3.6 RED Digital Cinema

The entire process of movie-making was revolutionized in the 2000s, with digital gradually replacing film as the primary recording medium. Digital allowed for very much easier editing and image manipulation, considerably less bulk and greater cost-effectiveness, while the quality gap with conventional film has gradually closed. RED Digital Cinema was founded in the USA by Oakley sunglasses’ head Jim Jannard shipping their first digital cinema camera in 2007, the RED ONE (www.red.com/). Unusually, product development involves engaging prospective customers via a discussion board, in which Jannard regularly personally participates (see http://reduser.net/). This has resulted in a great deal of interest and customer buy-in and, by the more enthusiastic users, in hero worship of the founder of the firm. This is an official account:

Disruptive, revolutionary, game changing, paradigm shifting, visionary, challenging, rule breaking, irreverent. All are adjectives used to describe the technology and the pioneers that envisioned a true digital evolution of film, the minds behind RED. HD was a step backwards, offering less, not more, resolution than 35mm film. Modest steps along the path of innovation had to be leap-frogged. When the RED ONE was first conceptualized, the technology didn’t exist to build it, recording solutions didn’t exist to capture it and no one thought it was possible. No one except for a small band of people not smart enough to know that it couldn’t be done. As with all revolutions, the RED revolution came with new rules, new solutions, and best of all, a new community of followers. One of the most significant departures from conventional marketing, pioneered by RED, was the concept of direct communication with its leaders. Here, unlike any camera company before it, a two-way dialogue has been established between the customer and the people responsible for the development of the product, most notably the owner and visionary himself, Jim Jannard. To have a finger on the pulse of the company, to engage in direct conversation with Jim and to learn the latest news at RED, your first stop should be the RECON thread on REDUSER. This extraordinary online relationship, creating a virtual roundtable of discussion, has been instrumental in the development and the advance of the art that is RED.

Source: www.red.com/learn

There is little doubt that RED shook up the somewhat conservative and closed world of cinema camera manufacturers. At roughly a similar time, a further threat to the latter emerged. Conventional 35mm single lens reflex (SLR) camera-makers such as Nikon and Canon had moved into the digital world, replacing film with digital sensors. As digital recording eliminates the need for bulky film stocks, it was soon possible for Nikon and Canon to offer motion picture recording facilities as an integral feature of their new digital single lens reflexes (DSLRs). While high-quality DSLRs were very much cheaper than professional cine cameras, they still came at a premium and proved a very lucrative line for Nikon and Canon.

Spotting an opportunity, Jannard announced a digital SLR (DSLR) ‘killer’, which metamorphosed into the Scarlet and Epic camera family. The new camera prototypes soon exhibited difficult-to-solve ‘bugs’.

However, more serious was their original decision to outsource actual production to Foxconn, a Taiwanese firm that employs almost a million workers at its electronic factories in China (see the case study in Chapter 8). Foxconn was, and remains, the main manufacturer for Apple. To a large extent, its competitiveness is based on very low manufacturing costs, in turn due to low wages and large-scale mass production. Foxconn has been embroiled in numerous labour scandals in recent years, including the usage of child labour, low wages and long hours, and allegedly high levels of stress being imposed on workers by demanding working conditions. Finally, a string of worker suicides and other protests rocked Foxconn plants. While Apple appears to have been undaunted by the reputational risks posed by such developments – periodic stated commitments to promoting better labour standards notwithstanding – RED was more deterred. Not only was the usage of labour under such conditions seen as detrimental to RED’s brand and ethos, but prospective RED customers were pressing for deliveries of the Scarlet camera, at a time when it looked as if the protests would make Foxconn a less than perfectly reliable partner.

In a web forum, Jannard stated:

I have started two companies … Oakley and RED … and have never seen anything like this in 35 years of business. We will get past these obstacles. No question about it. But we are going to need patience from our customers … We have been a ‘lucky’ company up to this point … Trust me when I tell you that we have been humbled … So what does this mean? Obviously another delay … To compound matters, the company (Foxconn) that was to make Scarlet has made an incredible announcement recently and has significant issues ... RED has pushed the envelope in every way. We have pushed ourselves and our competitors. We have laid out a roadmap for everyone what the future of image capture should be. I can only hope that counts for a bit of your consideration.

This highlighted a major problem of RED against the likes of Nikon and Canon; its HR strategy had centred on a small, highly skilled design and technical staff in the USA and had hoped to outsource the bulk of production, saving on labour costs and the challenges of managing a large workforce. In turn, this made its goal of humbling Canon and Nikon somewhat over-ambitious, especially as the latter continued to make headway into the cinema market in the interim.

Jannard has acknowledged: ‘The past couple of years we have been on a roll. Humility has now set in. Until we solve this one … we are heads down and nose to the grindstone. Probably not a bad lesson for us to learn.’

After the Foxconn debacle, RED decided to produce its new cameras in the USA, a move that will allow very much closer oversight of the production process and labour standards, and a tighter integration between design and actual manufacture – a valuable advantage in a rapidly changing industry.

The inevitable increases in production costs have meant that the new Scarlet camera is rather more expensive than initial estimates. Jannard has responded by saying that those using (significantly cheaper) DSLRs for filming ‘should be ashamed of themselves’ and that RED will not seek to cater to ‘hockey moms’. However, somewhat disturbingly, two of the world’s most prominent lens makers, Carl Zeiss and Schneider-Kreuznach, have begun to make cinematic quality prime lenses designed to be used with Canon and Nikon DSLRs. Against this, RED has begun to make slow inroads into the premium still photography market, with photographs shot with RED cameras appearing on the covers of leading fashion magazines.

RED’s main competitor in terms of professional movie cameras is the industry leader, Arri (www.arri.de/). Arri is in many respects a traditional German-based manufacturing company, with much of the process of production being conducted in-house; the firm has over 12,000 employees. Arri’s main supplier of lenses is Carl Zeiss, again a German company, with much of the production again taking place using a highly paid workforce in Germany. Outsourcing to China would have enabled RED to seize an advantage in cost terms. Over the years, the secret of Arri’s success has been incremental innovation, gradually improving the reliability of the quality of its core products, aimed at professional cinema photographers, not ‘computer geeks’. The digital revolution posed major challenges to Arri. Its initial response was to develop one of its existing camera platforms into a digital one and to offer scanning services from film. However, rapid inroads by RED into its market share led it to develop a new digital camera, Alexa. Taking a leaf out of RED’s book, the new product has its own website, with associated discussion forums (www.arridigital.com/). Arri has demonstrated no wish, however, to compete against considerably cheaper DSLRs, and remains committed to its highly paid workforce in Germany.

Questions

1. An attempt to outsource production to China did not work for RED. Why do you think this was the case? Is outsourcing the only option for other hi-tech companies making consumer electronics, such as Apple? If so, why, and if not, why not?

2. What do you think are the benefits and costs of the alternative approach by Arri, of building much of their expertise and manufacturing capabilities in-house? Which organization do you think is likely to be more successful in the long term and why?