Erosion of digital-versatile-disc manufacturing prices threatens replicators' capabilities to invest in equipment and capacity.
``The price deterioration in our business was much vaster than we anticipated,'' said Rick Marquardt, president of joint venture Deluxe Global Media Services LLC of Burbank, Calif.
The studios talked about efficiencies, ``and the industry listened and responded,'' Marquardt said during an Aug. 22 panel discussion at the DVD Entertainment conference in Universal City. ``It is unfortunate that there was price deterioration so quickly because the capacity had grown beyond demand.''
Price drops encourage the rapid transition of DVD use beyond video applications, said James Lance, vice president of operations for Concord Disc Manufacturing Corp. in Anaheim, Calif. Use of DVDs in audio and ROM formats are not as established as video, but they are ``starting to move faster and faster all the time,'' Lance said.
Lower prices have opened the doors for special-interest and corporate uses of DVD, said Tom O'Reilly, director of sales and marketing in Milford, Conn., with replicator Optical Experts Manufacturing. ``It has been one small positive that we have been able to promote.''
Prices of DVDs have come down, with some titles available for $9.95 or $14.95. Manufacturing prices have dipped to about $1 from $1.50 about 18 months ago, said Jim Bottoms, co-founder of London-based Understanding and Solutions Ltd. and, since January, president of the firm's North American subsidiary in Boston.
The panelists pondered DVD niches.
``You've got some integration of big companies,'' said Marquardt. ``You have smaller companies having all the services available. ... The stage is set for anyone to come into this business in a relatively easy fashion and economic fashion.''
``I think those niche markets are going to develop in the next year or so,'' Lance said. ``We have excess capacity. It is not all taken up by the movie business. Those people who have excess capacity are going to be branching out to help develop the ROM market or the music market.''
Several replicators have combined:
In mid-August, Nippon Columbia and Maxell Corp. of America tentatively agreed to create a joint venture merging domestic DVD manufacturing operations with annual capacity of 30 million discs. Equipment at Maxell's disc replication services in San Diego will be transferred by Nov. 1 to Nippon Columbia subsidiary Denon Digital LLC in Madison, Ga. Maxell, a subsidiary of Hitachi Maxell Ltd., and Denon will have a 60-40 split in ownership of the venture, MD Digital Manufacturing LLC.
In early August, Rank Group plc's Deluxe Video Services completed an 80 percent purchase of Ritek Corp.'s Ritek Global Media. The new joint venture, with which Marquardt is connected, combines DVD operations of Deluxe and Ritek in North America and Europe, with annual capacity to replicate 135 million units. Plans continue for 16 more replication lines at Deluxe plants in Carson, Calif., and Little Rock, Ark. Ritek Corp.'s U-Tech Media Corp. division in Taiwan covers Southeast Asia for the venture.
In the biggest deal, Technicolor of Camarillo, Calif., acquired most operations of Panasonic Disc Services Corp. of Torrance, Calif., on June 26. Negotiations took more than a year, said Robert Pfannkuch, who was Panasonic president and chief executive officer and remains with the new organization.
The digital media solutions division of Thomson multimedia oversees Technicolor. Matsushita Electric Industrial Co. Ltd. owned PDSC. Technicolor, the largest nonstudio-affiliated optical disc maker, operates in the same league as major captive-replication units of Sony Corp. and AOL Time Warner Inc.
In another business development, Pioneer Corp. said Aug. 20 it would convert its optical disc plant in Japan to production of plasma displays for flat-panel screens. Pioneer no longer will make DVDs.
Globally, as of December, more than 230 companies could make DVD videodiscs. Currently 31 of those firms are ``relying on overspill work'' from the largest replicators, Bottoms said.
In April, Guinness World Records Ltd. certified DVD as the ``fastest-adopted consumer product of all time.'' Bottoms projected that, by year's end, 40 percent of U.S. households will have a DVD video player with European penetration of 15-20 percent. Some DVD players cost less than $59.
In June, retailer Circuit City Stores Inc. of Richmond, Va., said demand for DVDs prompted a decision to eliminate VHS tapes from its shelves.
``DVD just shipped its one-billionth piece of software, a benchmark that took prerecorded videotape 10 years to attain,'' Charles Van Horn, president of the International Recording Media Association of Princeton, N.J., said in a presentation.