Before the Presses Roll: Full-Service Replication and the Return of the Short Run
Debbie Galante Block
June 2000 |
ith the constant evolution of format choices and implementation, the demand for CD and DVD replicators to deliver a broader range of services is booming. Clients are using CD and DVD for a multitude of purposes and are looking for a range of services to match. Problem is, the definition of full service varies just about as much as the uses for optical media. In fact, there isn't even consensus among replicators as to what constitutes a short-run--not to mention the difference between one for CDs and DVDs. Have a headache yet? Luckily, Replicators are anxious to reduce the mystery surrounding their operations and offer some definitions and guidelines to help even the most inexperienced publishers get the most out of the manufacturer they choose.
"Full service" has become an overused marketing term and, like many of its ilk, has lost all meaning. For an audio CD, full service might consist of mastering, replication, print procurement, and assembly. Some replicators further offer distribution and warehousing services. CD-ROM publishers' needs, on the other hand, are more complex. Thus, before choosing one plant over another, it is important to know what a given replicator specializes in and whether its definition of full service will leave you satisfied or wanting. One replicator, Doc Data New England, includes services through packaging and assembly within its full-service regimen because, according to Bob Petitt, CEO, "Our customers asked us to do so." He continues, "We've been in the kitting and assembly business for the last five years. Customers send us the media and the graphics, and we do the rest. We're not necessarily doing more orders, but more of one particular type of order."
While Petitt's attitude is not necessarily unusual among CD and DVD replicators, his company's niche within the industry is slightly different in that they outsource the actual DVD replication task. But the role of companies like Doc Data can be a vital one for content providers new to the production and publishing game. Among major replicators like WEA Manufacturing, Technicolor, JVC, Sony, and others, beyond-the-presses services are also available. However, unraveling how much you can get in terms of authoring and packaging assistance, and how little you can get in terms of affordable short runs varies from plant to plant, although most are eager to clarify their offerings.
Fill 'er Up?
Of course, where there is service, there is a price to pay. Most of the price paid to a multifaceted replicator is not for the actual replication; these extra steps cost. A ROM retail package can include a great deal of extra material, like marketing inserts and promotions, inside this very large box. "Direct to retail with EDI (electronic data interface) links is where the rubber hits the road, and you find out who truly offers full service," according to JVC Disc America marketing and sales VP Sean Smith. "We ship out cartons of products that meet incoming requirements of Walmart, for example." In the past, retailers used their distribution centers for fulfillment, but these days many products go directly from replicator to retail.
"Replication plants are in the service business," says Bob Hurley, VP of sales and marketing at Sony Disc Manufacturing. "Time pressures have made distribution necessary. Shipping discs to distributors just adds on a day or more to a release date and that day or two, in many cases, is too long," says Hurley.
Just Add DVD
To complicate further the definition of full-service replication, throw DVD into the mix. The process of replicating DVD requires even more attention particularly on the front end, where the list of services includes authoring, encoding, and compression--all well before the actual mastering begins.
Before choosing one plant over another, it is important to know what a replicator specializes in and whether its definition of full service will leave you satisfied or wanting.
For DVD, focusing on quality at the front end is key. According to Bob Freedman, senior VP of technical operations at Crest National Digital Media Complex, the goal should be "getting all of the elements together and getting them to the quality level that you want the final product to be." But he's quick to warn developers that replicators aren't miracle workers, and any project will bear the quality limitations of the media assets that comprise it. Don't expect to exchange a sow's ear for a silk purse; expect, more likely, a sow's ear on a DVD. "Just because a program is going out on DVD doesn't necessarily mean the quality level is better," he says.
He goes on to advise developers to look at the range of work a facility has done before choosing one over the other because all products are different, and it's important to know if a replicator has experience in the kind of project you have in mind. And the initial caveat of course still applies when assessing what a replicator has done with others' work: in looking at a final product, keep in mind that results do not have only to do with a studio's capability, but also with how much a client was willing to spend on the front end.
Some disc manufacturers, such as Doc Data, offer DVD premastering services only, and currently outsource replication for their customers. "We have just installed a new mastering suite at Doc Data California that is DVD-capable," says Petitt. "We're putting in the testing equipment right now so that we will be able to master DVD for our friendly competitors that are manufacturing DVD already. We are already manufacturing DVD at Doc Data Benelux, and I expect to be replicating DVDs here toward the end of this year."
Add it Up
How much of the final DVD disc cost is actually representative of replication costs? "For small-quantity DVD runs, the majority of the final cost stems from authoring, compression, and encoding," according to Steve Grosvenor, plant manager at Warner Advanced Media Operations (WAMO), the DVD arm of WEA Manufacturing. With CD, he says, mastering costs are often waived, which can save $1,500 or so.
Mastering fees are not usually waived for DVD, however, and DVDs are more inclined to include additional features and extras that drive up the price. "Are you looking to buy a Rolex or a Timex?" asks Crest's Freedman, who says there are ways of authoring correctly and ways that are down and dirty. John Walker, Crest's executive VP of sales and marketing at Crest, says prices can vary enormously when premastering chores are involved, depending on how much work a title takes. "Our premastering prices range by a factor of five. Our most extravagant titles are five times the price of our most inexpensive titles."
JVC's Smith says the majority of DVD's cost of goods comes from depreciation--how you depreciate the machinery over a given month over the capacity of the facility. "Right now, there are very high depreciation rates because the format and the equipment are brand new. The first couple of years of the depreciation cycle are going to be the highest. If a plant is running at a 60 percent capacity, the facility is very poorly utilized, so cost per disc is going to be higher. Typically, overhead costs are a fixed number. Each month, the more discs that can be replicated, the higher the efficiencies, and the higher yields by machine, the better the disc price," he explains. DVD costs are also higher than CD because of lower yields and lower unit orders as a whole. Royalties represent a very high percentage of the final cost as well.
Up for a Short Run?
Several kinds of clients, monthly publications, for example, only need short runs. The client base may be small, but their subscription revenue is very high. Needless to say, replicators prefer long runs because they are easier and more profitable. But since most plants are at capacity only three months of the year, some manufacturers look more kindly at minimum orders.
Of course, where there is service, there is a price to pay. Most of the price paid to a multifaceted replicator is not for the actual replication; these extra steps cost.
The definition of short run differs for every replicator and for every format. Some say 500 units is the minimum order size for CD; others say 1,000, while still others say 10,000. For DVDs, short runs are usually under 5,000 units. The option of burning versus pressing has provided some viable short-run alternatives. Now that pricing for CD-R duplication systems and media has dropped enough to integrate the technology cost-effectively into the process, some replicators and even cassette manufacturers have opened their doors to smaller CD orders. Ed Smith, president of Houston, Texas-based cassette duplicator Creative Sound, says undersized CD orders present a new way of marketing his company's services. "We do a tremendous amount of CD-R work for short runs--100 to 1,000 units. It's a niche we can plug into. These customers need CDs tomorrow; time is money for them. We're also doing short-run color packaging," he continues. "If a customer wants a four-page booklet, we can laser print a finished booklet. If they want 100, we can do that. The beauty of these smaller runs is that a company can test-market a product before broadly releasing it," he says.
As with many business endeavors, the bottom line dictates whether a plant can or will handle short-run disc orders. If a plant is cranking out a million CDs or DVDs a day, they'll certainly find it less logistically demanding to prioritize the high-volume jobs, and max out on those whenever possible. This is certainly how the numbers shake out for highest-capacity manufacturers like WEA and Technicolor.
"If we have available capacity, we welcome short runs," says Robert Headrick, VP for optical media sales and marketing at Technicolor. "There is an upcharge, but we will run any size. We look at pricing on an overall basis, i.e. annual volume versus order by order. Although most every customer requests short runs at times, these orders typically come from independent studios or are reorders on small catalog product."
According to replicators, DVD necessitates doing some short runs in order to provide the kind of customer service necessary to develop long-term relationships. "WEA offers an RSP (Replica Sample Package) which is approximately 20 discs," Grosvenor says. "These orders are used to test and approve DLT's before replication. Normal production orders have been as low as 1,000 units."
Crest also offers check-disc packages. "Our theoretical minimum order size is 1,000 units," Walker says. "But we do offer things like check-disc packages and we have worked out ways to do shorter runs for specific industrial customers. Minimal orders can be expensive, but at the same time, it gives customers a practical way of getting into DVD."
Sony Disc Manufacturing has a separate division that deals with short order business-to-business clients--those who are publishing information for their own captive customers. A company that distributes data to their own dealerships throughout the world is a typical example--a small run for a customer like this would be under 500 units. "They want them very quickly because this is often time-sensitive data that will expire if they don't get it," according to Sony's Hurley, who says that this type of business comes in steadily throughout the year.
Although the orders may be more than 500 units, entertainment software is also moving to smaller runs, Hurley adds. "I think with regard to ecommerce, once that kicks in and becomes significant, you are going to want to be shipping one and two discs. You're going to want to keep inventories as low as you can."
Not surprisingly, short runs can have significantly higher per-unit costs than typical long runs. Although no replicator would go on record with exact figures, most agree that short-run costs can go as high as four or five times the cost of a typical order. "A lot of the cost is changeover time," Petitt says. "If you can save your stampers and screens, it may not cost as much as others say."
My Broker is...
Brokers can also play a part in getting a replicator to accept a short run. They may bring to a plant a group of clients all wanting short runs--and once again, depending on the time of the year, these orders may or may not be filled. However, be careful when selecting a broker. The term broker has some negative connotations, and replicators may not want to work with them. (Hint: a broker who chooses a replicator based solely on price is not one you should be dealing with, so be sure to question a potential broker about which replicators they work with.)
Even the definition of broker is changing. According to Crest's Freedman, "About three or four years ago, the broker was a guy who didn't really give the product added value. A broker, today, might be able to bring different facets of the industry together, for example, replicators and distribution." As such, brokers may enable a client to receive a "full-service" package, even for a short run.
Inevitably, as the nascent DVD universe evolves, the media, its uses, and the means to get it to market will change. Every day, articles appear claiming that physical media is on its way out, and soon enough all valuable content will be distributed via the Internet.
Even though some of the short-order clients may indeed eventually conduct their business solely through the Internet, this will likely only change the definition of replication yet again. Just as replicator responsibilities evolved through the 1990s, rest assured that the new millennium will again redefine what clients will expect from their manufacturers, and what manufacturers will be willing and able to deliver.
Sony Finds a Niche in Short-Run Orders
Well aware of the industry's inability (or lack of desire) to handle short-run orders cost-effectively, Sony Disc Manufacturing has developed its Publishers Business Unit, a concern devoted entirely to custom and short-run disc production tasks. Now in its fourth year, the unit exclusively serves customers who need short disc runs produced at regular intervals January through December--for example, those who issue monthly periodicals. These clients need to ensure smooth and reliable delivery even when a replicator's seasonable demands could potentially squeeze out lower volume runs. "If a company is part of this program, guaranteed capacity is carved out for them all year long," says Jim Twiggs, the unit's previous director (now director of the distribution group). Sony benefits because these multiple small projects keep its plants running steadily, even during non-peak months.
Most product, CD or DVD, is run on a three-day turn. Order sizes vary from 15-10,000 units. But 10,000 would be a very large order for this unit, according to Twiggs, with the average size falling between 1,000 and 2,000 pieces. The whole business is centered around a high volume of order traffic. "We also offer a lot of different services to go with that, like graphics, premastering, authoring, packaging, and distribution," he adds.
This business is run primarily out of the Terre Haute, Indiana, facility due to the length of service, amount of turn time, and equipment available at the plant. There are about 17 employees in this unit, Twiggs says, who "develop a relationship with customers who will have multiple orders in our plants every day. It's really core, backbone business that is critical."
How does this all come together during the busy season? Of course, a customer can't expect to quadruple business at that time of year, but if "we have a head's up that they need 10 to 15 percent more capacity," Twiggs says, "we can handle it. Lead times will not go from three days to three weeks. We will take care of them throughout the Fall. This has been done very successfully."
About 65 to 70 clients are part of the program now, ranging from mom 'n pop software companies to Fortune 500 behemoths with modest disc-production needs. To be part of the program, there is a minimum volume guarantee for one year. (For more information, contact Cliff Brannon, Director, or Michelle Nichols, Program Manager, at 812/462-8100.)
Companies Mentioned in This Article
8083 Commerce Park Drive
#684, Houston, TX 77036
800/451-7034; Fax 713/774-3419 firstname.lastname@example.org http://www.creativesound.com
Crest National Digital Media Complex
1000 N. Highland Avenue
Hollywood, CA 90038
800/961-8273; Fax 323/461-8901 http://www.crestnational.com
Doc Data New England
1 Eagle Drive, Sanford, ME 04073 207/324-1124; Fax 207/490-1707 email@example.com
JVC Disc America
9255 W. Sunset, Suite 717
Los Angeles, CA 90069
310/274-2221; Fax 310-274-4392 http://www.jvcdiscusa.com
Sony Disc Manufacturing
1800 N. Fruitridge Avenue
Terre Haute, IN 47804
812/462-8195; Fax 812/462-8866
P.O. Box 7427
Charlottesville, VA 22901
804/985-1100; Fax 804/985-4625 firstname.lastname@example.org
WEA Advanced Media Operations Group
1400 Lackawanna Avenue
Olyphant, PA 18448
717/383-3577; Fax 717/383-9824 http://www.wamodvd.com
Debbie Galante Block (email@example.com) is a freelance writer based in Mahopac, New York.
Comments? Email us at firstname.lastname@example.org.