Update: New California Disc Replication Law Takes Effect January 1

A new California law that toughens existing anti-piracy regulations for the state’s CD, DVD, and Blu-ray replicators is set to take effect January 1, 2012, M&E Daily has confirmed.

California State Senator Alex Padilla, who introduced the legislation earlier this year, commented in a press release that the new law was aimed at protecting entertainment industry jobs in the state. “Those who illegally replicate CDs and DVDs undermine our economy and California’s role as a global leader in music and film,” Padilla said. “Illegal replication of CDs and DVDs steals revenue from everyone in the entertainment industry, from blue collar workers to those who walk the red carpet.”

Under the new measures (full text available here), law enforcement officers can conduct inspections of replication facilities without a warrant, and seize noncompliant discs or production parts. Replicators in the state also face stiffer criminal penalties for noncompliance than under the previous laws.

California Raises Anti-Piracy Requirements for Disc Replicators [Updated]

California Governor Jerry Brown on Sunday signed into law a new set of anti-piracy measures for the state’s optical disc manufacturing business, strengthening existing laws that require CD, DVD, and Blu-ray replicators to include source identification information on every disc they manufacture.

The new law enables enforcement officers to conduct inspections of replication facilities without a warrant, and to seize noncompliant discs or production parts. Replicators in the state also face stiffer criminal penalties for noncompliance than under the previous laws.

Full text of the new measures is available here. The legislation was introduced earlier this year by California State Senator Alex Padilla with support from the Recording Industry Association of America (RIAA).

Update: The new law takes effect January 1, 2012. “This new law is about protecting California jobs,” Sen. Padilla commented in a press release. “Those who illegally replicate CDs and DVDs undermine our economy and California’s role as a global leader in music and film.  Illegal replication of CDs and DVDs steals revenue from everyone in the entertainment industry, from blue collar workers to those who walk the red carpet.”

Fox Renews With Cinram for Replication, Distribution

Cinram has signed a new multi-year contract with Twentieth Century Fox Home Entertainment to continue serving as the studio’s primary supplier for DVD and Blu-ray replication and distribution services, across North America and Europe.

The deal extends a relationship between the companies that dates back 14 years to the VHS videocassette business.

“Cinram has a strong history of providing quality service, with unsurpassed commitment and dedication,” said Mike Dunn, President Worldwide, Twentieth Century Fox Home Entertainment, in a statement. “As the media landscape evolves, they will continue to play an integral role in our business for many years to come.”

Adding to Dunn’s comment, Cinram chief executive Steve Brown told M&E Daily that the scope of the Fox deal may well “spread” beyond packaged media in the future, though he declined to disclose specifics. Cinram is in the midst of integrating digital distribution services into its offering, having recently acquired digital media specialist 1K Studios and added key executive staff.

The current focus with Fox, Brown said, is on “making sure [the studio’s DVD and Blu-ray] in-stock rates are the highest in the industry.” Given the current dynamics of packaged media retail, Brown underscores that a fast response to “business intelligence” from the studio is playing an increasingly critical role in ensuring that Cinram delivers “the right number of units, at the right time, to the right store.”

Digital Now 40% of U.S. Music Market for Warner; Downloads Flat with Last Year

Digital products now account for 40% of Warner Music Group’s domestic recorded music revenue, though the U.S. market for downloads plateaued during the company’s fiscal 2010 (ended Sept. 30).

Domestic digital revenue amounted to $421 million for the year, up from $419 million in 2009. New albums from Michael Bublé, Jay-Z, Linkin Park, and Muse, along with the “The Twilight Saga: New Moon” soundtrack, helped sustain the U.S. digital market in 2010, as demand for ringtones continued to decline.

WMG saw a global growth for downloads in its fourth quarter, however, thanks to a stronger release schedule. Quarterly digital revenue of $183 million represented a 7% increase over the same period in 2009 for the company’s recorded music segment.

Overall recorded music revenue for the full year declined 7.1% to $2,455 million (down 9.2% on a constant-currency basis). Domestic recorded music revenue declined 11.2% from 2009 to $1,043 million.

Tapering CD demand drove the declines, WMG said. International markets helped overall digital recorded music revenue grow 8.7% over the prior year to $713 million, representing 29% of segment revenue for the year (up from 24.8% in fiscal 2009).

New Manufacturing, Distribution Agreement with Cinram

Seprately, replicator Cinram announced today that it has entered into a series of new agreements with WMG to serve as the music company’s primary supplier for manufacturing and distribution services in the U.S., Canada, and parts of Europe.

Cinram has enjoyed a supply relationship with WMG since 2003, when the company acquired the CD and DVD manufacturing businesses of Time Warner.

Cinram Reports Higher Margins, Blu-ray Revenues in Q3

Although its replication contract with Warner Home Video ended July 31, Cinram reported that its third-quarter results exceeded its expectations.

The results, said Cinram CEO Steve Brown, “included a significant amount of [Warner Home Video] offload from our competitior,” while margins “were better than expected as a result of the ongoing efficiency initiatives.”

Cinram reported Q3 revenue of $254.1 million, compared to $348.8 million in the third quarter of 2009. On a year to date basis, revenue was $808.7 million compared with $948.1 million in the prior year.

As a result of the maturity of the senior credit facility in May 2011, being less than one year from maturity, Cinram recorded its entire debt balance as a current liability in its Sept. 30, 2010 balance sheet. As a result, its working capital balance is in a negative position.

“The company is fully engaged in discussions with its lenders and our respective advisors in a refinancing plan and we expect to make an announcement of the refinancing plan in the near future,” said Cinram CFO John Bell.

While lower DVD shipments (related to the Warner loss) brought Cinram’s overall home video revenue down by 28% in the third quarter, Blu-ray disc replication revenue increased 72% year over year, to $8.1 million.

Cinram attributed a 21% quarterly decline in its CD segment to expected reductions in demand from its music label customers. Quarterly videogame revenue, meanwhile, was $11.1 million, compared with $18.2 million in 2009, due to what Cinram termed “continued softness in the gaming industry” as well as the loss of several customers.

Singulus Sells Blu-ray Line To Spanish Replicator

Barcelona-based disc manufacturer Duplico is adding Blu-ray capabilities with a Bluline II replication system from Singulus. With the Duplico deal, Singulus says, the Germany-based equipment supplier has sold more than 80 Blu-ray production systems to replicators worldwide.

Distributor Inception Media Group Signs with Arvato for Disc Replication

Inception Media Group, whose film and video distribution spans digital as well as physical channels, has entered into an exclusive three-year agreement for disc replication, print and distribution services with Bertelsmann’s arvato digital services.

The deal spans DVD and Blu-ray disc replication as well as print services, inventory control, order fulfillment and transportation management. David Borshell, Inception Media partner, said the agreement will “significantly limit our overhead costs related to the supply chain side of the business.” Release via MarketWatch.

Image In Manufacturing, Distribution Deal With Sony

Continuing its restructuring of operations, Image Entertainment enters a multi-year manufacturing and distribution agreement with Sony Pictures Home Entertainment, encompassing both Blu-ray and DVD discs. Home Media Magazine reports a separate deal between the two companies for Image to market an undisclosed number of Sony-owned titles, ranging from Sydney Pollack’s “Absence of Malice” to the Spike Jonze-directed “Adaptation.”

New York Film Processing Lab Going All Digital

New York-based DuArt says that it will close its film processing lab at the end of this month, after 88 years in the business, to focus on its expanding digital operations. A 4K color correction suite is on its way, according to the company’s blog, adding to a slate of services that  already includes HD mastering, Blu-ray authoring and replication. More at the New York Times and Variety.

Cinram Reports Q2 Earnings

Second-quarter revenue from DVD and Blu-ray replication and distribution, which represents 80% of Cinram’s business, was down 8% to $203.8 million from $222.6 million in 2009, the company reported yesterday. Cinram attributed the decline to lower DVD unit shipments combined with lower selling prices.

Blu-ray disc replication revenue, however, increased to $6.0 million in the second quarter of 2010, from $5.6 million in the comparable 2009 period. Total home video revenue for the first half of 2010 was flat with 2009.

Chief executive Steve Brown cautioned investors that with the termination of the Warner Home Video contract effective August 1, the company is expecting its third-quarter results to be lower than in 2009.

Cinram also said that as a result of the maturity of its senior credit facility in May 2011, being less than one year from maturity, the entire debt balance has been recorded as a current liability in the company’s June 30, 2010 balance sheet. As a result, Cinram’s working capital balance is in a negative position.

“We are currently working with our financial advisors, Goldman Sachs, on a number of refinancing alternatives,” said CFO John Bell, who added that Cinram is “optimistic that we will complete a refinancing of the senior credit facility before the 2011 maturity.”

UK Replication Plant Chooses Singulus For Blu-ray

London-based VDC Group, the UK’s largest indepndent disc manufacturer, is adding Blu-ray capacity with its recent purchase of a Singulus Bluline II and CrystalLine mastering system, along with associated QC equipment. VDC’s Sanjay Mohindra told Digital2Disc (which broke the news of the sale) that all of the  company’s current customers are looking at producing Blu-ray titles, with some already producing 3D programs.

Rubenstein Joins Sony DADC, Frey To Head Company’s Digital Services

Sony DADC announced today that it was promoting Michael Frey, President of its Americas division, to the newly created position of President, Sony DADC Digital Services.

Meanwhile, industry veteran Dave Rubenstein is joining the company to replace Frey as Sony DADC Americas’ head.

Dieter Daum, the company’s global CEO, said in a statement (via TWICE) that Frey will now have the opportunity to implement DADC’s supply-chain management system “for our ever-expanding digital offerings.”

Rubenstein, who previously headed disc replicator Cinram before stepping down in 2009, will oversee DADC’s physical distribution businesses in North and South America from the company’s office in Marina Del Rey, CA.

Manufacturing Line Supplier Singulus ‘Rather Confident’ In Blu-ray’s Future

Reporting its earnings for the first half of 2010, replication equipment supplier Singulus Technologies said that business development at its optical disc division fell “within expectations.” The Germany-based company, which claims a 90% market share in global Blu-ray Disc manufacturing lines, noted orders from four continents for Blu-ray systems in July. Most recent Singulus customers include Memory-Tech in Japan and Regency Media in Australia.

Styron Upgrades Plastic Resin For Optical Media

Plastics supplier Styron is replacing its Caibre 1080 polycarbonate resin with a new grade, Caibre 1060, for the manufacture of CDs, DVDs and Blu-ray discs. The company touts the resin’s high-flow properties through disc molding equipment, as well as an improved toughness for better disc durability. The legacy grade will be discontinued in the Americas in August; it already has been discontinued in Europe.

Styron recently was spun off from Dow Chemical in a sale to private equity firm Bain Capital.

Dow Chemical Divests Plastics Unit

The Dow Chemical Company and private equity firm Bain Capital Partners announced June 17 the completion of the sale of Dow’s Styron materials division to an affiliate of Bain Capital. Among the division’s businesses and products are polycarbonate plastic, used in optical disc manufacture, and polystyrene plastic, used in packaging of entertainment products. Dow retains a 7.5 percent equity position in Styron. Via MarketWatch

View From The Top: Steven G. Brown, Cinram International CEO

One year ago, former automotive executive Steve Brown was named CEO of the world’s largest optical media and entertainment supply chain services company, Toronto-based Cinram International. This year, he’s back at the industry’s leading event for entertainment operations executives with a new logo, a new message, record-breaking financials, and answers to several questions the industry has been asking of the company. Read more

Cinram Downsizing PA Plant

Cinram plans to lay off 155 staff at its Scranton, PA-area replication plant in August, following the transition of the Warner Home Video business to Technicolor. The facility currently employs about 1,000 – half the staff that worked there in DVD’s heyday seven years ago. By AP (via CBS)

Replicator Cine Magnetics Acquires Regional Rival

Armonk, NY-based Cine Magnetics recently acquired the assets and intellectual property of the Philadelphia-area Action Duplication, which it terms a longtime “friendly competitor.” Action Duplication sales reps Craig Kuptsow and Brad Cooper both have joined Cine Magnetics and retain their responsibilities for the service provider’s legacy customer base. Cine Magnetics

‘EcoDisc’ Claims 50 Percent Less Plastic Use Than Conventional DVD

A UK firm is launching an optical disc that uses 50 percent less polycarbonate than a conventional DVD, while removing the need for bonding resins, yet is playable in standard DVD devices. EcoDisc Technologies envisions its format as a successor to the DVD-5 in applications such as newspaper covermounts and driver discs for consumer electronics goods.

The product is now available in the UK through replication, packaging and distribution services provider Software Logistics. Via RealWire

Proposed Federal Rule: ‘Most’ Packaged Media Not Subject To Safety Labeling Requirements

A law requiring manufacturers to label children’s products as meeting restrictions for lead and other harmful chemicals does not apply to “most” DVDs, CDs and videogames, according to a proposed rule by the federal Consumer Product Safety Commission.

However, a grey area in the rule’s definition of “children’s product” could still hold workflow implications for suppliers of plastic DVD and CD cases.

The proposed rule, published in late April (PDF here, see pages 7 and 8), aims to help manufacturers determine whether or not the government would consider a given product as primarily designed for children ages 12 and younger – and hence subject to the “children’s product” restrictions.

Regarding DVDs and other digital media, the rule notes that most titles would be deemed “general use” products, as they do not primarily appeal to children ages 12 and younger. Even titles containing programming for very young children would not have to bear the children’s product labels, since children themselves are unlikely to handle the discs or load them into players.

“However,” the rule states, “DVDs and CDs and other digital media that may be handled by older children could be considered children’s products if such movies, videogames, or music were specifically aimed at and marketed to children 12 years of age or younger and have no appeal to older audiences.” Read more

Equipment Supplier Kammann Restarts

Werner Kammann, the German supplier of optical disc printing equipment, has emerged from financial restructuring following the purchase of tangible and intangible assets by company management and a Munich-based private equity firm. The new Kamman Maschinenbau GmbH will continue to maintain the company’s optical disc business, along with service and parts and other core activities. “For our customers, nothing will change,” say Kammann principals Matthias Graf and Christian Maas. Kammann Machines

Blu-ray Equipment Orders Rebound At Singulus

Singulus Technologies will return to full hours on April 1 and will need to add workers in the third quarter, as it plans to sell as many as 35 machines this year for Blu-ray production, company CEO Roland Lacher says. The Germany-headquartered company had cut 130 jobs in 2009 because of falling demand. Via Business Week

Entertainment Distribution Co. ‘Winding Up’

Subsequent to shareholders’ near unanimous approval of a plan of dissolution in January, replication and distribution company EDCI Holdings says it has turned its focus to “winding up business affairs.” But the company cautioned that a sale of its German subsidiaries – which remains contingent on the cooperation of its largest customer, Universal Music Group — is not likely in the near future. Via PR Newswire

M2 To Transfer Replication Equipment Sales, Support To ‘M2 ODA’

The “Optical Disc Alliance” (ODA) will exclusively market, sell and support M2 replication equipment and spare parts. M2 says the transfer of the activities will be finalized and executed before April 1. The ODA website is slated to go live March 1.

The Sweden-based M2 Engineering will continue to manufacture optical disc equipment at its production facility in Amata Nakorn, Thailand. M2 ODA will also establish a service organization, including on-site support and spare parts for all photo-resist based mastering systems.
M2 Engineering

Singulus Optimistic About Blu-ray Equipment Orders

Singulus Technologies launched its first Blu-Line Blu-ray production systems in 2005 and now, it says, except for Sony, almost all Blu-ray manufacturers are producing discs on Blu-Line equipment. With Blu-ray growth rates, and new applications, such as 3D, Singulus expects substantial demand for its Blu-ray lines in 2010. By One To One

Technicolor: Blu-ray Growth Helps Offset DVD Declines In ’09 Second Half

Technicolor’s Blu-ray replication volumes increased 38% year-over-year in the second half of 2009, to 36 million units. The second half’s 622 million DVD units represents a 22% decline from the 2008 period, which the company describes as “in line with general DVD market trends.”

Margins and cash generation in DVD activities continued to improve, however, as a result of substantial and ongoing cost reduction actions, efficiency gains and an improved product mix year-on-year, Technicolor says.

Despite continuing pressure on DVD volumes, revenue improved between the third and fourth quarter of 2009 for Technicolor’s Entertainment Services division, driven by strong growth in content creation and theatrical services, as well as market share gains. Via Marketwire

Technicolor Picks Up Warner DVD Business

Following Cinram’s announcement that Warner Home Video was ending its exclusive relationship with the DVD services company, rival disc manufacturer Technicolor says that it will fulfill the studio’s DVD and Blu-ray replication and distribution needs.

Technicolor announced on Feb. 2 that it expects its new long-term contract with Warner Bros. to start generating material revenue in third quarter of this year. The Paris-based company says that the deal also covers other aspects relating to strategic technology initiatives.

“We are extremely excited to be working with Warner Bros., the recognized world leader in packaged media,” said Frederic Rose, Technicolor CEO, in a statement.

Cinram stated that it would continue to provide services to Warner Home Video through July 31.

Prior to Technicolor’s announcement, a Warner Bros. spokesperson issued a statement saying: “As part of our standard practices, we are constantly looking at the systems we have in place and evolving them to meet our changing needs. The decision to change our video replication and distribution vendor, while difficult to make, is the right one for us at this time.”

Warner Home Video Ends Cinram DVD Supply Deal

Cinram’s long-running, exclusive deal with Warner Home Video (WHV) for DVD manufacturing and distribution services is coming to an abrupt end this summer.

The Toronto-based disc replicator announced Feb. 1 that the studio is exercising its option to terminate its service agreements on July 31. The loss, Cinram says, will directly impact its operations in North America, Mexico, the UK, France, Germany and Spain.

Cinram acquired WHV parent Time Warner’s DVD and CD manufacturing and distribution businesses in 2003, in a $1.15 billion deal that included an exclusive supply contract for WHV’s DVD needs in North America and Europe.

Cinram says that the WHV relationship represented about 28% of the company’s 2009 revenues. Company CEO Steve Brown — who joined Cinram last June, amidst an industry-wide DVD sales decline — told The Wall Street Journal that the loss of the business is “a bump in the road” that will prompt Cinram to seek new ways to cut costs as well as a new studio customer.

Brown added in a statement that Cinram is working with the WHV  “to ensure an orderly transition of the services.”

There is no word yet, however, on which company or companies Warner Home Video will now turn to for DVD manufacturing and distribution.

Time Warner plans to announce its full-year 2009 results on Feb. 3. For the first nine months of 2009 (ended Sept. 30), revenues from home video and electronic delivery of Warner’s theatrical products were down 26%, to $1.6 billion.

Ritek Purchases Replication Equipment Of Rival

Optical disc manufacturer Ritek has reportedly agreed to purchase replication equipment from fellow Taiwan-based Daxon, in a deal valued at up to $15.6 million. Ritek will use the equipment to boost its Blu-ray Disc production capacity. Daxon, meanwhile, is exiting the disc business to focus on the manufacture of optical thin-films and other products. By DigiTimes

EDCI Names New Chief Of German Unit

EDCI Holdings, the holding company for European supply chain service provider Entertainment Distribution Company, appoints John Fitzgerald as COO and Managing Director of EDC’s German operating subsidiary. Fitzgerald most recently served as Managing Director of Cinram GmbH. Via PR Newswire

Philips Slashes Royalty Rates For Taiwanese Replicators

Taiwan’s Digitimes reports that Royal Philips Electronics has reduced royalty charges for its CD-RW, DVD+R, DVD-R, DVD+RW and DVD-RW optical disc formats in new 10-year licensing agreements with CMC Magnetics and Ritek, two of the world’s largest recordable media makers. The new rates are down from US$0.035-0.036 per disc to US$0.01 per disc, according to the report. By Digitimes

Technicolor Expects 3D Blu-ray Replication In Early 2010

Manufacturing 3D Blu-ray discs requires no upgrades to current replication machines. However, there has been significant development and innovation needed on the creation side to be primed for 3D. Technicolor is rolling out new software for authoring, encoding and subtitling. By Video Business

Xiris Purchases Basler Optical Media Assets

Xiris Automation, the Canada-based supplier of test equipment to DVD and Blu-ray replicators, has purchased the IP rights and all assets associated with the optical media division of Germany’s Basler AG. Xiris assumes all aspects of sales, marketing, R&D, production and service of the Basler “R” Ident Code Reader and “L” Print Inspection Product Lines, as well as the sales of spare parts and service of Basler’s “S” Scanner product line. Xiris Automation

San Francisco Replicator Expands Into China

SF Video, a DVD and CD replicator serving the direct marketing industry, is adding production capacity in China to facilitate bundling of discs with its clients’ products. The company’s China location can produce 300,000 DVDs and 500,000 CDs daily, according to a company news release. Via Pitch Engine

Cinram Boosts Profitability In Q3

The Canada-based replicator and distributor posts net income of US$9.5 million for its third quarter, with Blu-ray volumes partially offsetting DVD declines. By the Canadian Press

Bay Area Service Provider Adds Blu-ray

MediaTechnics Corp. is now offering Blu-ray authoring, duplication, and replication services from its facility in Placerville, CA. The company expects “major growth” due to addition of Blu-ray services. Via Reuters

Paramount Renews With Technicolor; Business Impacted By Cost-Cutting

As part of a new multi-year agreement, Thomson’s Technicolor unit will continue to provide Paramount Home Entertainment with services such as mastering, replication, packaging, distribution and returns processing, as well as freight management services in North America, for both DVD and Blu-ray.

Paramount, which had been rumored to be exploring a merger of back-office operations with a rival studio, tells the Wall Street Journal that the new Technicolor pact will save the studio “tens of millions of dollars annually.”

The cost-cutting climate in Hollywood has significantly impacted Technicolor’s business. DVD replication volumes at the company are off by 22.5% from 2008, standing at 745 million units for the first nine months of 2009. In its third-quarter earnings report, Thomson attributes the market weakness to “lower than expected performance of major studios’ new release and back catalog volumes,” along with “a sharp decline of kiosk and game volumes.”

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