Deluxe Media Enters Digital Age as VHS Gives Way to DVD

by Alicia Stogner  on Monday, Jan. 27, 2003 12:00 am  

Since opening its doors in 1995, Deluxe Video Services in North Little Rock has produced movies on VHS videocassette tapes at full throttle.

This spring it will add DVDs — those ubiquitous video disks — to the production line as VHS begins to go the way of the 8-track. And in recognition of its expanded product line, the company changed its name earlier this month to Deluxe Media Services.

Five of 13 rows of videotape winding machines have been removed from the building and two more have been relocated to make room for the DVD production lines, said Patty Sinnot, executive vice president of worldwide operations and information technology. The 730,000-SF building has been expanded to house cooling towers, chillers and other equipment that will accommodate the additional power needed by the DVD replicator systems.

In all, Deluxe and its parent company — The Rank Group PLC of London — have made some $20 million in improvements and additions to the plant.

In February, employees at Deluxe's facility on the banks of the Arkansas River will begin test running the new equipment. Plant officials hope to be ready for production by March or April, though there's no word yet on the first movie they will be replicating, said Sinnot.

DVD production is a new technology for a select few of Deluxe's 750 employees, a whole 'nother beast that requires them to relearn everything they know about replication, according to Sinnot.

So far, 65 North Little Rock employees have completed several weeks of theoretical and hands-on training at a Deluxe plant in California that has been producing DVDs since 1996. These employees will run the DVD production cycle and will address any mechanical problems that may arise. Only one or two people will be hired to assist in the workload, Sinnot said.

Imprinting and Printing

VHS videocassettes are recorded from a master copy onto 30,000 blank tapes each hour. Up to 15 movies can be duplicated at once, Sinnot explained.

Deluxe's American plants produced 120 million videocassettes in 2002, a 20 percent decline from 2001, which Sinnot blamed on the combination of a sluggish economy, a dearth of blockbuster releases and the retooling for DVD production that slowed production this year.

As for DVDs, Deluxe produced 30 million-40 million DVDs in 2002 companywide. Sinnot expects the DVD production schedule in North Little Rock to be much slower at first, given that there will be only seven replicators at work when the plant begins productions in earnest later this spring.

But business will pick up, Sinnot said, to about 140,000 DVD copies during a 24-hour day, every day of the year. Production will peak in late September, as it currently does for VHS titles, because studios release summer hits on video in time for Christmas, Sinnot said.

Deluxe currently has contracts with movie studios such as Columbia, Universal and Paramount.

To make DVDs, binary codes are transferred to stampers that imprint the codes onto plastic disks that are molded from plastic pellets at the Deluxe plant. Lasers then interpret the imprints into movie images. For longer movies, two discs are fused together and both contain the imprints. The lasers in the DVD players first read the bottom disc and, sensing additional material is available, read through the first disc to the second.

Like musical compact disks, DVDs are labeled with screen-printed artwork identifying the movie. The labeling uses a four-color process, much like printing a brochure or an ad, said Deirdre Kurnett, director of marketing at Deluxe Media in Burbank, Calif.

Deluxe ships the finished DVDs to distribution centers across the nation, while storing large amounts of raw material to begin the process the next day.

The cost of producing DVDs is comparable to VHS — and maybe even a little cheaper — said Sinnot, though exact figures weren't available. Therefore the purchase price for the consumer also is comparable.

Eventually, Deluxe would like to phase out its video production, but as long as there are customers for the VHS tapes, Deluxe will produce them.

Movie studios still market a variety of videocassettes to households that don't own DVD players or those with young children who can't responsibly handle a disk, Kurnett said. This way, the studios don't alienate established customers, even while DVDs gain in popularity.

Indeed, DVDs took about five years — half the time VHS needed — to reach the billion-copies-produced mark, she said.

In fact, by April 2002, DVD players in the United States outsold VCRs by nearly two to one, according to Understanding & Solutions Limited, a specialist information and consultancy service in London. More than 25.5 million, or 24 percent, of American households owned DVD players by the end of 2001, a number "boosted by rapidly falling prices," the group said. A year later, the figure is closer to 50 percent, Sinnot said.

"We want it to eventually replace VHS," she said.

Direct Marketing

Movie studios are doing things a little differently as DVDs become more prevalent, Sinnot said.

As movies are released to the public, more DVDs are destined first for retail stores, unlike their VHS cousins that often make their first appearance in the video rental market. By sending DVDs directly to consumers, movie makers hope to sell more copies.

About three times more DVDs than VHS copies are sold nationwide because DVDs are sold to consumers, instead of first appearing at video rental stores as VHS tapes often do, Sinnot said. But it all really depends on the movie itself — whether it was a blockbuster, a box office flop or a special edition.

"The growth [of DVD ownership] is phenomenal" and driven by several factors, Sinnot said. Certainly, the consumer-first placement of DVDs increases ownership of new releases. But the inclusion of a second, special feature disk that often contains commentary and additional footage among other things adds to its appeal. Plus, consumers are following the newest technology trend and are purchasing more DVDs than VHS copies, Sinnot said.

Built in 1995, the North Little Rock plant was originally named Rank Video and was designed to hold the manufacturing services for the southwest and midwest regions of the United States. Because of its central location and lower operating costs, North Little Rock made an ideal choice to cover these areas, said Sinnot, who took over operations here in 1997.



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