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CD and DVD manufacturer Nimbus CD International is a global leader in the development of optical disc manufacturing technology; it currently produces 130,000 to 150,000 DVDs daily

02608686
Title: Nimbus' technicolor dream
Source: One to One:73, June 1999. ISSN: 0268-8786
Document Type: Journal; Company Overview
Publication Country: United Kingdom,  Language: English
Record Type: Fulltext; Abstract,  Word Count: 2910
Abstract:
Nimbus CD International (Charlottesville, VA) is a global leader in CD and DVD replication services. It is also a leader in developing technology for optical disc manufacturing. One year after the launch of DVD in 1997, Nimbus manufactured over 3.5 mil discs. It presently manufactures 130,000 to 150,000 DVDs daily. It manufactures around 1 mil CDs daily. It has facilities around the world. Its Camarillo, CA facility has 5 DVD production lines and 26 CD production lines. Its Charlottesville facility has 6 DVD lines and 18 CD lines. It Cwmbran, Wales site has 2 DVD lines and 21 CD moulders. It Foetz, Luxembourg facility has 10 CD lines. Around 65% of the company's CD business is related to CD-ROMs. Technicolor (US), which is, like Nimbus, owned by Carlton International (US), has a VHS turnaround of 1.5 mil tapes daily.

The article elaborates on Nimbus' manufacturing practices and future plans.
Text:
BY RICHARD BUSKIN

It is one of the world's leading independent manufacturers of optical discs, with manufacturing distributed throughout North America, the United Kingdom and continental Europe. Its name? Nimbus.

Providing comprehensive CD and DVD replication services, Nimbus CD International has forged a position for itself at the technological forefront of optical disc manufacturing by means of never sitting on the fence and waiting for others to research, develop, test and de-bug. Behind the Nimbus name lies the kind of experience, expertise and innovative attitude that is required in order to carve out a niche in a highly competitive market.

Acquired by Technicolor's owner, Carlton Communications plc, in July of 1998, Nimbus produced a combined total of more than 3.5million commercial DVD video and DVD-ROM discs during the 12 months following the format's 1997 launch, and in May of 1998 the company became the first to master and replicate DVDs in production quantities in the UK. Currently it produces between 130,000 to 150,000 DVDs per day, while the daily total for CDs hits the million mark.

The Nimbus CD International headquarters are based in Charlottesville, Virginia, while there are additional facilities in Camarillo, California; Cwmbran, Wales; and Foetz, Luxembourg. Another plant in Provo, Utah, has recently been consolidated into Technicolor's Camarillo setup. All except the Luxembourg facility have DVD capability - Camarillo has 26 CD lines and 5 DVD lines, Charlottesville has 18 CD and 6 DVD lines, and Cwmbran has 21 CD moulders and 2 DVD lines. For its part, the Luxembourg plant has 10 CD lines.

"Carlton wanted to establish itself as a dominant player in the optical field, and basically I think the Technicolor-Nimbus deal was a great mix," says Nimbus' executive vice president of optical media sales, Robert Headrick. Having joined Nimbus in 1993 following a seven-year stint with Sony, Headrick is now responsible for the strategic management of sales activities for all of his company's DVD and CD activities within the home video, computer software and audio markets in the US.

"At the time of the acquisition, Technicolor was one of the largest video duplicators and Nimbus was one of the largest optical manufacturers," Headrick continues. "Technicolor would have grown on its own, but I guess the growth rate wouldn't have been nearly as much without acquiring a company like Nimbus, which had a very substantial customer base."

Currently about 65 per cent of Nimbus' CD business is ROM-based, and although the demand for its DVD services is growing in leaps and bounds, there is also a more modest need to invest in extra CD lines.

"Our DVD growth has been steady, consistent and rather large," says research & development vice president, John Town, "and we've certainly been pleasantly surprised at the level of initial orders for the major titles." Town started working for Nimbus in his native UK in early 1987, before taking charge of the mastering operation in America the following year. In 1993 he became a company director, and then rose to vice president of R&D in 1995, overseeing the CD, DVD and video formats. Technicolor is the world's largest producer of VHS videocassettes, with a turnaround of 1.5 million tapes per day.

"The margins have definitely gone down with regard to CD," Town continues, "but we're still adding CD capacity. You see, the companies that are the most successful in the CD market are those that come up with the widest variety of services. Capacity is very, very important, and what with the Technicolor-Nimbus merger, the expansion from 8 to 26 lines in Camarillo leaves us very well placed to serve the major ROM clients as well as everyone else. Very few companies in the ROM arena have got more moulders than we have in North America."

"On the audio side the CD industry is growing at an average rate of about 8 per cent a year," adds Bob Headrick. "It's growing nicely, and I don't think it will flatten out as long as the artists continue to come out with new titles, which they will. At the same time, the CD-ROM side is growing at a rate of about 16 per cent a year, and at some point that will definitely be evolving into DVD. First of all it's going to be the gamers, which require the most multimedia devices. A lot of titles now come out in multi-disc sets, and as the price comes down in terms of DVD hardware manufacturing and the software volume goes up then the transition will start."

"There are probably only three companies in North America who are handling the majority of DVD production," says Town, referring to Warner, Sony and his own organisation. "Certainly only they can offer a proper service level on DVD-9, so I think the challenges for the industry right now are going to be centred around approaching CD service levels with DVD-9 product. The sort of growth that is mapped out for the industry with the way that DVD is going and with DVD-ROM on the horizon, I think the main challenges are trying to manage that growth and just being able to support DVD-9 as it becomes the chosen format. Cost and efficiency are the important factors, and so I think most discs will be DVD-9, especially video." That having been said, Town doesn't believe that DVD is now going to take over and leave CD in the dust. "I think there is a lot of inertia in the marketplace, certainly in audio and in ROM, and so it will be a long time before CD starts to trail off," he says. "I don't foresee any significant drop- off in CD demand in the next few years. CD is probably going to experience limited growth during that time, and the companies that have the best cost structure and the best available services will be the ones that succeed."

Bob Headrick agrees. "I don't think CD will die for years," he says. "That's not only because of the price factor but also because a lot of CD-ROM titles now only require one disc, and so there isn't any justification for jumping to DVD. It's a two-edged sword. I think the gaming side and the multi-media entertainment side of the business will definitely migrate, and that's a substantial portion of the CD industry in general.

"One of the things that we have been hearing for years is that products will start moving into sleeves as opposed to jewel boxes, and in some cases that's happening on the OEM side because they're trying to reduce costs. They feel that the software doesn't sell the hardware and so they don't need something flashy and glossy in order to sell their hardware. As a result, even though they are not taking over, sleeves are becoming more popular. Then there's the packaging side for retailing, with the retailers pushing to have the developers package the products in smaller, more compact boxes with multiple platforms; in other words, anything they can do to reduce the overheads and increase the number of titles that are available.

"At the same time, on the video side, although people have invested substantial amounts in their VHS libraries, I regard the situation in the same way as I view cassette versus CD; people can see the advantages of DVD in that they can jump around without having to fast forward or rewind. There are a lot more opportunities and there's a much better picture quality, and so I think the public in general is ready for the next step.

"DVD video is selling very briskly, but I don't think that means people are going to get rid of their VHS tapes or their players, just as they haven't got rid of their audio cassettes. It's an evolution. The DVD video sales have shown that the American public is ready for the next step, and I think with DVD-ROM It's going to happen in exactly the same way. In fact, when it gets going It's going to be an easier transition, due to the fact that the entire library that people have of CD-ROMs is backwards compatible. Once it takes off It's not going to take long for it to grow quickly."

In terms of its production capability on the DVD front, Nimbus presently replicates in DVD-5, DVD-9 and DVD-10 formats, having been the first independent company to offer DVD-9 manufacturing back in May of last year.

"A major part of our strategy has been to offer the service level that we supply on DVD-5 with DVD-9," says Town. "We invested early on in the DVD-9 technology, we had the technical expertise and we put the resources into it. You can't do this with a cheque book. You have to buy the equipment and you have to make it work for yourself. There is no plug-and-play solution for DVD-9. We got in there early, we invested early, and we made sure we could make the discs for the large orders that came along. We have taken a 400,000-piece order for DVD-9 and we've made it on time."

Of course, the lack of capacity on DVD-9 has also led to Nimbus taking quite a lot of orders for DVD-10 product. Yet, despite its cost efficiency, the lack of titles in the 8.5 - 9.4 gigabyte range means that the company in no way views DVD-10 as the format of the future. All of which paves the way very conveniently for DVD-18 and the handful of enterprising replicators that are prepared to take the plunge and utilise the new technology right from the get-go.

"We're committed to it," confirms John Town. "As an industry leader we've been first with just about everything on the independent scene - the first to make DVD-5, the first to make DVD-9, the first to do DIVX - and we want to be the first independent to offer DVD-18. We've identified a strategy whereby we can manufacture the discs in our Camarillo facility and put the manufacturing process alongside our DVD- 9 manufacturing process in what we believe is a pretty efficient manner. In fact, we think that manufacturing DVD-18 discs this year is absolutely achievable right now."

Bob Headrick concurs with this prediction. "It is the next step," he says. "Things have jumped so quickly from DVD-5 to DVD-9, and most industry analysts and manufacturers didn't forecast that, so I don't see that DVD-18 will be that far behind. DVD-18 is a completely viable product and credible technology, and we will be producing discs very soon."

"Whether or not there will be a demand for this format, we just feel that we need to be in a position to offer these services to our clients," adds John Town. "Certain types of product would lend themselves to DVD-18, no doubt about it, such as a three-hour movie for which you want both aspect ratios... I won't tell that joke about going down with the ship if you can't do it, but we all know the kind of titles I'm referring to!"

So what, I ask Town, are the technical hold-ups pertaining to the launch of DVD-18 right now?

"I wouldn't say there are technical hold-ups," comes the reply, "but I'd say there are definite technical challenges. Basically, the surface transfer process involves a technology where one of the plastic layers of the disc is stripped off and discarded, and one would imagine that being able to do that efficiently is the key difference between making DVD-9 and DVD-18. There is another step in there - starting off with two DVD-9s, peeling off the top side of both discs and bonding them together as you would with any other DVD-9 - and so the manufacturing process will be tighter and your success will be in no small part dependant on how good and how flat the original DVD-9s are.

"Nobody that we know of has published on DVD-18 yet, but of course a very well respected company has developed a solution for it - concept discs which I have held in my hand and tested. And I would imagine that, with the amount of publicity which this has received, they have put the researchers' know-how into this product and it will fly. Similarly we believe that if they can make it fly then we can make it fly. We have the same technical capability, and that formed part of our decision in going for this."

These days a quick tour around the trade shows makes it abundantly clear that, for the replicators, It's largely a case of jump into DVD or jump out of the business. Most of the investment in technology reflects this, yet Nimbus stands out as one of the few major companies to have also expanded its CD facilities during the past year. Nevertheless, like its competitors, the company isn't upgrading its existing equipment, converting CD lines to DVD.

"We've not chosen to go down that route," says John Town. "I don't think any of the major suppliers of discs are doing that. Anyone who's a major player is buying new."

"For us there's nothing that we need to do as a manufacturer to upgrade anything for the audio market," adds Bob Headrick. "We're not getting out of it, we're staying in it and we're growing it, but we're growing it along with CD-ROM. In fact, we're seeing huge growth on both the OEM and the game development side, and it certainly isn't even close to levelling off. We are continuing to develop the CD business even though DVD has really done well, and we'll probably expand the DVD business more quickly now as far as hardware and manufacturing lines are concerned because of the growth that we have seen on that side.

"We are going to continue to add CD and DVD lines in order to be a front-runner on the technology side, with DVD-18 standing as a particular example of that. It's really important for an independent such as ourselves to keep up with what's going on and what the next big thing will be. After all, we took a gamble on DVD two and a half years ago long before anyone else beside Warner was totally into the new technology, putting our foot down and saying, 'This is going to be a viable disc. It's going to be a huge plus and we're going to jump into it now.' It's all a case of having the right people here, making the right decisions, knowing what the next level is going to be and not waiting around, but being a leader."

While Nimbus continues to broaden the turnkey and distribution side of its business, it is also setting its eyes upon expanding into other parts of the world. Inevitably one such territory is the huge Asian market, for which the specifics are currently being considered and discussed, although a precise location has yet to be confirmed.

"That's the next big market," asserts Headrick. "There's so much distribution going on in Asia, and so it makes perfect sense for us to have a local manufacturing setup. There again, when I talk about expansion, that means expanding all of our facilities, not just the US, not just the UK and not just Europe, and so growth and a broadening of the services that we offer with regard to technology are our short-to- medium-term goals."

As an independent setup that owns no content and therefore works only for third parties, Nimbus caters specifically to the needs of its customers. "You're dealing with a wider market place," says John Town. "You're more in control of your business as opposed to having a bigger identified business out there controlling you."

At the same time, this is a somewhat different experience for Bob Headrick when compared to that at his former employer, Sony, where there is a tie-in with Sony Music and Sony Pictures.

"Coming to Nimbus represented the complete opposite situation for me," he says. "From our side It's a plus being independent, in that you can go to all of the major studios and CD-ROM developers and basically sell your service without being bumped by a major release. If we were a corporate entity with our own artists, we would have to move other people out of the way in order to fit our own product in. For us It's an advantage to go out and say, "We aren't hooked to a major." There are lots of studios out there that are not hooked to a major, and so It's a huge plus to be able to sell ourselves as an independent. We'll think twice about giving business to Warner or to Sony, because they have their own motion picture studios and there's competition on the production side and the movie release schedules."

Conversely, there are also unique pressures on an independent setup, not least because of the different strategic relationships within the film industry. Certain major companies have agreements with independent motion picture and CD facilities, and therein lies plenty of political manoeuvring.

"There's always pressure," says Headrick, "but I think to a certain extent pressure is good, because it keeps everyone on their toes and it has kept us on top. We're definitely one of the top three - if not one of the top two - in the world for DVD and CD manufacturing, and there aren't many independents who could even aspire to that."

Copyright 1999 Miller-Freeman plc


Company Names: NIMBUS CD INTERNATIONAL INC; TECHNICOLOR INC (CARLTON COMMUNICATIONS PLC)
Concept Terms: All company; All market information; Capacity; Corporate strategy; Output
Industry Names: Entertainment; Recording
Product Names: Video tape production (781280)
Geographic Area: European Union (EUCX); Luxembourg (LUX); North America (NOAX); United Kingdom (UNK); United States (USA); Western Europe (WEEX)