Delivering on the Promise: DCDC connects content and cinemas large and small

Features
Technology

“We have been really fortunate in our development. And how fast we have grown!” acknowledges Randolph “Randy” Blotky, CEO of Digital Cinema Distribution Coalition. In an exclusive update of the work accomplished since DCDC went live on Oct. 1, 2013 with “about 300 sites” deployed, Blotky reports, “Now we have 1,910 installed and we have more than 2,430 theatres that are under contract, with a backlog of 500 sites that we will continue to work on.”

Once they all have come online, DCDC will serve over 28,000 screens across the United States, out of the roughly 33,000 digital that NATO counts. By 2018, its network will surpass 32,000 screens in more than 3,000 theatre locations. “Eighty-nine exhibitors have signed up. On the content-provider side, DCDC started with six major studios–and that took a while,” Blotky admits. “There are now 31 content providers, including many independents in addition to alternative-content providers as well.”

“There’s a multiplicity of reasons” that led to this success, Blotky believes. “For the first time in the history of the industry you got five large, disparate companies on both sides of the aisle coming together to basically put their money where their mouth is. Namely, to provide an electronic delivery system to the industry.” The founding members were Warner Bros. and Universal Pictures on the studio side, and–with AMC Theatres, Regal Entertainment and Cinemark–the country’s three largest cinema chains. “All coming together in finding common ground so that things can move ahead.”

Long before any installations began, there were many conversations (and obstacles to conquer) in order to get things off the ground. Without “having to mention any names or companies,” Blotky provides an example of how the early conversations played out at a film studio. “I was talking about what we were going to be doing and how it was to be implemented. One of the folks…interrupted me and said, ‘Randy, what makes you think that–in a million years–I would ever deal with a company that is owned by two of my biggest competitors? And, worse than that, why would I ever do a deal with anybody who is owned by the three biggest exhibitors in the country? I don’t trust this as far as I know.’ So, one of the things that we found was…a lot of distrust among studios themselves and among exhibitors—and among the studios vis-à-vis exhibitors.” In response, Blotky and his team stated early on, “We understand that we need to build trust in us and your confidence that we will actually do what it is that we say we are going to do.”

Did the business model behind DCDC help to smooth the satellite airways? “The fact that these folks were coming together, putting their industry hats on, and allowing us to work on this sort of egalitarian, industry-centered business plan” was key for Blotky. “[Putting] this together in a way that has zero cost of entry for the open network that we run for both content providers and for exhibitors” helped as well. “DCDC pays for all of the equipment that goes in the theatres, we maintain all of that equipment, and we install all of that equipment at no cost to exhibition.”

To make back their capital investments, DCDC charges fees for delivery to both the theatre and content provider. “I won’t discuss specific pricing for obvious reasons, but we priced it in a way that makes it way less expensive than for delivering hard drives and physical media to the theatres. And also, we priced it below the normal return freight for exhibitors. It became a win-win.”

Part of winning the satellite distribution game is inviting everyone to the table and holding open cards, Blotky asserts. “We keep our word and are very honest about what it is that we can and cannot do, and why. It is just that simple.” Still, it took DCDC about a year and a half to have all of the studios sign on. In the process, “several major studios went out of their way and made us promise to be available to all. ‘You are not going to leave the little guys’ theatres behind in this process,’ they said. ‘This cannot be only the big guys with huge numbers of screens… The mom and pops need to get the service too.’” With the additional backing and collaboration of NATO, Blotky made that promise to find ways “to serve the entire industry and not just a precious few.”

Blotky emphasizes that “when you are a customer of DCDC, the pricing you receive is exactly the same as everybody else’s.” AMC, Regal or Cinemark and Warner Bros. or Universal do not get “any pricing deal because they are also owners of the business,” he assures. “Once we start making enough cash, we can reimburse to each of the founding members what their capital investments in DCDC have been from the beginning.” After that, and better yet, DCDC intends to begin “using what otherwise would be posted as after-tax profits to actually rebate monies to the users of the system.” All customers will benefit in two ways. “One is weighted on a 50-50 basis on how much revenue they have been responsible for during the immediate past year. Secondly, we assess how much revenue was generated historically since becoming a customer. In other words, over time DCDC has the additional beneficial effect of driving the cost of delivery down even lower than it is now.”

This is meant to address the fact that–as a huge cost-saving measure–all content is satellite-delivered to catch servers at every theatre on the network. Regardless of their respective sizes and whether they show the film or not at all, DCDC only charges distributors and exhibitors “once the film is actually booked,” Blotky explains. “The delivery to a multiplex has the same price as the delivery to a one-screen. For the latter, that represents basically 50 deliveries per year… That is good for them and good for us. Although it is a very slow return compared to the larger number of deliveries to folks with multiple screens, we do them anyway.”

In terms of deployment of equipment into the theatres, the DCDC team counts on their partners Deluxe/Echostar and Hughes Network Systems. Blotky notes, “We first do a survey at a theatre to plan the installation. What is the cabling route? Are there any landlord issues that the exhibitor has to figure out? What kinds of points-of-entry are available on the roof? Is there going to be enough room for a rack? And all sorts of things.”

Unlike the initial phase of deploying digital projection equipment, no attempt was made to pick a bunch of theatres in a given region. “It was all over the United States. There were 300 different teams working to get the equipment into the theatres simultaneously.” Adding pressure, that process did not get rolling until about June 2013, Blotky notes. “During those four months between June and September, we made it up to the 300 that we had promised everyone…that we would go live on” with Runner Runner from Twentieth Century Fox.

Has it been running smoothly ever since? “As a highly technological business, by definition nothing runs like clockwork. But honestly it’s doing well,” Blotky reassures FJI readers. “Yes, there are issues that would come up every once in a while, with one server not talking to another server and having to figure that out. But we really have not had any major issues.”

But some complications arose with the proliferation of different trailer versions. “When Deluxe and Technicolor joined hands and the universe was no longer split, if you will, the number of trailers on one delivery doubled overnight.” In response, Blotky says, DCDC asked Deluxe/Echostar to attach a two-terabyte drive to its catch server that offloads the trailers from the main archival server. “Even though we have 12 terabytes of storage, honestly we could not possibly take all of the trailers and store them there for the length of time that folks like to have them stored. By and large, it’s all working very well. The people on the day-to-day in terms of how we operate, they work really hard to make it happen.”

Looking at the rest of the world, does Blotky foresee expanding DCDC to other territories? “We have chosen to really focus on the U.S.," he responds. At the same time, “everybody out there,” from Canada, Europe, Asia, Australia, South America, is examining options and solutions “that mimic DCDC, including the technology from KenCast, while looking at our business model and the all-inclusiveness of the network.” The problems he sees are “that every single one of those territories is filled with their own very specific issues–political, economic, technological, regulatory, legal, you name it. It is very difficult to try to tackle those in any real way unless people are willing to go and put the money where their mouth is.” Just like DCDC’s founding partners have done across the United States.

One example is laws and regulations in South America, he says, that require the satellite to be owned by the country in which the signal is received. With eight to twelve different satellites, “you cannot develop an economic model,” Blotky knows. “In Europe it is much the same, even though there is the EU. Each country, because of its own cultural independence, mostly maintains control over how movies and other cultural products are distributed. There is a lot of work to be done out there for anybody.” Even though he hopes “parts of the DCDC model will be copied. This would make the transition happen because the cost of delivery is even higher than the cost of delivery inside the United States was. So it would be good for the industry everywhere.”

On that note, Blotky wishes to add delivery of his own message. “Our industry needs continued successful collaborations among people who are working inside similar and different companies.” In his view, “more direct collaboration between the exhibition community and the content-provider community” would prepare all of us for even bigger things. “I think once people understand how to program their screens, the sites will become true community center nodes on the network… While DCDC is a technology platform–and we do that very well–it is also far more than that,” Blotky urges. “I think at DCDC we create opportunities that were not there before. We create thinking pieces for people to begin to understand what it is that they have at their disposal and how they can be part of the whole system. It is really much bigger than anyone had ever thought of before, beyond the two-dimensional delivery of movies.”

Film Journal Internationalwould encourage our readers to also read the insightful article that Randy Blotky wrote for our April 2014 edition.