It's the start of a new year, so what better time to take a look back - and forward - at the digital cinema conversion. In the December 2016 issue of Cinema Technology magazine, AAM CTO Rich Phillips took a look at the steps digital cinema technology has taken to get us to where we are today, and what the future might hold.
The transition from celluloid to digital technology was catalysed across the globe by the Virtual Print Fee financial model. Even though not all territories or individual cinemas adopted the model, it is clear that without the financial stimulus and technical standardisation that VPF deals brought, the industry would look very different now. Digital presentation would have permeated into cinemas, but without standards the benefits would be more questionable, and the experience inferior. And celluloid film would still prevail, with its inherent restrictions, impeding modernisation of the cinema industry to meet the demands of today’s digital citizens. VPF deployment is now over, even if the contracts and resultant obligations for exhibitors, distributors, technology providers and integrators are not.
Meeting the demand for VPF deals
Larger exhibitors, or smaller ones that were able to club together to form large coalitions were able to strike VPF deals directly with distributors, and in other cases equipment manufacturers stepped in as facilitators, eyeing the opportunity for controlling equipment sales, but in the main part VPF deployments and their consequent administration were managed through third-party entities. In Europe, XDC grew out of what had earlier been a hardware manufacturing business offering cinema playback servers. Ymagis was formed specifically to exploit opportunities that the VPF model provided, and my employer, Arts Alliance Media, realised that the experience gained in rolling out the pioneering lottery-funded Digital Screen Network could be put to good use doing the same within the VPF model.
Deployment kept us all busy for a few years, but that phase is done. Conversion, at least under VPF models, is now complete. Ongoing administration of VPF contracts is not trivial, but processes are now well-established. Opportunities that the VPF model brought were transitory and a means to an end rather than an end in themselves. Some of the industry consolidation seen now is evidence of how these companies are re-organising to support the next phases of the digital transformation. Notably, XDC (which later became Dcinex) joined forces with Ymagis. No longer in competition for VPF customers, it made sense to consolidate, seeking efficiencies through scale, refocussing on service and support and absorbing a number of smaller cinema service companies (with whom they had partnered during VPF rollout). The whole entity recently re-branded as Cinema Next.
"Exhibition is characterised by a significant quantity of unused off-peak capacity. Any system that uses that capacity represents additional revenue."
Digital transition also provided opportunities for other parties not directly involved in VPF deployment. Content processing and distribution, clearly different from celluloid, required new approaches from incumbent service providers such as Technicolor and Deluxe, but also gave opportunities for new providers such as MPS and Eikon. Film logistics providers such as Gofilex adapted to digital with electronic delivery solutions replacing vans. New entrants to the cinema space such as Smartjog, Arqiva, Eutelsat and Globecast, eyeing opportunities for large file transfer, launched their own DCP delivery networks.
With all these providers, consolidation was inevitable and Ymagis led the charge. Variously Smartjog, Arqiva’s DCP satellite network, DSAT and others have been acquired under the Ymagis umbrella and are being rationalised. Deluxe abandoned its own attempts at building a broadband cinema delivery network in Europe, and after combining its digital cinema operations with Technicolor’s, opted to partner with Unique Digital instead, which had built its own successful broadband based delivery solution in Norway and was extending it elsewhere across Europe.
But it’s far from over. We expect to see further consolidation and change and in particular expect to see a move towards more of a “pull” or “on-demand” model, where content assets required for playback are automatically retrieved through standard broadband internet according to exhibitor requirements, rather than requiring managed “push” delivery logistics and privately managed networks.
Recently we have seen the introduction of platforms offering exhibitors the ability to browse and book content, with content delivery logistics handled automatically upon booking. These platforms include MPS’s OnCinema and GoFilex’s Cinio platform. Whilst focussed initially on independent and repertory content rather than mainstream first release, these platforms are demonstrating what is possible, presenting wider content choice to exhibitors and ultimately to customers.
Particularly interesting are platforms which extend that choice directly to consumers. Tugg in the US and Ourscreen in the UK provide a library of content; participating exhibitors supply bookable space on their screens, and consumer-led demand does the rest. Screenings with sufficient motivated customers make the event worthwhile for exhibitor and content owner alike. Exhibition is characterised by a significant quantity of unused off-peak capacity. Any system that uses that capacity represents additional revenue.
"The number of innovations looking to exploit the cinema arena is growing"
This is not the only area where technology and data are optimising programming and increasing revenue. Cinema Intelligence offers analytics tools to predict box office, and optimise bookings and scheduling based on data. Other data-driven platforms such as Movio and Showtime Analytics seek to understand customer preferences in order to drive programming and direct marketing.
Although providing the spark of ignition for digital conversion, VPF deals brought their own restrictions. While the burden of cost of the transition was largely moved from the exhibitors to the distributors (who stood to gain most from the distribution cost savings), the system ensured that all content providers — whether mainstream, independent or alternative — shared the cost. Fair in principle, it acted as a brake on disruption. Smaller content providers pay similar fees to larger incumbents. Moreover, the terms of VPF agreements themselves naturally favour the primary investors of the transition, and have the effect of imposing limitations on content scheduling and booking patterns. So, while software and a data-driven approach to content selection and programming is showing promise, the full impact is unlikely to be felt until after VPF contracts have completed.
Innovation in the cinema space
Software is playing a pivotal role in other areas. Screen advertising, previously restrained by physical limitations of film, can now be dynamically altered show by show, adjusting to audience demographics or even the weather. As screen advertising companies have embraced the possibilities through campaign management systems such as Unique’s Advertising Accord and AAM’s AdFuser, so they are seeing benefits and increased revenues. The same principles apply to trailer programming and lobby digital signage, both areas with potential for improvement.
There is more: interactive pre-show from the likes of iPlateia and TimePlay, dynamic ticket pricing tools such as those by SmartPricer, social media engagement applications like Cinema Conversations from EventsTag, and user-generated content such as CineCardz.
"Opportunities for greater customer engagement, increased revenue, and increased relevance of cinema are endless"
The number of innovations looking to exploit the cinema arena is growing. Some are start-ups, specifically targeting cinema niches. Others are from existing technology providers who have products in other markets which show promise in ours.
Opportunities for greater customer engagement, increased revenue, and increased relevance of cinema are endless, yet potentially overwhelming for exhibitors adjusting to the transition from celluloid. And it is hard for the technology providers themselves. While many ideas show promise, the available exhibition market is small yet geographically diverse. Reaching and engaging with that market as a small start-up is challenging. These were the driving forces behind Thunderstorm, AAM’s own platform.
Fundamentally a marketplace that draws together innovative software applications into one place, it simplifies access to these new products for exhibitors. Think of it as the app-store for cinema. It provides a secure portal for exhibitors to manage and monitor their applications, and offers low-risk opportunity for exhibitors to try out new ideas without the high up-front investment and long-term commitments.
For technology providers it offers a way for them to reach a wide customer base and will provide common APIs and interfaces with the platform, including to the underlying data analytics, billing engine and reporting tools — as well as, for the applications that require it, a single integration point into AAM’s Screenwriter theatre management system customer base.
Initial applications available include CineCardz’ personalised on-screen greeting messages, Incode’s digital signage platform for cinema, SmartPricer’s airline style ticket pricing engine, Cheerfy’s WiFi enabled CRM, iPlateia’s second screen advertising, and Cinema Conversations’ social media engagement platform. New products ranging from utilities for automated KDM management to mobile second screen customer engagement apps will be added in coming months, all managed within one web-based portal.
Software is becoming ever more important. Just as it has in other markets such as music, television and print, the transition from analogue has provided the key to unlock transformation of the industry through disruption, data analytics and consumer engagement. By embracing these changes, the cinema industry will not only survive, but will thrive.
Thanks to Cinema Technology magazine for letting us publish this piece in full. To read the latest issue, visit the Cinema Technology website.
Any thoughts on the points raised in this post? Let us know in the comments below.