Time saving tools NOW available – Free to SCO qualified cinemas + a history lesson from the VPF scandal

It's all happening at SCO

In this newsletter we cover a number of important issues:

1. Online tools designed to save time for small cinema owners when managing there cinemas are now available for SCO qualified cinemas to access.
2. Australian Content For Australian Communities (ACAC) Update, broadening the focus to include smaller distributors.
3. An update on the digital delivery landscape.
4. A history lesson on the VPF scandel.  With a lot of changes coming in the next year for small cinemas, it is time to look back at what has happened in the past and how it has shaped our industry.  Have we learnt from our mistakes?

Free tools to save time for small cinema owners now available

I am excited to announce SCO has finalised the availability of tools that should be a major time saver for suitable cinemas. These tools have been developed by digitAll Pty Ltd, a company I am a director of.  I have a commitment from the board to make a limited selection of tools available at no costs to SCO qualified cinemas. These tools were developed in conjunction with the software used to operate regional cinema locations.  digitAll Pty Ltd objective is to bring Cinema to regional locations by implementing modern "Web" technologies to reduce the running costs of smaller cinemas.  Utilising such technologies greatly improves the viability to operate cinemas in many more regional locations. Why would digitAll Pty Ltd make these tools available to smaller cinemas at no cost? The board of digitAll Pty Ltd believe a rising tide lifts all boats.  If a region location has a cinema, it is the best for those cinemas to be successful and grow cinema culture in Australia. To get an introduction to these tools, please watch the video below.  SCO does not expect these tools are for everyone, but those who see value are welcome to apply for an account to access these tools today. (Note: you must qualify as a SCO cinema.  Do I qualify to be a SCO cinema: You must own or operate a small cinema.  You must not be connected to a larger cinema chain or organisation. THERE IS NO FEE REQUIRED, you only need to qualify as a small cinema operator)

List of tools available and coming next year

1. Release Tool: visually identify upcoming movies with research (Film detail, Poster/Trailer) and Google trends Integration.
2. Bookings Tool: Visually see films you have interest, offered of confirmed.  With automatic contractual commitment calculator. Track your negotiations. Full Email integration. (Don't over commit your cinema to policy requirements)
3. AutoKDM Tool: Never have to ingest a KDM again.  Based on a tool in use for over 3 years by 10 locations, digitAll will bring this time saving tool to all small cinemas. (Released date early next year)
4. FLM/electric DCRF records tool: This tool is used to turn the DCRF record Email into a electronic form and is expected to be a requirement in the coming future for exhibitors. (Release date mid 2020)
5. Digital Signage, poster and trailer Tool: As we move to digital delivery of DCPs, it is also expected a strong push to digital Posters will also follow.  This tool is designed to be a set and forget postor solution. (Release date mid 2020)

Small Cinema Owners (SCO) Cost Saving Tools released - CLICK HERE

https://youtu.be/Zj-pe4LlgR4

The Australian Content for Australian Communities (ACAC) Initiative Update

After a lot of input from from smaller distributors, SCO has obtained a commitment from digitAll Pty Ltd to also develop tools on top of these made available today that focus on the needs of small Australian distributors.  Stay tuned. Smaller Distributors are welcome to review the exhibitor focused tools and submit recommendations on how to modify or re-develop the tools to focus on their needs.

DCP digital delivery update

In recent weeks there has been a number of developments in the landscape of the transition to digital delivery.  In the next topic I will cover historical events (VPF scandal) as to give you a better understanding of what is at stake, however, for now let's just go over what is happening. There are a lot of potential suitors and in recent announcements some have decided to join forces and others to go out on their own.  Plus, very generous offers of paying for your internet link over the top of supplying a computer to store the DCPs. "There is no such thing as a free lunch".  So what's the deal?  Why are these companies offering these generous deals?  What is in it for them? As the CineTechGeek, in many of the videos I specifically call out exhibitors to take the time to listen to details and be in a position to make an INFORMED DECISION.  Some of the deals sound great, however, there are ramifications you should be informed about before you take them on. An example of this should be taken from DCI (Digital Cinema Initiative board made up of all the major studios).  In the forming of the standards that make up what we know to be the digital cinema technologies used in our projection rooms.  A number of specific decisions were made.  I would like to point out one of the underlying outcomes the DCI committee archived.  All the technologies used to implement DCI-digital cinema specifically avoids the use of technologies that are covered by licensing (All but the forensic marking as by its nature it needs to be licensed).  This was to ensure no individual company or association was in a position to become a gatekeeper or control access to market. An example of this in recent years was when Dolby introduced Atmos followed by DCI releasing the document announcing that it would only move forward with a SMPTE open standard version of immersive audio. See DCI_Object-Based_Audio_Addendum_2018-1001.pdf In recent weeks we have seen Universal go with MPS, meaning DCPs for Universal will soon start coming from an alternate source (not Deluxe).  While Deluxe, likely in reaction to this, is changing its tune in regard to implementation of its digital delivery solution.  Currently Beta sites are running small applications on there own equipment being a PC or Linux computer and are utilising pre-existing internet connections the sites already have. (delivering trailers and Features without issues on the cheaper NBN50 links, shared with front of house) This option has now changed and Deluxe requires to install a NBN link "at their cost" to your cinema that they have complete control over.  That sounds very generous. Why would they make such an offer?  One possibility is to take ownership in a site.  In effect, giving the impression that they are the only trainline into the Coal mine that is your cinema.  Giving the impression they are the gatekeeper to access the resources within.  Putting pressure on Universal to move back to Deluxe. It must be made clear.  Your site would have a NBN/internet connection already, adding a second should not be difficult as usually a second backup connection is always present.  But what happens when Universal/MPS also move to digital delivery.  There are no lines left.  A very difficult and costly exercise. Are cinemas expected to have a tall rack full of servers and internet equipment from all the different suppliers?   Who's paying for all the electricity? (This equipment needs to be on all the time)  Whos going to fix the equipment if it fails?  Who pays for service call/travel/accommodation?  What if there is a fault with your NBN link.  Can you go home to your home NBN link and just download the DCP from there as a fallback? What happens to the smaller self distributor?  Can he penetrate these complex gatekeeper restricted paths to delivering DCPs digitally to your location?  How does this affect independent Australian Films? If the content delivery entity is paying for the link, does that mean they charge the studio, and then they on-charge the cost of the link in other ways?  Does this mean, as the Minimum Guarantee, expected to be greatly reduced after the VPF is over is no longer the case? (A poor outcome for smaller cinema owners and distributors indeed) As you can see, such generous offers can lead to other outcomes that are not so welcome. This is not necessarily the case, but you should ask the question and make sure you are informed in the ramifications of taking any offer. Like DCI, here at SCO we believe the best path is that which avoids the potential development of gatekeeper/monopolistic positions.  If you are downloading a DCP, it should be on a solution/NBN-link that you have control of the costs for.  Otherwise, you have no idea how these costs are being archived or the costs involved.  Costs, at the end of the day you will have to pay for directly or indirectly.  Keeping these costs under your control is advisable. This does not indicate the Deluxe deal should not be taken, it does appear generous, however, be ready to also accept content from alternate suppliers over your general NBN link as well.  As mentioned in previous newsletter, the use of simple tools that do not need a dedicated link of server at your location will obviously be far cheaper in supplying these services.  It is expected independent distributors will adopt this capabilities.

A History lesson, what did we learn from the VPF scandal? And how is it connected to digital delivery?

The VPF is months from ending.  In this section I will discuss historical events around the VPF contracts and lessons we should take away from the darker side of the history of our industry. In brief: The original VPF contracts were developed by DCN Australia, of which I am the CTO and a director.  DCN was ready to start signing contracts with the studios when the opportunity was diverted.  This resulted in a court case that was expected to be around 8 months, but ended up taking over 3 years in an attempt to win by bankrupting the directors. Ultimately the federal court had four (4) Judges look into the case.  All supported DCN Australia's position.  Calling out those who attempted to divert the opportunity "Red Blooded Fraud" and that they "Planned and executed it". This was a very dark time for me as we where instructed by or legal team to stay quiet and let the VPF be signed by Omilab as that would have guaranteed a positive outcome for us, however, not for the exhibitors.  I was very conflicted with this as based on correlated submissions from each of the VPF companies by the Federal court , the original DCN VPF turned out to return the most to the exhibitor if taken. (Note: the VPF comparison document does not take into account that ICAA support service was not a full service and cinemas were also required to pay for a second on site service entity, greatly reducing the return to exhibitor compared to the other VPFs.) Unlike the DCN VPF being one of the best for exhibitors, the alternative was one of the worst.  In my opinion this contributed greatly as to why the Studios refused to sign alternate offers.

So what is the lesson from this?

Such a brazen act of fraud.  Why would, at the time, the largest media company in Australia take such a big risk?

Many opportunities were discussed in the initial planning of the VPF.  One of the most lucrative opportunities identified was the following.  In my opinion, this opportunity contributed greatly as to why Omnilab planned and executed the fraud.

It was, in the early stages, expected that a much larger number of independent cinemas would have adopted the VPF as at that stage it was a very generous deal.  This would give the VPF holder specific control over cinema locations.  For example, in taking on the liability of the VPF, integrators "could" (And in my experience do) claim control over the infrastructure.  In effect, altho the cinema owns the projectors, network etc, you can only do what the integrator allows you to do.

In effect, the VPF integrator has complete control over who and how an external entity can interface with digital delivery.  It makes them a gatekeeper.  In reality, the VPF contracts have paragraphs that stipulate condition to stop this from happening as the studios wanted to avoid these potential monopolistic prices that could result, however, these sections are usually conveniently forgotten and only the VPF entity and studios know of there existence. (Note, the Compare VPF document reference these stipulations. See paragraph "Delivery Reverences")

This is only the tip of the iceberg.  The control over who can distribute content to the exhibitors then opens up a huge opportunity.  Not just in monopolising the content delivery market but also giving the entity the power of deciding what films get a theatrical release.

This is the key for Omnilab as a media production company, they saw this as a way to control who could and couldn't get the 40% rebate from Screen Australian on the production of films as you are "required" to get a theatrical release. "If you want the rebate, you have to use us".

This is where Hollywood accounting comes into play.  As an example, it was typical for a Omnilab colour grading suite to cost $1600 per hour rate card (Or RRP in other words.) But no one actually really paid that.  It was always negotiated down depending on how the project was getting paid for.

Considering that Screen Australia invests hundreds of million per year in film projects, you now understand what was at stake.

Yes, this opportunity was identified by DCN, and shared with Omnilab as part of there potential offer to invest in DCN, however, executing such a plan was against the ethics of the controlling portion of the board of DCN being Martin Gardiner, my brother and I.  I expect this is primary reason Omnilab took the low road, then refusing very generous offers of a settlement.  They simply did not want the original DCN board involved as it would stifle the opportunity.

The landscape is now different but there are still large opportunities if you can obtain a gatekeeper position.  As part of the court case, these business models were made available to many entities.  This is why I expect there is a very crowded market for digital delivery offerings in Australia.

Haunted by Ghosts of the VPF scandal

An example of the fallout of the scandal is still relevant today.  In recent years I was involved in developing a delivery solution for our industry, however, this was shelved as VPF entities refused to allow the solution to plug into the projection network.  The reason given was "security"  an issue that could have simply been overcome with a suitable firewall configuration.  In reality it was a political issue. If a digital solution was going to happen, they wanted to clip the ticket or own it as the gatekeeper.

My argument with this position was that, even if we agreed to such demands, eventually a content delivery company that can bypasses this artificial gate will emerge anyway (After the VPF was over specifically). Their prices would be half that of the VPF/gatekeeper entity. There would be no ability to compete and the investment lost.

This is predominantly why Australia is one of the last countries in the world to implement digital delivery of DCPs. 

The VPF is months from ending. I expect these integrators will try anything to keep ownership / control of your cinemas infrastructure.  I am writing this today to make sure you are informed of the ramifications.

As always, if you have any questions regarding these topics or advice on how to take advantage of the evolution of the australian cinema industry, please contact me, I am happy to discuss them with you. James Gardiner Founder, Small Cinema Owners Association james.gardiner@smallcinemaowners.com.au mob: 0412997011