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w/e December 21, 2008 SCRI International, Inc © 1984 - 2008
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$8 billion Digital Cinema Market Beckons
The conversion of the world’s cinema screens to digital technology is at last under way, opening up a potential $8 billion equipment market at today’s prices. As soon as 2013 half of all cinema screens worldwide could employ digital technology in place of traditional 35 mm projectors, according to the latest Digital Cinema Report by analysts Dodona Research.
After more than a decade in development, digital cinema took off in 2007 with 4,627 screens converted by September, approaching 5% of the global total. The beginnings of widespread adoption of the new technology has been facilitated by the emergence of third parties willing to finance the huge conversion costs. These so-called integrators typically finance purchase of the equipment, seeking to repay loans by levying an array of usage charges. While the cost of installation, maintenance contracts and sometimes content delivery charges are paid by exhibitors, the main source of revenues to support conversion comes from so-called virtual print fees. These are paid by film distributors out of their notional savings from not having to strike 35 mm film prints.
The report observes that, while most of the debate about digital cinema has revolved around film distributors and exhibitors, in practice these businesses will be relatively little affected compared to film processing laboratories and the film transport business. In particular, the $1.5 billion market for release printing will, the report predicts, all but disappear, while in the long run the film transport business will be superseded by delivery by satellite or over other digital networks.
With one provider, Access Integrated Technologies, responsible for 80% of digital cinema installations to date, it would be premature to judge how robust current business models will prove. In essence most participants in this market are seeking to develop networks of digital cinemas and then build revenues from providing a range of services such as mastering and delivering digital films, supplying alternative content, screen advertising services, and upgrades and maintenance of software and equipment.
After Access, the three leading companies in this area are XDC, Arts Alliance Media and Technicolor, each with a market share in the region of 6-7%. Equipment markets are also dominated by a small number of companies. Christie has a 77% share of the 2K and 4K digital projector market, followed by Barco with 14% and NEC with a little under 8%; in servers Doremi has a near 80% share of 2k and 4k installations, followed by Dolby with 9% and XDC, with 5%.
Digital cinema primarily makes sense in terms of networks, so installations tend to be concentrated in clusters. 78% of all digital cinema screens are in the United States, and 40% in the cinemas of a single circuit, Carmike Cinemas. The second largest number of screens is in the United Kingdom, thanks to the UK Film Council’s initiative in establishing the Digital Screen Network, while South Korea, where three exhibitors, Megabox, Lotte and CJ CGV, are committing to digital cinema to serve one of the world’s most tech-savvy audiences, is third.
The countries where the progress of the technology is most advanced, however, are Luxembourg, Singapore and Belgium. Half of Luxembourg’s screens are already digital due to the rapid embrace of the new technology by its leading exhibitor, Utopia. In Singapore the Eng Wah circuit was supported in converting to digital as long ago as 2004 by the city state’s development agencies, as part of a strategy to establish Singapore as a digital hub in the region. In Belgium, another initiative by a leading exhibitor, the Kinepolis Group, saw 10% of the country’s screens converted by September 2007 with plans to convert most of its circuit by the end of the year.
With more than 50% of the market soon to be digital in Belgium and Luxembourg, it is likely that there will soon be pressures to complete the conversion process, due to the high costs of so called dual-running of digital and 35 mm distribution systems. This could become a highly politicized process if, as is widely feared in Europe, smaller exhibitors are not able to access equipment at an affordable cost.
The main factor slowing further adoption, according to the report, has been the absence of any obvious source of extra revenues from installing the new technology. While cinema exhibitors have been quick to note the benefits to distributors of much lower print costs, they have been sceptical about the potential impact of alternative or non-traditional content, for example sports events or concerts, on their bottom lines. Although Dodona believes this scepticism is misplaced, seeing classic movies as a particularly promising source of higher revenues, instead there is a consensus building up that 3D will be the driver that takes the market to the next level.
Two rival systems from Real-D and Dolby have different advantages and disadvantages but Real-D, which was earlier to market, dominates in installations, with 423 in place by September 2007 and more than 1,000 expected for the North American release of Beowulf, compared to perhaps 75 to 80 Dolby systems by the same date. Barring mishaps, these numbers are expected to grow exponentially to 2009, when a number of high profile films, made explicitly to exploit the 3D medium, are due to be released, including Avatar from James Cameron, Monsters vs Aliens and the first film in a series featuring TinTin.
With at least 5,000 3D systems expected to be in place by 2009, this will clearly provide a considerable impetus to the digital conversion process, as these 3D systems need a digital projector to bolt onto. The Odeon UCI circuit, for example, has announced its intention to install 500 3D systems despite today having fewer than 100 screens converted to digital.
consultants counsel against over-confidence in this market. Financing the equipment is complex and difficult conditions in financial markets could derail progress by making money more expensive and leading financiers to question future revenue assumptions more stringently. The report’s author, Karsten-Peter Grummitt notes the importance of game theory in understanding this market. The equipment manufacturers want to defray their R&D costs; the distributors want to make the minimum financial contribution possible to conversion; exhibitors wonder whether potential new revenue sources will justify the investment. “Nevertheless,” says Grummitt, “the next step in the market’s evolution is probably going to need a fall in the price of equipment, or higher virtual print fees, or bigger exhibitor contributions, or all of these. Strategies in this market need to move on from the ‘who pays?’ face-off of the last few years to focus on how to get this done.”
Mobile TV Consumption Growth
QuickPlay Media, provider of mobile TV and video solutions, has unveiled the findings of its first quarterly consumer consumption analysis. The results - aggregate usage statistics from 15 representative QuickPlay-powered services over the third quarter of 2008 - demonstrate that demand for mobile TV and video content is increasing steadily. The results, compiled from July through September, 2008, show mounting consumer usage of both mobile video on demand (VoD) and linear TV. Further, the increase in streaming video and video downloads per unique user shows consumers are becoming more engaged with this medium.
Key findings include:
Total video downloads increased by more than 87 per cent over the previous quarter
Average download per user increased by 42 per cent, to 4 per user/month
Total video streams viewed grew more than 27 per cent
Average streams per user increased by 12 per cent, to 19.3 per user/month
Average stream duration over Q3 2008 was two minutes and 47 seconds
Online video shifts from PC to TV screen
While today's consumer is most likely to watch online video on the PC screen, over time more and more consumers will watch over-the-top video delivered to the living room, according a new study from ABI Research. This continued trend towards TV-viewed online video will help drive overall adoption, as the number of online video viewers grows from 563 million at the end of 2008 to 941 million by 2013.
"All stakeholders in the online video ecosystem are eyeing the living room," says research director Michael Wolf. "With the continued adoption of network-connected video game consoles, the porting of popular online video services such as Hulu and Netflix onto third party consumer electronics devices, and network operators' growing interest in over-the-top video, we see this market for TV-displayed online video continuing to grow."
"There is a continued maturation in the various advertising models for online video," continues Wolf. "At the same time, hybrid models such as those offered by Netflix's instant viewing service or pay models such as Apple TV will also grow in importance. Also, while the economic environment will have some negative near-term impact on online video advertising CPMs, ABI Research sees overall viewing of online video growing over the next few years as it is a fairly resilient and somewhat counter-cyclical form of low-priced entertainment."
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Broadcast technology confidence falls
Confidence amongst senior executives in the supply side of the broadcast and media technology sector has declined markedly according to an IABM Industry Trends Survey. The survey, undertaken in conjunction with Ernst & Young polled the views of some 80 senior executives in IABM member companies around the world.
According to IABM Chief Executive Officer Roger Stanwell, the extended period of growth in the sector may be coming to an end and responses to our survey suggest that suppliers are now expecting much more challenging times over the immediate period ahead.
Confidence has gone from positive to negative for the first time since the survey started in 2005 and 43 per cent of respondents expect the situation to be deteriorating in a year from now compared to 13 per cent who think it will be improving. The view reflects the late cyclical‰ nature of the sector where large projects have momentum and so an adverse economic situation takes time to impact but similarly may make the sector late in recovery. It is also indicative of the massive growth in the broadcast market over the last 18 months, buoyed by the quadrennial events the Olympics, US election and other live events, and the shift towards digital infrastructures and HD.
Order volumes and values have weakened over the last quarter and although selling prices were stable in Q3 2008, cost prices have continued to show upward movement resulting in squeezed margins. This is predicted to continue. The political/economic situation and project/order deferral by customers are cited by 57 per cent of respondents as limiting factors on order growth
China plans fibre network
China has confirmed that it will build its first high-capacity optic fibre network nationwide, which is able to carry Internet, TV and phone services through one network. The Ministry of Science and Technology signed an agreement with the State Administration of Radio, Film and Television (SARFT) on building the national network. The backbone network of the new net will have a bandwidth of 1,000 G bits, comparing with the current one of 1 G bits. It will allow every user in the network to have a 100-Mb per second access to the Internet rather than the existing 1-Mb access, said a ministry press release.
A regional network has been built in the Yangtze River Delta and put on a trial run for one year covering about 30,000 users. But the nationwide programme is still at a very early stage. The agreement did not mention the timetable of construction nor the cost."
Fox selects Motorola for HD
Motorola has been selected to provide the satellite transmission equipment, including compression systems and multiplexors, to enable Fox to transition all its satellite programme distribution to 100 percent HD delivery. The move which will enable Fox viewers to benefit from the clarity of HD content on the company’s broadcast network, national cable channels, regional sports networks, Fox News Channel and Fox Business Network. The migration to Motorola technology will be rolled out in early 2009.
The transition to all-HD distribution will enable Fox to significantly streamline its distribution infrastructure as it moves from the current mix of SD and HD environments and diverse, multi-vendor technology platforms to a common all HD Motorola architecture. The need for parallel SD storage and distribution will be eliminated since Motorola radios will support the real time conversion of the HD content to the SD format.
Time Warner Reaches Agreement with Comm. Corp & Granite Broadcasting
Time Warner Cable and Communications Corp. of America announced an agreement to continue to provide broadcast television programming in several markets, including FOX programming in Waco, and NBC programming throughout Harlingen and El Paso.
Time Warner Cable and Granite Broadcasting Corporation announced an agreement to continue to provide broadcast television programming in several New York State markets, including ABC programming in Buffalo and CBS programming throughout Syracuse and Binghamton. Time Warner Cable also will launch the digital feed of WBNG, which will bring CBS programming in high definition to Binghamton customers.
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Barco announces further cost saving measures
Barco continues the reduction in headcount as part of its overall cost reduction plan announced with the results of 2Q08. Following the initial reduction in staff in September, the number of employees will be further reduced by around 200 people worldwide, 130 of whom will be leaving the company this month. The remainder of these employees will leave the company in the course of 2009.
In July Barco announced a euro 30 million cost reduction plan in light of the deteriorating global economic environment.
This plan defined four ways to reduce cost:
1. The maximum exploitation of internal synergies. In this respect Barco has started the creation of one common operations organization. At the same time one unified and global corporate marketing team has been set up.
2. The simplification of the company structure. The presentation business unit was integrated into the Media & Entertainment division sales channels and the simulation and avionics activities were combined in the Avionics & Simulation division.
3. Cost containment actions. In Sales & Marketing, Customer Services and R & D the necessary actions are being taken to achieve a higher level of efficiency. Other cost containment actions lie in the areas of marketing expenditure, travel and supporting services.
4. Sale of non-strategic activities. The Maritime Safety and Surveillance activity, based in Stuttgart, Germany, was sold to Thales in September 2008. An agreement to divest the medical advanced visualization business, based in Edinburgh, Scotland, was signed with Toshiba Medical Systems end November 2008.
Barco expects to see the full impact of this cost reduction
plan in its 2009 results.
Miranda to Acquire NVISION
Miranda Technologies Inc. announced that it has entered into an agreement to acquire all of the outstanding shares of privately held NVISION, Inc. of Grass Valley, California. The all cash transaction is valued at US$40 million and will be financed with a combination of cash on hand and a US dollar credit facility. It is expected to be accretive to earnings during 2009 and should generate cross-selling and geographical distribution synergies. The transaction is expected to close by December 31, 2008, subject to closing conditions.
NVISION, a supplier of routing systems for the broadcast industry, has grown rapidly and profitably in recent years. For the twelve months ending September 30, 2008, NVISION had revenues of approximately US$34 million and gross margins in line with Miranda's.
"We have enjoyed a good relationship with Miranda over several years and I am pleased we will be working together through our next growth phase," commented Chuck Meyer, President and CEO of NVISION. "By joining forces with Miranda, an industry leader, we gain access to an extensive global distribution network and the ability to offer our customers a broader range of leading edge products."
"The proposed acquisition of NVISION will strengthen our overall product offering and competitive stance," added Strath Goodship, Miranda's President and Chief Executive Officer. "They are a natural fit with our branding, interfacing and multiviewer product lines and will also bring considerable technical expertise. Furthermore, the business combination confirms Miranda's position as an industry consolidator and is in line with our growth strategy of focusing on accretive acquisitions. We believe that it is a productive use of our cash, which totalled over CDN$86 million as at September 30, 2008 and believe it will benefit our customers, employees and shareholders."
Genuity Capital Markets is acting as financial advisor to Miranda
QuVIS closes its doors
QuVIS, a Topeka technology company that tried to woo Hollywood into using its digital cinema technology, has closed its doors
QuVIS laid off 29 employees Dec. 1, said Kenbe Goertzen, QuVIS president and founder.
The company, which has 1,900 shareholders, many in Topeka, was struggling under $40 million in debt and insufficient revenue. It fought to meet payroll in its last three months.
Goertzen was sitting alone in front of a laptop Monday at 2921 S.W. Wanamaker Drive. He said he was communicating with secured note holders and shareholders, trying to find a way to reorganize.
"I'm providing volunteer labor to see if anyone wants to reorganize in any way," Goertzen said. "It is complicated and difficult at this 11th hour. We were still getting good reviews on our products, but we have limited maneuvering with no funds."
Goertzen said it is possible the company may enter bankruptcy. He said the assets of the company were "intellectual property, furniture, inventory, receivables, name, blue sky — anything could be considered an asset under a secured note."
In the early 2000s, QuVIS, marketed itself to Hollywood and was able to digitize several movies, such as "Toy Story II," "Bounce," "Shrek" and "The Perfect Storm."
"A lot of eggs were put in the digital cinema basket, but that came to a screeching halt," Goertzen said.
Goertzen founded QuVIS in 1994 in Topeka after working for another technology company called NewTek, which moved to San Antonio, Texas, from Topeka.
Goertzen acknowledged timing wasn't good to raise money because of the financial market meltdown.
"Whether or not we can get out of here has yet to be seen," he said.
RIM to acquire Chalk
Research In Motion (RIM) is to acquire Chalk, a publicly-held company based in Vancouver, British Columbia, in an all-cash transaction. Chalk is the developer of Mobile chalkboard, an award-winning application suite that enables the rapid creation and secure deployment of media-rich ‘Pushcasts’ to BlackBerry smartphones.
SCM and Hirsch to Merge
SCM Microsystems and Hirsch Electronics have entered into a definitive agreement to merge. The combination of SCM and Hirsch is expected to result in a new security products leader at a time of escalating market demand for converged security solutions leveraging smart cards and smart chip-enabled devices.
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Doremi and RealD to Incorporate Real-Time 3D EQ
RealD announced an agreement with Doremi Cinema LLC to integrate RealD’s proprietary 3D EQ technology in Doremi’s digital cinema servers. This new feature for RealD’s award-winning 3D cinema system will be available on all new Doremi servers beginning in March 2009, while existing Doremi servers will be updated in all RealD installations at that time.
“RealD’s 3D EQ ‘ghostbusting’ technology significantly improves the viewing of 3D cinema features,” states Joshua Greer, president and co-founder of RealD. “Traditionally, this process is incorporated into the master by our studio partners. By moving this process into the theatres, it allows us to simplify the distribution process while optimizing the viewing experience. It’s a win-win for the studios, exhibitors and audiences.”
“Doremi strives to provide exhibitors and distributors with the best feature sets available in its digital cinema servers,” comments Michael Archer, vice president of Doremi Digital Cinema. “Integrating the RealD ‘ghostbusting’ technology in our DCP line of servers illustrates another example for Doremi’s leadership in digital cinema server technology and commitment to its customers needs.”
Doremi digital cinema servers are currently installed in over 80% of all RealD locations. The updating of Doremi servers with RealD’s 3D EQ technology will enable the vast majority of screens to quickly take advantage of this new 3D feature.
Cisco media processing platform
Cisco has unveiled a media processing platform that simplifies live and on-demand media sharing across PCs, mobile devices and other digital screens, by seamlessly formatting video and rich media for viewing on any device. The create once and share anywhere Cisco Media Processing platform provides media conversion, real-time post production, editing, formatting, and network distribution capabilities in a single networked solution to help businesses develop targeted visual communications that drive intimacy with employees and customers.
Rimage Introduces Archiver for Panasonic's P2HD
Rimage Corporation has introduced its newest disc publishing application: Rimage Archiver for P2HD to their worldwide distribution channels.
Rimage Archiver for P2HD is a fully integrated solution for offloading and archiving Panasonic P2HD content and is exclusively available on Rimage Producer™ III and Professional™ series of disc publishers. Until now, users of Panasonic P2HD cameras have had to choose between keeping their footage on volatile hard drives or investing significant time and effort recording to and retrieving video assets from linear tape. Now, P2 solid state camera card files can be safely and automatically recorded for archive and/or distribution on a non-linear format in Rimage disc publishing systems using a simple drag-and-drop workflow while maintaining the P2 data structure and integrity.
“The offloading and archiving of P2 card content is a real challenge for users of Panasonic P2 cameras and we are extremely pleased to provide them with a simple, cost-effective, and secure optical disc based solution that meets their needs” said Manny Almeida, Executive Vice President of Sales and Marketing at Rimage. “With the phenomenal partnership support we are receiving from the Panasonic Broadcast division across the globe, we are able to directly address their customers’ needs, be they event videographers or network broadcasters”.
Rimage Archiver for P2HD employs a simple wizard, based on the long-established Rimage QuickDisc™ interface that allows users to browse for Panasonic P2 card contents in any local or network-accessible drive folder. The necessary MXF and XML structure of P2 Contents folders is maintained from clip selection through label choice to final recording. In addition to providing user-selectable clip archiving, the Rimage system automatically prints clip thumbnails and metadata on the disc label, enabling an easy visual identification of discs associated with a particular program or shoot.
Tadao Shimozuru, Director of Professional AV Systems Business Unit at Panasonic, said “Rimage products are the perfect automated offload systems for P2 contents and their Archiver for P2HD application provides P2 users with a very professional interface to archive to the Blu-ray format, thereby helping extend the tapeless benefits of P2 workflows beyond the acquisition and editing area for any video professional using P2 cameras. ”
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PEOPLE IN THE NEWS
President of the Media & Entertainment Division to leave Barco
Barco announced that the company and Mr Stephan Paridaen will end the employment agreement between the two parties as of 1 January 2009. Mr Paridaen guarantees a smooth transition of the management of his division to his successor, who will be announced in due time.
Stephan Paridaen joined Barco in 1993 and held several managerial positions in Eastern Europe and Asia. He took up his current position as President of the Media & Entertainment division in 2000 and succeeded in bringing the three activities of his division to leading market positions.
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SCRI RESEARCH NEWS
Broadcast/Pro Video Product Sales Top $10 billion -- read more
2008 - 2009 Broadcast/Pro Video Product Reports
2008-09 Broadcast/Pro Video Macro Industry Overview Report
2008-09 Broadcast/Pro Video Micro Quantitative Product Data Report
HDTV / Digital Trends Report
IPTV / Mobile TV Report
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