American screens already installed and 14,000 going direct to the studios in this deal, and 8,000 going though AccessIT in the CBG deal, that's 28,000 of approximately 41,000 screens in the US and Canada. Are the owners of these screens just waiting in the wings? If DCIP does there own supply and installation contracting, and if they complete their DCDC distribution infrastructure plans, is there enough business left over to keep AccessIT investors happy? to support other groups, for example Technicolor? Kodak? both of whom have a couple hundred systems installed. The significance of the additional 6,000 screens handled by DCIP must loom large in their plans.

And what of equipment manufacturers. Will a large sale like this promote the use of single vendors, or will several different brands of servers and projectors be used? The latter would promote interoperability point that NATO has detailed in their DCinema System Requirements.

One thing not mentioned in the press release is time of deployment. How many quality lenses can be crafted every month?

Nothwithstanding all this, such a major agreement is a welcome relief in an industry which has invested a lot of un-recouped engineering, exposition/marketing, and standards development effort, time and money.

The titans have sat at the table and made their deals. Now the exciting part of implementation can begin.

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CineCert Gets DCI Cert Nod

At last night's meeting of the ISDCF (Inter-Society Digital Cinema Forum), John Hurst of CineCert announced that CineCert has received a 1 year renewable contract from DCI. The contract will give a special credence to compliance tests that CineCert performs for manufacturers, upon equipment meant to be in compliance with DCI Specifications.

CineCert will issue a Pass Report to the manufacturer (assuming the equipment passes). The manufacturer then can pass that report onto the individual studios, and to end users, as they see fit. The critical aspect is that reports submitted from CineCert will be acknowledge as valid by the studios, which has been a problem for exhibitors.

[Edit: 14 Oct. - And then there are three - DCI announced today that there will be 3 places to send your gear to: CineCert (contact John Hurst), DMC/Keio University in Tokyo, Japan (contact Naoshisa Ohta) and Media Innovation Center of Venice, Italy (contact Angelo D 'Alessio). The press release is here.]

John made the point,

It should be clear that we will issue a ‘report of compliance’. This is not ‘certification’, which is a charged word, with specific meaning.
In addition, we understand that there will be other announcements about contracts with other labs from DCI in the near future.

Why is this important? There are a few reasons.

Primarily, clients who are involved with VPF agreements obligate themselves to use DCI Compliant equipment. If they don't, then they can get cut off. This has happened before when early-adopting customers of Avica or XDC could not get movies because their servers couldn't play JPEG 2000...only MPEG-2.

And consider the poor manufacturer who has to promise that their equipment is DCI Compliant. If they are a public company, they are wary of making such statements since Sarbanes-Oxley regulations prohibit them from taking profit on items that have unknown liabilities. Not having anyone to test for certification puts them in a difficult 'unknown liabilities' situation.

And, finally, for the industry itself. In olden times, one recieved a film and one did the best possible with it. The Laws of Physics decreed that the film would degrade, but there was little that the cinema could do to keep the quality up.

Digital can change that. Light, Color, White Point...all those fun SMPTE Standards can be checked for and maintained. (Link to a list in pdf of all completed SMPTE DCinema Documents.) Equipment known to be compliant is the first step to a better picture (and sound~!) for us all, and a level playing field for all cinemas.

Part Two; the implemation of a set of standard quality control procedures built into the cinema's processes. You can read about that at our sister company's site: DCinemaCompliance

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3Questions - Doremi's Streamer

We are pleased to present Doremi's new satellite feature as the subject of our first 3Questions 4Manufacturers.

Question 1: Is this meant to be used at the Central Server, or can it be used without any other equipment at the Playout Server?

Doremi has a satellite receiver called STREAMER which inputs RF or ASI, then multicasts it over Gigabit Ethernet in the multiplex, thus allowing use of existing Cat5 or CAT6 infrastructure. The DCP-2000 players are able to intercept this stream.

Using extended SPL, they can decode the HDTV stream and play it over Cinelink II to the 2K projector. This solution supports 2D and also 3D encoded with Sensio.

Question 2: Is this a standard option? And can current owners upgrade to include this feature?

STREAMER is an option that can be added at any time to a configuration.

Question 3: We imagine that eventually, a cinema complex will need several satellite feeds, and back-ups for those feeds. Can the Streamer take more than one feed? If there is a failure with a feed, can it automatically roll-over to a 2nd source.

In current version, we take only one satellite feed but this TS can have several broadcast channels so the DCP2000 players can select various channels.

Is an editorial appropriate here? OK; as you can tell, our feeling is that the future cinema infrastucture will be very sophisticated. There will be many different inputs that need to be correctly, quickly and securely routed to the different screening rooms...much like a modern post-production facility does. We therefore applaud the foresight that this valuable option that the Doremi Streamer presents.

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Concepts in Exhibition...Making money with Digital

We all know that digital is not magic, but we do constantly forget. In the case of D-Cinema, the digital part is just a platform and we are just now seeing what that platform is good for.

If it was just movies, then the platform of a digital server and projector, and perhaps a management system, would be enough. But cinema theaters cannot survive on movies alone, regardless of what inflation makes the numbers look like.

Thus, Alternative Content becomes a platform of its own. It offers something different to draw crowds, and it has a different monetary structure...the cinema gets to keep more of the income flow.

Live opera, F1 and wrestling get the fanfare, but commercials lead the way. As Andreas Gronarz of Sanyo points out, a less expensive projector with a less expensive bulb can more easily play a variety of inputs (commercials usually come in MPEG2 and MPEG4), from a less expensive server, and without the trauma extra steps of the encryption process.

And local commercials aren't hard to create. A Blackmagic card in a decent computer can ingest most anything and send it out HD-SDI. A camera, some talent in front of it, a little practice and voilà, extra income and a service to the community.

This forum begins today, dedicated to the exchange of ideas in our dcinema community about the successes and trials and thoughts about adding more to the d-cinema movie server/projector chain. We'll provide space for manufacturer editorial, we'll jot down a few of our ideas, but what we really hope to inspire is real life lessons that will get us all down the road more efficiently. The curtain opens, and it is your stage. Thanks in advance for your participation.

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