Can a high-tech breakthrough approach deliver novel supply and demand solutions? A study of digital cinema rollout Nigel Culkin Submitted to the University of Hertfordshire in partial fulfilment of the requirements of the degree of PhD December 2016 1 Table of Contents Abstract 5 Acknowledgements 7 Preface 8 Prologue 9 1.0 Introduction 13 1.1 Background 16 1.2 Chapter Summary 19 2.0 Technological innovation 23 2.1 Defining and contextualising innovation 24 2.2 Why firms innovate 29 2.3 Measuring innovation activity 31 2.4 Innovation as part of an evolutionary process 35 2.5 From creative destruction to technological disruption 36 2.6 Digitising innovation 38 2.7 National systems of innovation 39 2.8 Chapter summary 42 3.0 Research design 45 3.1 Research problem and justification 46 3.2 Research approach 47 3.2.1 Pragmatism 47 3.3 Methodologies and methods 48 3.3.1 Historical research 57 3.3.2 Case study research 57 3.3.3 Statistical analysis 58 3.4 Ethics 59 3.5 Chapter summary 61 4.0 Research paper summaries 63 4.1 Overview 63 4.2 Supporting papers 66 5.0 Disturbing effects of the digital cinema rollout 75 5.1 Introduction 75 5.2 From supply chain to value networks 80 5.2.1 The Limits of the straitjacket 82 5.2.2 The value of nothing 85 5.2.3 The charge of the rollout 90 5.3 The disruption of markets 92 2 5.3.1 The diffusion of digital cinema 95 5.3.2 Member state clustering 97 5.3.3 Digital diffusion curve observations 102 5.3.4 The price of cinema tickets 104 5.3.5 Film market shares, by admission 107 5.4 The disruption of learning 110 5.4.1 It’s all about the windows, stupid 111 5.4.2 A different window 119 5.5 Chapter Summary 120 6.0 Conclusions 126 6.1 Introduction 126 6.2 From supply chain to value networks 127 6.3 The disruption of markets 130 6.4 The disruption of learning 135 6.5 Chapter summary 138 6.6 Limitations and future research 139 7.0 Contribution to knowledge 144 8.0 Epilogue 149 References 152 Appendices A1. List of interviews, industry events, markets and workshops attended. 172 A2. Research model, data and methodology. 178 A3. Country clustering according to digital cinema adoption. 180 A4. Two-way mixed ANOVA model. 181 A5. Speech by Lord (Tony) Hall, Director General, BBC. 182 A6. P1 Digital Cinema: No Country for Old Entrepreneurs? 187 A7. P2 Digital Cinema: Opportunities and Challenges. 207 A8. P3 Digital Cinema as Disruptive Technology. 230 A9. P4 Getting in and getting on in Hollywood: Freelance careers in an uncertain industry.’ 246 A10. P5 Facing the digital future: Digital Technology and the Film Industry. Separate Document A11. P6 An Emotional Business: A Guide to Understanding the Motivations of Small Business Decision Makers’. 268 A12. P7 Anchor Institutions and Regional Innovation Systems for supporting micro and small businesses. 287 A13. P8 Entrepreneurial universities in the region: the force awakens?’ 297 3 List of Tables 1.1 Published works and their relationship to entrepreneurial innovation, digital cinema and national systems of innovation 20 3.1 Non-exhaustive list of events attended for data collection 51 5.1 Selected country status, 2007 78 5.2 US Studio ownership, 2016 88 5.3 Cinema indicators, 2005 – 2013 94 List of Figures 2.1 The innovation measurement framework 32 2.2 Sources of information used for product/process innovation 2010-12 40 3.1 Constituents of the conceptual framework 55 3.2 The eight published papers and their relationship to the conceptual framework 56 5.1 European diffusion S-curve of digital screen innovation Digital screens over total screens (%) 95 5.2 European digital screen penetration as at December 2008 (%) 98 5.3 European digital screen penetration as at December 2011 (%) 100 5.4 European digital screen penetration as at December 2013 (%) 101 5.5 Marginal means of digital screen penetration by adopter clustering 104 5.6 Ticket price at European box office in Euros (€) 105 5.7 Marginal means of ticket price at European box office in Euros (€) 106 5.8 Film shares in the European market by admissions (%) 108 5.9 US studios release window strategy 2006 – 2006 112 6.1 Wanda cinema group timeline (Dec 2016) 133 4 Abstract Digitalization is the process of making digital everything that can be digitised to change a business model and provide new revenue and value-producing opportunities. However, difficulties exist in evaluating the value created by digital technology investments in organisations, industry structures, economies and society, at large. My dissertation illustrates how the distinct characteristics of digital technologies are implicit in an evolution from stable to fragile product innovation; while highlighting the need for a dynamic approach to entrepreneurial innovation within national innovation systems. The foundations for my work are bound up in the digitalization of value networks, and the context for this research is digital cinema – a process that began in 2000. Digital cinema offered a new value proposition to distributors and significant cost reductions for the US studios. With a reliance on a highly developed value chain to protect intellectual property, these studios sought to learn from the disruption digitalization caused to the music industry, by cultivating digital technology as an, incremental innovation, in replacing celluloid with bytes to project content to cinema audiences. Global digital cinema penetration in 2014 stood at 90 per cent of the total screen footprint. The dissertation assesses features of this digital rollout that have been under- explored; including the role digital technology has assumed in process and product innovation; and, the behavioural responses of both incumbents and new entrants during the diffusion and adoption phase. My dissertation is supported by eight published papers, which highlight the need for domestic policymakers to focus their attention on emerging entrepreneurial innovations; the utilisation of current knowledge and strategies for novel solutions in order to strengthen their respective national innovation systems. Taken together they help explain the creation, diffusion and adoption of digital cinema, explore the new content creation opportunities they support, and explain how three nations in particular 5 have sought to innovate and reorientate themselves in relation to these novel phenomena. The wider implications of the findings of the project build on the innovation literature in examining the diffusion, adoption and knowledge acquisition during the rollout of digital cinema technology. These findings suggest a radically different reading of both disruptive innovations and national innovation systems than has been offered in previous accounts, viewing the digital cinema rollout as a case study of an increasingly mobile sector, in which technological factors retreat in importance behind entrepreneurial innovation as a key driving force in reaching audiences. Finally, in exploring the phenomenon of the digitalization of value networks I have made a significant contribution to knowledge in the design of an innovative mixed method; specifically in the area of field research - a qualitative data collection method designed for considering, observing, and interacting with individuals in their natural environments. Over time, I have established that digital cinema was capable of delivering novel supply and demand solutions - starting with a few unrelated scraps of data, through the establishment of personal networks with communities of practice (in the UK, US & Norway) to building rich, and complex quantitative data sets capable of measuring the entire diffusion and adoption phase of the digital cinema rollout, right across Europe. 6 Acknowledgements Woody Allen once said: “Life is full of misery, loneliness, and suffering - and it's all over much too soon.” I doubt if he was making a direct comparison to the process of writing a dissertation, but then you never know with Woody Allen. What I do know is that we each arrive at complex problems from different starting points and with that in mind, I thank my supervisors, Professor Keith Randle and Dr. Frank Currie. They have been gracious with their time and support throughout this meandering voyage of discovery; they also helped reduce the misery along the way. My children, Alexander and Nathalie, joined a little later and helped to take away the loneliness, especially when I found myself jumping onto the Island of Conclusions, wandering up the Mountain of Ignorance and falling in the Doldrums. Last, but certainly not least, my partner Harriet, who kindly put up with all sorts of suffering and foolishly thought that it would be over soon. Well, it is now. Nigel Culkin St Albans, December 2016 7 Preface This dissertation is based on outputs described across the following eight papers. When they are referred to in the text, for convenience I use the corresponding alphanumeric system from P1 to P8, in addition to the author surnames and dates. P1: Culkin, N. (2008) ‘Digital Cinema: No Country for Old Entrepreneurs?’ Journal of Retail Marketing Management Research 1(2) pp 44-58. P2: Culkin, N. & Randle, K. R. (2003) ‘Digital Cinema: Opportunities and Challenges’. Convergence: The Journal of Research into New Media Technologies 9(4) Winter pp 79- 98. P3: Culkin, N. Morawetz, N. & Randle, K. R. (2006) ‘Digital Cinema as Disruptive Technology’. In Van Der Graaf, S. and Washida, Y. (eds.) (2006) Information Communication Technologies and Emerging Business Strategies. Hershey: Idea Group. P4: Randle, K. R. & Culkin, N. (2009) Getting in and getting on in Hollywood: Freelance careers in an uncertain industry. In Smith, C. and McKinlay, A. (eds.) Creative Labour and the Labour Process. London: Palgrave. P5: Culkin, N. & Morawetz, N. (2004; 2005; 2007) Facing the digital future: Digital Technology and the Film Industry, [A series of three industry reports commissioned by the East of England Development Agency.