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Fox Renews Service Agreements with Cinram

April 19, 2011

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Twentieth Century Fox Home Entertainment has signed a new multiyear agreement for video disc replication and distribution with Canada-based Cinram. The two companies share a 14 year history together and the agreement, announced by Cinram, assures the replicator's position as the studio's primary supplier for DVD and Blu-ray Disc services across North America and in Europe.    

Cinram has worked hard to retain the contract with Fox, anxious not to repeat the experience of July 2010 when it lost its replication and distribution deal with Warner. However, although studios are in theory at liberty to shift disc replication provision between providers, in practice their ability to do so is stymied by the sheer size of their operations.

The DVD replication market is seasonal with high production peaks early in Q4. As a result, many of the DVD production lines that exist to meet this peak in demand are under-utilized through much of the year. Furthermore, recent declines in the DVD market have resulted in almost all disc replicators having some spare DVD production capacity even during this peak in demand. In addition to this spare capacity, larger replicators frequently agree over-flow deals-under which they offload some of the production at times of high demand to other providers-with smaller companies. These factors combined allow considerable flexibility within the replication market.  

Despite this, the defection of one of the six US majors (Disney, Fox, Paramount, Sony Pictures, Universal or Warner) from one of the top three dominant replicators to another would require that the recipient effectively increase its replication capacity by 50% or more in the US and European territories. Shifts are possible, as demonstrated by Warner's 2010 move, and on a region-by-region basis these can be more easily accommodated. However the major restructuring process that enabled Technicolor to service the Warner contract from Q3 2010, was actually started by Technicolor as early as July 2009. When Fox's deal with Cinram came up for renewal, no similar restructuring by either Technicolor or Sony DADC had been reported.

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