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Market Insight

Sony DADC UK supply chain recovers after warehouse fire

September 04, 2011

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The UK home video supply chain of disc replicator and distributor Sony DADC is back in place following a fire that destroyed the company's only UK warehouse during the London riots, 8 August 2011. Through collaboration agreements with fellow distributors Cert Octavian and Cinram, Sony DADC is now able to meet all distribution agreements previously fulfilled from the company's Enfield distribution centre. Cert Octavian's nearby Hertfordshire operation will manage around 80 per cent of DADC's volume, with the remainder shipped from Cinram's retail distribution warehouse in Buckinghamshire.

In addition to Sony DADC's major studio customers, product from around 165 independent video and music labels were distributed from the Enfield site. Many of those independents may have lost all their externally-held back catalogue stock as a result of the fire. The independent home video companies affected include Revolver Entertainment and Metrodome Films - which accounted for 0.6 per cent and 0.5 per cent of the 2010 UK video market by volume respectively - along with the British Film Institute's video label.

The events of the last few weeks stand as testament to the effectiveness of Sony DADC's Disaster Recovery Plan. DADC started to re-manufacture destroyed product the morning after the fire, and direct-to-retail shipments resumed immediately from the company's Southwater production facility in West Sussex. New release products from major studios were restocked from elsewhere in Europe and the company has reported that no stock orders were lost as a result of the fire.

Consequently the direct impact of the Sony DADC fire on the total UK video market will be minimal. Whilst some individual titles have of course been affected, the much greater impact at retailer level will be felt as a result of store closures during and after the riots. The speed at which distribution capacity was restored means that most stores in the UK will have been able to simply replenish their shelves from existing stocks.

However, the long term loss to the UK indie sector of thousands of items of stock in just a few hours is more severe. The value to the sector of the destroyed stock and the resultant lost of future sales may cripple some small content owners. Furthermore, while stock of newer video releases may be replaced through insurance payouts, many mid to tail-end back catalogue items will prove uneconomical to replace. Once the stock held by retailers of these older titles is exhausted, they will simply cease to be available. Volume sales of these titles may be comparatively low but the revenue generated by these, often full-price, catalogue sales is important to many indies' revenue streams.

One possible solution may be the wider endorsement of manufacturing-on-demand services offered by companies such as Tribeka and MOD Systems. Successful implementations of these solutions are already in use by UK retailers Tesco and Game, among others and by Amazon in the US to facilitate sales of some deep back catalogue video titles.

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