December 2010

Dear Industry Friends

We have been contacted by numbers of you in recent months asking a variety of questions about the status of our business and issues surrounding the VPFs. In particular, we are concerned that information has been provided directly to some of our clients that DCN is no longer operating and that you should hand your business over to other providers.

THIS INFORMATION IS NOT TRUE.

We thought it might be helpful to respond to some of your most frequently asked questions below. PLEASE forward this email to other cinema owners, suppliers, and industry colleagues. DCN is keen to ensure that accurate information reaches independent cinema owners. If you have any questions at all, please telephone me directly and I am VERY happy to speak with you personally.

The rumors about our status seem to change over time. One rumor doing the circuits mid year was that we no longer existed because we'd been bought out. In recent months we have heard from clients that they have been told we were no longer viable and no longer trading. Let's deal with these one at a time.

Has DCN been bought by Omnilab?

ABSOLUTELY NOT. Omnilab approached DCN and expressed an interest in purchasing us.

Many of you telephoned DCN in the middle of 2010 saying you'd been told we were sold. We were not sold. We didn't feel that Omnilab's offer was commercial and the sale didn't happen. We did not make public the news that Omnilab had approached us, so we can only presume that the news came from somewhere else. We only learned in mid 2010 of a presentation at the ICAA conference in March 2010 where the 'sale' was apparently discussed.

Is DCN still trading?

YES! ABSOLUTELY. DCN is still trading. We continue to sell equipment, support our customers, and develop our technology. We are looking to expand and improve our network across Australia. Please ignore any malicious or sneaky gossip that we are closed, are closing down, are out of business, are finished trading, or that we are no longer servicing our clients. These rumours are not true.

Why weren't the VPFs signed in July like ICAA said they would be?

In July this year DCN was ready to conclude and sign the VPF contracts that DCN’s director, Michael Smith, had been negotiating for two years. At this time, we discovered that Omnilab's name had found its way onto our VPF contracts. We learned that Omnilab, was planning to sign the VPF contracts that DCN had negotiated.

In September 2010, DCN commenced legal proceedings in the Federal Court against Omnilab. The trial of DCN’s claim against Omnilab is due to commence in February 2011.

Omnilab has lodged a cross-claim against Michael Smith associated with the same court proceedings.

Michael resigned as a director from DCN some weeks ago.

We are angry and disappointed that the VPF opportunity has been put in jeopardy for independent cinema owners. Martin and James Gardiner have been working for decades in the digital media field, and are keen to see a VPF arrangement roll out that took into account the needs of independent cinema owners.

What is happening with the VPFs?

DCN is continuing to negotiate with the U.S. studios for VPF contracts for independent cinemas in Australia. Martin Gardiner met with the studios in mid December. Our position on the VPFs has not changed since 2008, when we announced that we were negotiating for the contracts. Unfortunately now, the studios have made it clear that they will not complete negotiations with DCN because of the confusion that has occurred. They have indicated that they will not sign any VPF deal until the legal matters in Australia are resolved.

Who are DCN's directors now?

DCN was formed by Martin Gardiner, James Gardiner, and Michael Smith. Associated with the issues that have come to light with regards to Omnilab, Michael has recently resigned as a Director of DCN.

Where does the current situation leave DCN?

Many of you who know James and I are aware that we have been working in the digital film industry for more than twenty years. We have a heartfelt and long term commitment to independent cinema owners. We value our relationships with you, and have worked hard to help our customers with the migration to digital technology. We established DCN because we believed there was a real opportunity to pursue and secure the VPFs with Hollywood Studios, and at the time (2008) no other company was prepared to commit the time and resources for independent cinema owners. We commenced the business with Michael because we believed he was committed to the same goal.

Our track record in the independent cinema industry is a tangible one - we have rolled out screens across Australia and New Zealand, and we have developed and own much of the technology for networking and monitoring. Our clients can be reassured that, this Christmas, like every other day of the year, we stand behind our 'Digital Cinema Network'. This online network makes us instantly ready to support your venues.

We developed our products in Australia in response to the feedback we have received from all of you over many years.

DCN is backed by digitAll pty ltd. digitAll is a leading digital cinema development & technology company whose technology is used to run the Australia & New Zealand Network. digitAll supplies eCinema, DCI & networking technology and products around the world, including major networks running in the USA and India.

DCN has every intention of seeing the VPF negotiations through. DCN also has every intention of seeing through to conclusion its legal action against Omnilab.

Any other questions?

DCN depends on the goodwill we have garnered over many years with our clients and industry partners to create solid, long term relationships of trust.

If you have any questions at all about the business or the issues that have occurred, I encourage you to contact me in person. It is important to us that you have the facts about us, rather than the half truths or overt untruths that are 'doing the rounds' at the moment.

We would appreciate you telling anybody who relays to you that DCN is no longer operating or ‘on the way out’ that their information is simply wrong and that they should contact us directly to get the facts.

Thanks

Finally, we want to send you our best regards for the holiday season. We also want to acknowledge all of those customers and industry stakeholders who have provided support to us, in large and small ways, especially over the last six months. We wish you well and thank you from the bottom of our hearts.

Warmest Regards,
Martin Gardiner
Managing Director, DCN.

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