Blu-ray Replication Capacity Growth Trends

[Kosty]

Thought it might be useful to have a master thread on articles talking about Blu-ray replication capacity and yields including BD50 replication and growth in smaller replicators gaining some Blu-ray capacity as time goes on.

[Kosty]

previous BD50 replication thread RIP here

Rumor: BD50 Shortage?

The industry has seemed to moved beyond that time and major studios seem to be having little issue in getting dual layer Blu-ray capacity to meet there immediate needs and 4Q 2008 production of The Dark Knight seems to be a turning point.

As more capacity is available the more flexibility studios and replicators have to shift things around and even leave a Just In Time production capacity to meet unanticipated demand. Also with more capacity available, larger more economical production runs can be made and discs stockpiled for future use.

[Kosty]

http://www.homemediamagazine.com/rep...ixed-bag-15327

Ancillary Business a Mixed Bag


By Chris Tribbey | Posted: 10 Apr 2009
ctribbey@questex.com


Recent months have seen a combination of two things that are bad for any business: a drop in demand and clients who can’t pay. So says Andy Forman, VP of sales for DVD and Blu-ray Disc replicator Expedia Media in Anaheim, Calif.

“In general, January and February were horrible. March picked up pretty good, and it’s carried into April, but not enough to make up the numbers,” he said. “But the biggest problem has been collecting from clients. A big, good client for 10 years is into us for six figures.

“We’re getting beat up in that regard.”

DEG: The Digital Entertainment Group reported 2008 saw DVD sales down 9%. And 1,200 fewer DVDs were released in 2008 compared to the year before, according to The DVD Release Report. The drop-off is being felt by replicators big and small.

“It’s really a mixed bag,” said Paula Tait, EVP of sales and marketing for Precise/Full Service Media in Ontario, Calif. Precise handles replication, packaging and distribution. “Some of our clients are actually increasing both the number of titles and the volume … but some of the smaller replicators are in trouble. The cost of the physical goods, the licensing costs … it’s definitely hurting some people.”

Dublin, Ohio-based Zomax had to cut more than 100 employees in January. In November, Clearwater, Fla.-based Evatone filed for bankruptcy. Both Cinram and Technicolor posted big losses for 2008, with Cinram laying off 200 employees in March.

“The decline in EBITA (earnings before interest, taxes and amortization) was the result of lower average selling prices for DVDs, which coupled with lower unit volumes are the two main drivers of Cinram’s profit margins,” said CEO David Rubenstein, while reporting a $33.8 million annual loss. He resigned at the end of March.

“There’s been some consolidation,” said Ed Virgie, president of Biddeford, Maine’s Media Services Group, which sells replication equipment and helps with replication plant set-up.

He said that from 2000 to 2001, the per price replication costs for a DVD was halved from $2 to $1, due to the competition. Today a DVD-9 will cost less than 50 cents, he said.

“There’s definitely been consolidation in the market and price degradation,” said Ryan Anderson, director of North American sales for Carrollton, Texas-based replicator Duplium. He said that his company is doing well during this recession, thanks to Duplium’s diversification in services it offers.

“It’s gotten cutthroat out there,” Anderson said. “In this industry, you need to do more than the traditional.”

Those who seem to be doing well are offering suppliers a one-stop shop. If you can cut a warehouse shipment or two and do your replication, packaging and printing in one spot, it’s better business, replicators said.
“Diversify, get into fulfillment, packaging, anything to make you stand out,” Virgie suggested.

One thing that isn’t standing out with smaller replicators is Blu-ray Disc.

“The whole Blu-ray Disc cycle hasn’t really taken off yet, or filtered down to the smaller, mid-size replicators,” Virgie said.

That was confirmed by Technicolor in March when its parent company, Thomson, blamed a nearly 31% year-over-year drop in profit due largely to lower worldwide volumes and price declines in physical medias, not offset by the growth in Blu-ray and distribution. For 2008, Technicolor’s DVD replication volume was down 5%, and Thomson posted a loss of $2.49 billion.

Expedia Media is unique in that it has BD25 lines, and is getting ready to install two BD50 lines. Sony DADC, Cinram and Technicolor handle most of the Blu-ray work for the industry.

“It was cost prohibitive for us, but we needed to step up to keep our installed base, our key studio partners,” he said. “If the current trends for Blu-ray continue, it will help our business.”

One area that seems to be doing well: green packaging. David Beschen, president of GreenDisk in Issaquah, Wash., called his business “booming,” adding that in the past 18 months his company has added 150 or so clients in the home entertainment industry.

“Retailers are dictating it, but people are paying more attention to the environment, and as it turns out, being environmentally conscience is economically smart. You eat what you kill, and don’t waste anything,” he said.

Expedia Media is unique in that it has BD25 lines, and is getting ready to install two BD50 lines. Sony DADC, Cinram and Technicolor handle most of the Blu-ray work for the industry.

Thats news to me. Two BD50 lines at anywhere beside Cinram Technicolor and Sony DADC would be the start of a good trend.

[Sbert]

Are there any plants in mexico? My Old School Blu-ray had a sticker on it that said disc made in mexico.

[Kosty]

Originally Posted by Sbert

Are there any plants in mexico? My Old School Blu-ray had a sticker on it that said disc made in mexico.

News to me. Maybe BD25 machines. As fair as I know all BD50 lines currently used for studio production in the USA are at Sony DADC , Cinram and Technicolor at the moment.

[Sbert]

Originally Posted by Kosty

News to me. Maybe BD25 machines. As fair as I know all BD50 lines currently used for studio production in the USA are at Sony DADC , Cinram and Technicolor at the moment.

I _ALMOST_ thought about taking a picture of the sticker for the board, but I didn't because I was thinking that would be a bit to OCD.

[Kosty]

OCD Obsessive-Compulsive Disorder

LOL

Like that would bother someone like me who has a virtual hobby of keeping track of Blu-ray Disc sales statistics each week for the last few years and keeps a browser window open to this site when he's online.

Bring it on brother.

[Ben]

Originally Posted by Kosty

...keeps a browser window open to this site when he's online.....

Nothing like being a hog on the bandwidth.

[Kosty]

This is the best place for any discussion of BD50 or other Blu-ray yield or replication capacity issues.

[comixguru]

There's an interesting article at DVD Intelligence with some specific replication info:
Packaged Media Still Good Business, But No Room for Complacency

Relevant section:

The Blu-ray session brought to the forth – once again – the “extortionate” cost of AACS licensing for independent replicators, and the challenges of competing against Sony DADC.

“The AACS charges four times,” says a disgruntled Laurent Villaume, CEO of French replicator QOL. “A licensing contract for the publisher, a license for the replicator at $15,000/year plus a $1,250 key per title, and €0.03 per disc. Given that piracy is taking away a lot of revenue potential, spending all this money on AACS is ridiculous, especially on catalogue titles.” This AACS cost is an obstacle to the growth of BD, because a number of independent publishers would like to release movies, but the fixed cost is too high particularly at this point in time when sales are still modest.

Screen Digest invited AACS LA to answer these concerns, but “the anticipated imminent release of our final specifications and the licenses prevented us from coming to PEVE,” said the Los Angeles-based organisation in a fax that repeated nearly word-for-word the message sent to PEVE the previous year. “We are confident that our soon-to-be-released final documents will demonstrate our determined efforts to make AACS even more accessible to all who wish to participate to the Blu-ray market,” the fax concludes.

Not only is authoring and premastering of a BD disc complicated operations, but having to redo a test disc because of a mistake, however small, requires a new, expensive AACS key. “It’s already a complicated process and very expensive for smaller content owners,” notes Chris Nealy, VP European Operations, Sonic Solutions. “The system is set up for the big studios. It needs to be affordable to smaller studios. After all, DVD became a big success when it spread outside the Hollywood studios. AACS LA needs to reflect this reality.”

Delegates were reminded, however, that the AACS keys of all BD titles have been cracked and available on the Internet. And the optional BD+ protection has been compromised as well. Macrovision, who owns the BD+ technology, said that their extra security layer acts as a speed bump, letting the legitimate copy enough breathing space before the pirated copy eats into the revenue.

Another recurring theme is the difficulty for independent replicators to compete with “BD inventor, manufacturer, distributor” Sony DADC – who control nearly 90% of the market. “A level-playing field via a global licensing system for disc and players is in order,” said QOL’s Villaume. “I had feared that some companies did not want to play the BD games on the basis of the sharing of royalties.” He now welcomes the new partnership Sony has joined with the other French companies.

With a monopoly on the manufacturing side, Sony DADC does not make it easy for the other replicators to commit the huge investment necessary,” argues Jean-Michel Cathonnet, VP European Logistics & Distribution, Cinram. “If Hollywood studios will not share their production requirements with independent replicators with local knowledge, as was the case with VHS, they will be faced with a dearth of capacity as DVD replicators will have little incentive to convert to Blu-ray.”

It remains that investment in BD facilities is huge, owing to the lack of competition in the provision of pressing tools. “We have no access to Sony manufacturing equipment. So far Singulus is the only supplier,” complains Villaume. “So, there is not downward pressure on price. A BD replication line costs €2m to press 10-12,000 BD discs per day when a DVD line cost €800,000 for 35,000 disc a day.”

Costs are to be expected to be higher at this time, I think. They should decline over time. Curious information about Sony's capture of most of the marketplace in connection with the comments from Cinram and QOL. Although the Cinram quote looks like it easily could be placed here out of context.

[Kosty]

http://www.homemediamagazine.com/rep...tops-17m-15584

nwedel@questex.com

Cinram Q1 Loss Tops $17M


Lower priced DVDs and fewer unit shipments contributed to Cinram International posting a first quarter (ended March 31) loss of $17.6 million compared to income of $7.6 million during the previous year period.

The Toronto-based replication company said revenues fell 19% to $303.2 million from $373.8 million last year.

Home video revenue, which includes replication and distribution of DVDs and Blu-ray Disc, was down 21% to $220.6 million from $279.5 million in 2008 due to lower DVD replication volumes in North America combined with lower selling prices globally.

Cinram replicated 215.6 million DVDs in the quarter, including units associated with the DVD contract signed with Universal Europe in 2008, compared to 262 million units in 2008.

Blu-ray Disc replication revenue increased to $4.4 million from $4.3 million in the comparable 2008 period.

Music CD revenue was down 30% in the first quarter to $37.1 million from $52.8 million in 2008 in line with a corresponding decline in replication volumes.

Revenue from the video game replication was up 8% to $23.6 million in the quarter from $21.8 million in 2008, reflecting organic growth in the market.

As previously reported, CEO David Rubenstein resigned as a trustee and officer of Cinram, effective March 31.

[SRW1000]

Originally Posted by Kosty

http://www.homemediamagazine.com/rep...tops-17m-15584

nwedel@questex.com

With the increase in BD sales from Q1 2008 to Q1 2009, they only managed a little more than a 2% increase in revenues over last year? Does that sound possible?

What am I missing? Is Cinram's BD market share dropping?

Scott

[Kosty]

No but Techicolor is adding capacity and Sony DADC still has the giant share of BD50 capacity that exists. Cinram is pretty much running its available BD50 lines full out despite this being the stage that DVD lines go dark for lack of work.

Maybe its an accounting thing or somehow is accounting for them adding capacity. They have more lines now than they did back then and they are running them harder so they are generating far more units. There must be some sort of lag or accounting offset in play.

[SRW1000]

Originally Posted by Kosty

No but Techicolor is adding capacity and Sony DADC still has the giant share of BD50 capacity that exists. Cinram is pretty much running its available BD50 lines full out despite this being the stage that DVD lines go dark for lack of work.

Maybe its an accounting thing or somehow is accounting for them adding capacity. They have more lines now than they did back then and they are running them harder so they are generating far more units. There must be some sort of lag or accounting offset in play.

If it would be a lag, the difference should be even more dramatic, considering how many more units were sold in Q4 2008 vs. Q4 2007.

They have more units running, it's probably safe to assume that the yield rates have increased as they get further along in the learning curve, and sales are up. There should be much more than a 2-3% increase in revenue.

If it were some other kind of accounting thing, you would expect to see a similar effect on video game replication, but that's the opposite (video game sales were flat from 1Q 2008 against 1Q 2009), yet replication rose 8%, according to the article.

Now, there's some danger in linking retail sales by quarter to wholesale production, since there is a bit of a lag there, but a 2-3% seems suspiciously low, looking at market place demand.

Scott

[Kosty]

Bit of a mystery to me too. I know that they have been running at high capacity for their Blu-ray lines and have been doing production in advance of some 2009 releases and I also believe, just wink wink hinted but not confirmed, some repressing of some already released Blu-ray titles in anticipation of additional 2009 and 2010 demand.

I also know the size of their 2009 Blu-ray production runs have been greater than most runs of 2008 except for The Dark Knight.


Their traditional DVD and announced Blu-ray studio clients have announced and have released and have sold a lot more Blu-ray units (almost double) than they did in 2008. so that little a gain in Blu-ray revenues claimed is a bit mysterious to me also.