Company seeks digital growth past core film biz

PARIS — Nearly three years after emerging from bankruptcy protection and vowing to reinvent itself, Technicolor is continuing to look for fresh revenue streams and new ways to thrive amid digital-age moviemaking.

Since 2000, the iconic 97-year-old American film technology company has been owned by French-headquartered electronics conglom Thomson, which in 2010 re-branded itself as its better-known subsid and opened a Los Angeles headquarters at Sunset-Gower Studios in an attempt to get closer to content creators and distributors.

But Technicolor, which reportedly contributed to more than 70% of U.S. blockbusters in 2011, with services ranging from post-production to vfx, is also getting into cloud technology, and aiming to develop new patents, the lifeblood of the company.

Stephane Rougeot, Technicolor’s chief financial officer and head of strategy, says he has high hopes for the company’s multiplatform digital content service M-Go, a free app that enables consumers to easily locate, view and share content via the Internet. The service, due to bow in the U.S. by year’s end, has already inked content licensing deals with DreamWorks Animation, Relativity Media, NBCUniversal’s film unit, Paramount Pictures, Sony Pictures Home Entertainment, Twentieth Century Fox and Warner Bros. Digital Distribution. The international version of M-Go will bow in this year, Rougeot says.

Technicolor also has been diving into animation production, delivering its first toon series, “Pete and Pickles.” And it recently announced a partnership with “Grand Theft Auto” publisher Rockstar Games to bow a vidgame and animation production unit in Bangalore, India.

The company has been ramping up its presence in France since acquiring Quinta Industries’ bankrupt post-production biz at the beginning of the year and opening a dubbing facility.

Headed by Michel Vaquin, the year-old Technicolor Entertainment Services France has nabbed more than 30% of the French post-production market, with a client portfolio that includes some of Gaul’s top indie producers, notably La Petite Reine (“The Artist,” “Colt 45″), LGM (“Boule and Bill”) and Les Productions du Tresor (“Blood Ties”).

The shingle is still undergoing a major makeover that’s been propelled by the film biz’s growing digital reality. In the past couple years, Technicolor has closed various film printing labs, axing hundreds of staffers. And since Thomson’s re-branding itself as Technicolor in 2010, it’s been moving away from services for retailers and exhibitors, notably set-top box manufacturing. Most recently, the company divested itself of its bankrupt set-top box manufacturing facility in Angers, France, laying off more than 350 people.

In the meantime, since getting U.S. private equity firm Vector Capital onboard as a shareholder in June, Technicolor has been improving its balance sheet. Over the third quarter of 2012, revenues reached €928 million ($1.2 billion), an 11% year-to-year increase; debt sits at $1.5 billion.

While Hollywood remains Technicolor’s No. 1 client, the company, which is listed on the Paris stock market, has just expanded its research activities in Gaul, where it launched a facility near Rennes. The decision to establish the site was in large part a response to the French government re-upping the country’s research tax credit for the next five years. The Gallic program offers a rebate of 35% on such investment, with no caps.

Technicolor CEO Frederic Rose, an energetic French-American exec who joined Technicolor from Alcatel-Lucent in 2008, notes the location in Rennes, nicknamed the French Silicon Valley, is an ideal place to develop new products. “With all its topnotch technology schools and experts, Rennes is providing us with a stimulating environment,” said Rose during a recent press tour of the new facility.

The 193,750-square-foot building centralizes a staff that had been located at three different Rennes sites since 1973. It employs 500 people, including 220 researchers, more than half of all researchers Technicolor has worldwide.

Rose maintains that Technicolor has been dedicating more of its research to service in the film and TV biz. He says the ultimate goal is to create a synergy between researchers and creators working on both sides of the Atlantic.

Some of the entertainment-related technology being developed at Rennes includes flying drones for video capture; an audience response measurement system that applies sensors to the body; and a consumer-based app called “synchronized movie summary,” which allows users to retrieve a movie synopsis and extra features by capturing a single frame of a film with a mobile device. VFX-related initiatives in development include solutions for the pre-visualisation and/or rendering of massive scenes with thousands of trees and buildings, and complex substances such as clouds, smoke or dust.

Eric Beaudet, financial analyst at Paris-based Natixis, says that developing new patents is crucial. Technicolor owns 40,000 patents that are big revenue-drivers but 45% of these revs will disappear when patents related to MPEG technology will fall inot public domain in April 2015, according to Beaudet.

In 2011, Technicolor invested E150 million ($198.3) in research, which Beaudet says is two-and-a-half times less than what it was spending 10 years ago.

Per James Fancher, an entertainment technology consultant based in Los Angeles, Technicolor’s strategy of developing technology that benefits the entertainment industry sounds promising, but he maintains that most of the research that’s being done in Rennes and elsewhere in Europe remains dedicated to consumer electronics.

“The huge commitment that Technicolor has in Europe to R&D continues to be a cash-flow drain, because they’re still running it on a consumer electronics policy,” says Fancher, adding that researchers in Rennes are too disconnected from the concerns of moviemakers.

Ultimately, Rose says Technicolor’s future will hinge on its current efforts to renew its portfolio of intellectual properties.

“We must anticipate what the market needs to stay ahead of the game and (develop new patents),” Rose says. “We’re in a competitive environment, and the Americans and Asians are moving very fast.” What: Technicolor targets digital growth areas.
The takeaway: French company expands into toons, develops apps and leans on R&D to tap rev streams.

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