Regal Entertainment Group the largest motion picture exhibitor in the world has announced an agreement to install Sony 4K digital projection systems across Regal’s entire circuit over the next three to five years which – when completed – would create the most extensive 4K deployment in the world. Like it or not this is one of the biggest developments to date in the short history of digital cinema. This announcement did not happen in a vacuum; there are underlying issues that helped drive this agreement among them the current state of the global economy. One thing is certain: the competition in this business has heated up and the Regal-Sony announcement has significantly raised the stakes in the ongoing digital cinema roll out. First some of the underlying issues: Last month Sony reported a $1 billion loss for the fiscal year that ended in March its first annual net loss in 14 years. The company projected it would lose even more money this year amid a serious slump in the global electronics market. As a result Sony is closing three plants in Japan. For its part Regal despite solid profits of its own announced in a recent investor conference call that it is curtailing its overall growth plans because of a slowdown in shopping center development which it also attributed to the pressures of the slowed economy. As further backdrop consider the fact that the Hollywood production and post-production communities are solidly behind a move to 4K and have been for quite some time. The almost cult-like acceptance around the world of the Red One camera has helped lead that charge. Meanwhile Sony’s newly released F35 camera is currently being used on several productions in Hollywood Panavision’s Genesis camera is a favorite of many cinematographers and JVC has announced that it will soon bring to market its own professional 4K camera. Sony is not alone among the studios in supporting 4K for movie distribution. Last month Sony Pictures Entertainment released Angels & Demons in 4K which is to be expected but in a sign of a growing trend Paramount and Twentieth Century-Fox both recently released movies in 4K The Soloist and X-Men Origins: Wolverine respectively. The dream of many in Hollywood is to have a production post-production and exhibition workflow that is built – seamlessly they envision – on 4K technology. Agree or disagree but some have made the case that a 4K workflow from start to finish most closely mirrors the current worldwide celluloid workflow that digital cinema was designed (and is destined) to replace. And one final piece of backdrop: this is Sony's second big digital cinema hardware deal in recent weeks following on the heels as it does of its March agreement with AMC Entertainment the second largest chain in the country. The agreement with Regal calls for Sony to outfit a minimum of 5 000 of the exhibitor's 6 700 screens and with the AMC deal and others would bring Sony's planned U.S. digital installations to 11 000 screens. That is close to a third of all the screens in the U.S. and roughly ten percent of all the screens in the world. The Regal and AMC agreements with Sony are of course part of the initiative being led by the Digital Cinema Implementation Partners formed in 2007 by Regal AMC and Cinemark. DCIP is charged with planning and implementing the deployment of digital cinema. Its efforts have stalled due to – yet again – the fact that raising capital is more difficult given the current state of the economy. The fact that Regal and AMC are competitors as well as temporary compatriots may have also had something to do with all of this. In making the Sony announcement Regal founder and chairman Mike Campbell noted the slowed economy and suggested that it may have played a role in the decision. We continually strive to strengthen and enhance the final presentation we make to our customers he told the Hollywood Reporter. Our goal is to offer state-of-the-art levels of resolution contrast and overall image quality. The delay in having been able to roll out the technology has a silver lining as it turns out. It has allowed us to roll out superior technology. Over the past 18 months the cost of the Sony 4K technology has dropped to where it is just marginally more expensive than the 2K and 4K gives us a competitive advantage over 2K. “The rollout of these Sony 4K systems gives Regal the opportunity to utilize the latest technology to provide our patrons the best available presentation ” said Amy Miles Regal Entertainment Group’s incoming chief executive officer. “Sony’s state-of-the-art 4K systems produce the highest levels of resolution contrast and overall image quality.” Approximately 1 500 of the Regal screens will also be outfitted for 3D digital projection using Sony’s newly introduced dual-lens adaptor technology. “Regal has always been at the forefront of merging technology with entertainment to create a dynamic movie-going experience ” said Gary Johns vice president and head of Sony Electronics’ digital cinema business. “The innovative design and capabilities of the 4K projectors are a perfect fit for supporting their commitment to deliver not only the highest-quality 2D and 3D digital projection but also alternative content live theatrical events and more.” The Regal-Sony announcement clearly caught the digital cinema world by surprise so much so that the immediate response from many when I broke the story four days before the official announcement was to assure me that I had to be wrong. There has been some speculation that Sony given its own internal economic situation offered Regal such an attractive deal that they simply couldn’t afford to say no. If that’s the case and Sony can deliver what it says it can for the price it quoted then congratulations to Sony and Regal. That’s how business works especially in tough economic times. There has also been some speculation that the announcement will not stand the test of time and that Regal may in fact change its mind in the end. Regarding that I have no reason to predict one way or the other and I wasn’t able to put that or any question to a Regal executive. No Regal executives were available to be interviewed for this article despite several requests. Regal’s PR department attributed the situation to vacation schedules and the Memorial Day holiday weekend here in the States. That may have been the case or it may have been the fact that Regal as a company felt that not commenting further at this juncture was simply the right thing to do. What is perhaps not widely known is the fact that the Regal-Sony announcement was delayed for several days at Regal’s request. Their reason? They wanted the time to send executives around the country to deliver the news in private and in person to Sony’s competitors many of whom continue to supply the technology that is driving the digital screens in Regal’s theatres today. Those 2K DLP competitors – Barco Christie and NEC – all of whom individually currently have more projectors installed in theatres than Sony does were understandably stunned by the news. “It was a surprise. I was taken aback and to some degree confused given the positive experience [Regal’s] had with DLP ” said Jack Kline president and COO of Christie Digital Systems. As the market leader Kline said the decision which he called “a leap of faith” was especially surprising because 2K DLP is a proven technology whereas Sony’s 4K LCOS has yet to stand the test of time. He said Christie currently has at least 4 000 projectors installed in the United States compared to in his estimate Sony’s 500. “We understand what the industry needs ” he said. “There are a lot of puzzling factors here ” said Kline. One is the fact that since AMC and Regal often compete in the same markets the fact that both now can offer 4K negates any supposed marketing advantage that 4K might provide versus 2K. “Where’s the advantage? What has Regal accomplished?” Kline asked. A second thing that puzzles Kline is the fact that the announced deal includes both projectors and servers and he questions the wisdom of working with a single technology vendor – any technology vendor – across a company as large and diverse as Regal. Kline said a third puzzling factor is that he believes LCOS technology cannot deliver even 2K resolution when projecting 3D which he noted is “the real benefit in exhibition today.” Fourth is Kline’s claim that 4K LCOS is much more expensive to operate and maintain than is 2K DLP. Asked if Christie would make a counter proposal Kline would only say “We have a very close relationship with Regal. We’ll do what the market requires us to do.” For now Kline suggested he would take a wait-and-see attitude toward the announcement and said that Christie would continue to do business as usual: “Christie DLP is still the leading technology. We’re completely confident in our technology. We’ve established the bar and that bar’s pretty damned high. We’re going to stick to our knitting.” Jim Reisteter NEC’s general manager digital cinema called the Regal announcement “unfortunate news. It was a shock.” But he added “We’re going to continue to support Regal which currently has some 250 NEC 2K projectors running successfully throughout the chain.” Reisteter dismissed as “marketing hype” Sony’s contention that 4K is dramatically superior to 2K technology. “There is no objective evidence that 4K is better ” he said. “Having said that we have to tip our hat to [Sony]. I can’t take anything away from Sony. They’re certainly on a roll. They’ve made it more competitive.” Reisteter said that NEC hasn’t given up on the possibility that Regal might change its mind about the Sony deal or at the very least consider continuing to also work with more than one vendor. He said it’s possible that NEC would still make a counter proposal to the one Sony has made: “We’re certainly looking at that.” JP Tanghe Barco’s vice president corporate communications called the Regal-Sony announcement “surprising” mainly because DLP 2K technology has been tested and been proven reliable for many years on thousands of screens worldwide while Sony’s 4K technology in his words “has not been proven yet.” Tanghe said exhibitors should consider that and other factors when deciding which technology to buy. Cost of ownership is one and he suggested that 2K technology is more cost-effective than 4K. Next he asserted that Sony’s 4K projectors don’t deliver as much light as their 2K competitors and noted that even more light is required to deliver 3D successfully. “Sony needs two projectors to do 3D ” Tanghe said. Tanghe would not comment on rumors that Barco is making a counter offer to Regal or that Barco is close to finalizing a deal with Cinemark. He simply said “It is normal that you fight for any business. We have a leadership position and we intend to keep it.” Of particular interest to the OEM vendors and the industry at large is just how Texas Instruments will react to the announcement. Nancy Fares manager DLP cinema products at Texas Instruments said her company is quite capable of making 4K chips now but believes that 2K is the right technology for digital cinema today. “We know exactly how to do 4K and more today ” she said. “But it remains to be seen if now is the right time to bring 4K to market. We believe we are the technology of choice for exhibitors – the best choice.” She noted that the news is still fresh and the situation needs to be evaluated. “We’re digesting the news ” Fares said. She said the renewed Sony competition would only make Texas Instruments better. “It’s going to make us sharper ” she said adding “We’re going to win [Regal] back.”
