By : Erik Gruenwedel | Posted: 01 Feb 2010
Warner Home Video is terminating its DVD and Blu-ray Disc replication deal with Cinram International after six years, the Toronto-based replication company said Feb. 1.
A Warner spokesperson said a replacement replication company had not been determined. Online reports suggested the studio is taking its disc business to Technicolor.
The departure represents a huge blow to Cinram, which generated about 28% of its 2009 global revenue, including operations in North America, the United Kingdom, France, Germany and Spain, from the studio.
Cinram CEO Steve Brown, who reportedly characterized Warner’s departure as a “bump in the road,” said the company will work with Warner during the transition while looking for a new studio partner.
The news is not totally unexpected considering lower demand and a lower average selling prices for DVD at sellthrough and rental.
Cinram posted a 7% decline in revenue to $276.7 million, from $298.4 million in the most recent financial period.
However, the replication service last September signed a three-year deal with Lionsgate.
Nonetheless, analyst Adam Shine with National Bank Financial said the move by Warner represents a serious blow to Cinram's future, a company that reportedly produces 2.1 million DVDs annually.
"We're quite surprised to see the termination of this key relationship," Shine wrote in a note to investors.