Fox has pulled out of its acrimonious VHS duplication deal with Deluxe Video Services and moved its half-billion-dollar business to Toronto-based Cinram Intl., which projects the multiyear deal — the 30-year-old company’s biggest ever — will bring it C$750 million ($510 million) in additional revenue over the course of the new agreement.
Twentieth Century Fox Home Entertainment withdrew from its agreement with Northbrook, Ill.-based Deluxe over an apparent disagreement about Deluxe’s performance. There were still four years remaining on the contract. Deluxe had serviced Fox about 10 years. Until now, Deluxe and Technicolor have cornered the videocassette duplication business in the U.S.
Major loss to Deluxe
The shift is a major loss for Deluxe. Faced with about a quarter less business without Fox, the company will downsize, said Mary Ann Fialkowski, exec VP, business development.
Relations between Fox and Deluxe apparently broke down over Deluxe’s repeated inability to meet shipment deadlines. Deluxe’s struggles to keep up with the increasing volume of VHS orders since the adoption of revenue sharing are well known within the video industry. Rev sharing allows video retailers to order many more copies of each video to satisfy early consumer demand on hit titles. Sources said Technicolor has also had late shipments, but not as frequently as Deluxe.
Fox VP Steve Feldstein would not discuss specifics except to say, “We couldn’t come to agreement on certain elements of our contract with regards to performance parameters.”
Other aspects remain
Fialkowski noted the shift doesn’t affect international video duplication and distribution.
Fialkowski confirmed that Fox has already begun moving finished product out of Deluxe buildings, but said it has not yet finished with all Fox orders.
Cinram has been duplicating videocassettes for Fox in the Canadian market for several years. The new deal with Fox is Cinram’s first contract with a major studio for domestic business.
(Diane Garrett is a staff reporter for Variety sister publication Video Business.)