Thomson Positions for a Digital Cinema Future

by Michael Karagosian
©2001 MKPE Consulting All rights reserved worldwide
Written for Digital Cinema Magazine, Jan 2001

Technicolor has a long history in the movie business. Philips Broadcast is a well-recognized name among digital postproduction professionals. Thomson Multimedia SA recently acquired both of these companies, and that alone should be enough to pique the interest of digital cinema professionals. Add in alliances with Carlton Communications, Qualcomm, and Alcatel, however, and you've got a powerful group of companies whose technologies--if combined in the right ways--could have a potentially major impact on the future of digital cinema on several fronts.

On December 11, 2000, Thomson Multimedia SA announced a preliminary agreement with Carlton Communications plc to form a strategic partnership. At the core of the deal is the sharing and reallocation of resources related to digital television, interactive TV, and media services. All well and good, but the digital cinema world took special note that part of this "reallocation" of resources was Thomson's acquisition of Technicolor from Carlton. This was all the more notable considering that the previous week Thomson announced a preliminary agreement to acquire Philips Broadcast. And earlier in the year, Thomson entered into a joint venture with Alcatel to form Nextream--dedicated to the high-growth interactive video networks market, an area not dissimilar to the kind of networking needed for wide-bandwidth digital cinema distribution to theatres. Let's look closer, starting with Philips.

Philips Broadcast is comprised of several businesses, including those engaged in cameras, digital telecine, signal processing, media networking and control, and systems. This group is a leader in the high-end digital postproduction world, the developer of such technologies as the Spirit DataCine, the VooDoo D-6 uncompressed media recorder, and the recently introduced LDK 7000 digital cinematography camera. Many of the top digital post facilities currently favor the Spirit DataCine as the ne plus ultra in converting film-based images to digital data. Likewise, the VooDoo Media Recorder, with its compressionless recording and 12 discrete channels of digital audio, is a popular choice for digital cinema mastering. And the LDK 7000 HD camera, introduced last year at IBC, applies Philips' custom CCD-designing expertise to the quest for film-like acquisition in digital cinematography. These are plum technologies at a time when filmmakers and studios are getting into the business of generating, processing, and distributing movies as beautifully crafted bitstreams.

High-end digital cinema gear aside, Philips Broadcast also manufactures broadcast cameras, switchers, routers, that compete with similar products from Thomson Multimedia. This would seem a redundancy until one observes what seems to be a more profound strategy at work here. Over the past 15 years, Thomson Multimedia has been on a steady growth path. Once known as a maker of television sets--which include the familiar U.S. market brands of RCA, GE, and Proscan--Thomson is now the world's fourth largest producer of consumer products. In their effort to expand their reach in the professional market, Thomson last year announced a new business unit, Digital Multimedia Solutions, focused on providing business-to-business digital content solutions for broadcasters, content providers, network operators, and advertisers. Philips Broadcast is expected to become a major holding in Thomson's Digital Multimedia Solutions (DMS) division. "The idea is to build an aggressive and formidable presence," comments Jeff Rosica, VP and GM of Philips' North American Sales Operation. "This will allow us to combine the strengths of both companies into a formidable group. We'll take our technology, R&D, and product development and put it together. We'll have very aggressive offerings for digital cinema."

Up until recently, Thomson's entire portfolio has been built around product manufacturing. Their recent deal with Carlton that gives them Technicolor might seem like an unusual move for their DMS division. After all, Technicolor is a world leader in processing and distributing motion picture film, and they are the largest independent manufacturer and distributor of pre-recorded DVDs, CDs, and videocassettes. But consider what happened decades ago to the railroads; they lost out to air travel when they failed to realize that they really weren't in the train business, but the transportation business. Thomson, on the other hand, appears to understand that Technicolor is in the content packaging business. It's worth noting where Thomson chose to partner rather than to buy outright. Carlton, a content producer with satellite capabilities is a strategic partnership. So are Nextream with Alcatel. Philips retained its Digital Networks division.

Then there's Qualcomm, and its Technicolor Digital Cinema division, a joint venture with Technicolor. This venture is committed to producing an end-to-end solution for digital cinema exhibition. Qualcomm, which is best known for their CDMA cellular telephone technology, is a newcomer to the entertainment industry. Having developed their ABSDCT compression scheme for government use in the early 1990's, they are now engaged in a focused effort to market it to the professional entertainment world.

As the core of that effort, Qualcomm is about to introduce a chip capable of both decryption and decompression, two very important functions for digital cinema exhibition. Placing these functions on a single chip is a brilliant step toward ensuring the security of the content. But Qualcomm's plans could be upset by the MPEG Digital Cinema Group, should they choose a compression algorithm other than ABSDCT. This will remain a challenge for both Qualcomm and Thomson.

As an ISO 9000-qualified company, Qualcomm brings considerable manufacturing know-how to the partnership. But neither Qualcomm nor Technicolor have needed experience in cinema product marketing. Fortunately this is a role that Thomson, along with newly acquired Philips Broadcast, can quite capably fill. As for the distribution side of digital cinema, Thomson again wins. Both it and Philips have expertise in routing and digital transmission. Securely managing and packaging first-release content will also be a service in demand, and Technicolor is well positioned to be a leader in that market.

What could still be missing in the bundle, though, is the expertise in digital rights management (DRM) and key management required for the electronic distribution of movies. Given that first-run content will be strongly encrypted, moving encrypted files about while maintaining the security of the content is a no-brainer. The crux, however, of maintaining secure distribution in a business-to-business environment is the management of the encryption keys. They who hold the valid keys have access to the content, and managing those keys securely is probably the most important service to be provided in the electronic distribution of digital cinema. How will Thomson handle this if their new holdings can't deliver? If their recent activity is any sign, expect another acquisition or partnership soon in DRM.

Whatever happens, Thomson Multimedia and its allies are worth watching as an emerging player in digital cinema. They have the technology "puzzle pieces" for a digital cinema future in which one group could dominate the tools to produce, post, distribute, and exhibit content (sans projection). But can they integrate those "puzzle pieces" so that they make a pretty picture?