Despite DVD Replication Rebound, Technicolor Transitioning Biz to Include Vinyl Records

Paris-based packaged media replication giant Technicolor continues to diversify business strategies, including transitioning away from the DVD, Blu-ray Disc and music CD markets to focus on vinyl records.

The “DVD Services” segment changes, which also include microfluidics (opening new lab/production facility in Poland) and supply chain fulfillment (i.e., transportation), now focus heavily on vinyl replication. Technicolor said it has contracts with three major U.S. record labels, and two independents.

Indeed, for the first time since 1996, both music CDs and vinyl music records experienced revenue growth in the same year in 2021, according to year-end data from the Recording Industry Association of America. The resurgence in vinyl continued for the 15th consecutive year, as revenue grew 61% to $1 billion. The last time vinyl exceeded $1 billion was 1986. Vinyl accounted for 63% of revenue from physical formats, and 7% of total music revenue.

“As we reposition the disc activity into a volume-based business … over the quarter, we made good achievement in the vinyl business,” CEO Rick Moat said on the fiscal call earlier this month.

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Meanwhile, DVD Services revenue totaled €150 million in the first quarter 2022, up 8.2% compared with the first quarter of 2021. Despite lower disc volumes year-on-year (-16.5%), revenue increased driven by the performance of new growth businesses.

In the first quarter of 2022, pre-tax earnings amounted to €5 million (vs. €4 million in the first quarter 2021) underscoring significant footprint optimization, headcount reductions and higher activity in non-disc activities. These changes were offset in part by the impacts of lower disc volumes, and higher labor costs in North America and Mexico. DVD Services continued to adapt distribution and manufacturing operations, and related customer contract agreements, in response to continued volume reductions.

In 2022, higher year-on-year new-release volumes are expected as theatrical attendance continues to normalize, but this will be slightly offset by lower catalog sales. This should be further mitigated by continuing cost efficiencies, according to Moat.

“As part of the business segment’s restructuring to accelerate the diversification of the business, the division is continuing to work on significantly expanding non-disc activities,” he said.

1936 Musical ‘Dancing Pirate’ Due on DVD and Blu-ray Feb. 22 From Film Detective

The 1936 musical Dancing Pirate will be released on special-edition Blu-ray and DVD Feb. 22 from Cinedigm and The Film Detective.

Billed as the first ever 100% Technicolor dancing musical, Dancing Pirate stars Charles Collins as a dance teacher from Boston who is tricked into joining a band of pirates, leading him to be fitted for a noose in California. He catches a break when the mayor’s daughter demands the hanging be postponed until he teaches her to waltz.

Dancing Pirate earned an Academy Award nomination for Best Dance Direction. The film features many familiar faces from Hollywood’s Golden Age, including Frank Morgan (The Wizard of Oz) as the mayor, Steffi Duna (Waterloo Bridge) as his dancing daughter and Rita Hayworth (Gilda) in an early performance as a specialty dancer.

The special-edition release features a new restoration from original 35mm archival material with a new 4K scan.

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“We are delighted to release our first Blu-ray from the recent acquisition of the late Alexander Kogan’s Film’s Around the World Library,” Phil Hopkins, president of The Film Detective, said in a statement. “This particular title was his prized possession, obtained from the famous film collector Wade Williams more than a decade ago. This important piece of film history is finally getting the proper attention it deserves.”

Bonus features include audio commentary and an original insert essay from author Jennifer Churchill; “Glorious Pioneers: The Birth of Technicolor,” an interview with author/historian David Pierce; and “Ambushed by Mediocrity: Remembering the Dancing Pirate,” an interview with film producer/historian Michael Schlesinger.

Supply Chain Crisis Impacts Home Entertainment Amid Lingering Replication Woes

The supply chain woes that are making headlines around the country are having an increasingly pronounced impact on the home entertainment business, sources say — compounding existing problems with limited replication.

Studios as well as independent content suppliers are reporting delays in bringing their product to market as the fourth-quarter holiday season nears. DVD and Blu-ray Disc sales may have been slipping year over year, but demand typically picks up as the holidays grow near. This year is no exception, particularly with catalog product, as studios continue to mine their vaults for anniversary or 4K Ultra HD reissues.

This uptick in catalog title sales is a good thing — and a bad thing. Most of the big Hollywood studios do the bulk of their physical disc replication through Technicolor, which now does most of its manufacturing work at a single facility in Mexico. (Paramount has its own manufacturing deal, with Sonopress.) And, sources say, when things get backlogged — as they invariably do during the fourth quarter — catalog titles are pushed back behind new releases. Now factor in supply-chain problems and it’s easy to see why that spectacular new anniversary release or 4K Ultra HD reissue may not be in stock.

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“It’s a huge problem,” said Bill Hunt, who as editor of The Digital Bits website closely monitors disc releases. “Almost every title is getting delayed, and those that aren’t are hard to find on street date.”

Hunt adds, “COVID is what started the supply chain issues, and they’ve basically cascaded across the economy. The Technicolor replication plant in Mexico City is at capacity, so a lot of studios are sending replication projects to Germany as well. But then shipping those discs back takes time, distributing all the discs to retail takes time, etc.

“It’s just a mess everywhere.”

“Our industry isn’t insulated from the global supply chain situation,” said Eddie Cunningham, president of Studio Distribution Services (SDS), the joint venture between NBCUniversal and WarnerMedia formed earlier this year to distribute DVDs, Blu-ray Discs and 4K Ultra HD Blu-rays from Universal Pictures Home Entertainment and Warner Bros. Home Entertainment. “At SDS, along with the rest of the industry, we have been wrestling with supply chain challenges for a number of months. We, with our many supply chain partners in manufacturing, distribution and freight, are doing everything in our power to mitigate those pressure points.

“Sometimes meeting delivery dates and keeping retail on-shelf availability at our usual high industry standards has been difficult. It is a huge focus across our company and everything in supply chain that we used to check weekly is now daily, and everything we did daily is almost hourly, as we constantly re-assess priorities.

“Our recent focus, aside of new releases and promotions, has been the fourth-quarter retail catalog resets and preparing for Black Friday, all of which looks good.”

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The trouble in getting consumer goods into stores — and consumer homes — is due to a variety of factors, including a labor shortage that is affecting all aspects of transport and shipping. This is compounded by pandemic-induced demand. In the first six months of this year, according to U.S. government estimates, retail sales rose more than 22% to $3.25 trillion.

As the World Shipping Council explains in a newly released video, “Global supply chains are a complex network connecting manufacturers, exporters, importers, rail, truck and ocean transport providers. Finely balanced, it can take a lot. But when COVID-19 closed down ports, put drivers in quarantine, the problems started. The U.S. demand spike has maxed out inland capacity, containers are tied up in storage, and vessels are stuck outside ports.”

“A lot of companies have really been struggling to get staff in these relatively low-paid jobs — pack and ship, that sort of thing,” said one high-ranking studio executive familiar with supply-side issues. “In a lot of cases, governments are paying more for them to stay at home.”

Labor shortages, he notes, have been impacting production of everything from the chips used in automobiles to the glue used to seal cereal boxes.

And even when the end product does get made, bringing it to market is a whole other challenge due to labor shortages in the transport sector. The trucking industry, for example, has long been having trouble attracting new recruits. Meanwhile, demand for trucking services has soared, thanks to the rapid gains of e-commerce — 32.4% growth in 2020, according to government statistics — and an overall rise in consumer retail spending.

More than 140 container ships are circling outside the ports of Long Beach and Los Angeles, waiting to be offloaded. “And if you figure each ship has about 1,800 of those great big containers, you can only imagine how much stuff is still sitting out at sea,” the studio executive said. “And medical supplies are the priority — not boxes of DVDs.”

Independent suppliers are grappling with their own worries, said Ed Seaman, GM of MVD Entertainment Group. These include a steadily shrinking number of smaller replicators who deal primarily in independent film.

But fewer replicators, and replication facilities, is just one of several clogs in the indie pipeline, he says.

“We’ve had some replication delays, but also lots of madness bringing goods in from Europe,” Seaman said. “The flights and capacity for cargo is scarce, and then products are getting lost, misplaced or delayed at the ports —  which, of course, is broadly publicized. This is causing release dates to be missed.”

On top of that, Seaman said, “the cost to bring goods in are nearly triple what they were pre-pandemic. Most of our suppliers and customers are understanding, but in some cases it is really straining relationships. Not fun.”

Additional reporting by Stephanie Prange.

Disc Replicator Technicolor Downplays Market Rumors

Technicolor SA Nov. 19 issued a statement attempting to quell market scuttlebutt the Paris-based entertainment tech company is about sell assets, including the company itself.

Technicolor operates a set-top box division (called “connected home”) and entertainment unit, the latter providing digital effects to movies and DVD, Blu-ray Disc replication to home entertainment.

In March, Technicolor sold its patent licensing unit to wireless provider InterDigital for $475 million. The connected home division generated 56.5% of the company’s first-half revenue of 1.77 euros ($2.02 billion).

Technicolor said it regularly reviews and evaluates strategic alternatives for its assets, whether acquisitions, combinations or divestments, in the best interest of its stakeholders.

“This may involve discussions with industry players and/or financial investors,” the company said in a statement, adding “any discussions are at a preliminary stage. No strategic decision or commitment has been made.”

The company said it would provide no further comment on rumors.

Since acquiring Cinram Corp. in late 2015 and securing outsourcing agreements with Sony DADC in North America and Australia, Technicolor has become the world’s largest replicator of DVD and Blu-ray Disc units.

The company said disc replication services would continue to maximize cash generation while continuing to develop further “opportunities.” Indeed, Technicolor said it shipped a record 1.6 billion discs in 2017.

“People want to own their favorite movies, the classics, and the blockbusters,” Rose told Forbes.com earlier this year. That’s what they put under the tree. We were the only ones who saw the growth left in this business.”

 

 

Talk of Replication Backlog Recalls Good Ol’ Days

I’m hearing rumblings from various quarters about a replication backlog on discs.

Whether it’s because of the enormous demands of the game business or just an unrecognized and continued demand for physical media during the holidays, it reminds me of the glory days of disc, when replicators could not keep up with orders.

More than one industry insider, including one from a major studio, has noted that street dates are being pushed back as major replicator Technicolor is backlogged.

The Twitter-ing is starting to show, as HighDefDiscNews.com wondered what was up with preorders for Batman: The Complete Animated Series on Blu-ray, which was due out Oct. 30 but Amazon had listed as no longer available.

“Pressing delay. They can’t fill orders by that date, so it’s getting bumped. This plant issue is starting to cause a pile-up,” came the reply on Twitter from Troy Anderson of the Andersonvision.com blog. “Right now, it seems like everyone is just trying to meet retail demands. Black Friday should be a lovely mess this year.”

Let me know if you’ve heard anything at sprange@mediaplaynews.com.

Technicolor Sells Patent Licensing Unit, Remains Bullish on Disc Replication

Seeking to streamline operating costs and reduce debt, Technicolor has sold its patent licensing division to InterDigital, a U.S.-based wireless R&D company, in a deal that value the unit at $475 million.

Paris-based Technicolor said InterDigital paid $150 million up front and will pay it 42.5% of future licensing revenue generated in consumer electronics, including deals with Sony Electronics.

Technicolor will maintain its Research & Innovation organization for its operating businesses, while engaging in funded research with InterDigital.

InterDigital will pay Technicolor $5 million annually, while investing an additional $5 million annually in internal R&D projects that are aligned with the priorities of the research cooperation.

“This agreement will allow us to fully focus on our core operating businesses and includes a collaborative research program built up on the strength of our research and innovation teams,” CEO Feederic Rose said in a statement.

Notably left off the auction block: disc replication.

Since acquiring Cinram Corp. in late 2015 and securing an outsourcing agreement with Sony DADC in North America and Australia set to begin in the second quarter, Technicolor has become the world’s largest replicator of DVD and Blu-ray Disc units.

A distinction some observers might liken to dominating newspaper publishing.

Disc replication remains part of Technicolor’s Entertainment Services division, which recorded flat fiscal 2017 pre-tax earnings at €230 million ($283 million), with revenue gains seen in the second half production services of last year due to better resource allocation.

The company said disc replication services would continue to maximize cash generation while continuing to develop further “opportunities.”

Indeed, Technicolor said it shipped a record 1.6 billion discs in 2017.

“People want to own their favorite movies, the classics, and the blockbusters,” Rose told Forbes.com. That’s what they put under the tree. We were the only ones who saw the growth left in this business.”