The rallying cry of the first fiber-to-the-home interactive projects of the mid-’90s was “the last mile” — a phrase referring to the final connection from the cable trunk line to the subscriber.
These days, Technicolor and Deluxe, both written off countless times as celluloid-era dinosaurs with no future in digital Hollywood, are fighting for the first and last inch as they transform themselves in response to radical changes in the industry they serve.
Rivals for almost a century, the pair have evolved from photochemical labs to digital tech providers, offering services from pre-production to the living room. They remain in intense competition, each determined to convince content owners that it has the soup-to-nuts solution for handling the many imaging systems and platforms of today’s movie biz.
When asked to comment on Deluxe’s business model, Technicolor execs smiled and joked they’d never heard of ’em. In fact, Technicolor has been hearing of Deluxe since 1919 — when Technicolor was 4 years old.
But their competition has heated up in the last decade, as both stretched vertically and competed head to head horizontally.
Gambling on growth
The two players try to be all things to all content owners, from gathering data on the set for digital dailies, through post, distribution and archiving. They’re arguably the biggest cradle-to-grave service providers for the motion picture business since the studios owned their own labs and movie theaters.
After it was acquired by Paris-based Thomson Multimedia in 2001, Technicolor entered a frenetic period of partnerships (often with outside-Hollywood companies like Microsoft) and of buying labs and digital post facilities. By 2008, Technicolor was under new management and started consolidating shops and shedding companies such as broadcast-equipment maker Grass Valley, focusing on “organic growth” in core areas and alliances.
Deluxe has followed a similar trajectory of acquisition. Only a decade ago, its business was running labs in London, Toronto and L.A. and mastering DVDs. Then it purchased 20% of EFilm from Panavision to develop the digital intermediate (DI) biz. By 2006 it was bought by Revlon billionaire Ron Perelman’s MacAndrews & Forbes (which also owns Panavision). Since then it has been on a shopping spree, buying companies that almost always compete head to head with Technicolor enterprises.
It recently swallowed Ascent Media’s content and media services divisions for $68 million, adding Encore Hollywood, Encore Hollywood and Level 3 to its portfolio and giving it a significant position in TV post in Hollywood for the first time.
Despite Deluxe’s blistering pace of acquisitions — 20 companies in 10 years — Technicolor is still much larger, thanks to the legacy Thomson businesses. But the duo continue to jockey for position. In October, for example, Deluxe won out over Technicolor for Universal’s lab contract. Technicolor, in turn, earlier this year signed a deal with Relativity Media, which aspires to mini-major status.
Both Technicolor and Deluxe argue they’re uniquely positioned to solve the digital or file-based workflow issues of modern media, and both claim an edge in proprietary technology and customer service. Both are eager to strike exclusive relationships with companies and filmmakers. But they have so many pieces on the board it’s common for a project to be handled by Technicolor at some phase of production, post or distribution and Deluxe at others.
Cinematographer Gabriel Beristain said it’s not unusual for him to process film at Technicolor, view digital dailies at an unrelated post house, return to Technicolor to create a digital intermediate with his preferred colorist, Jill Boganowicz, and finally work on a release print by Deluxe.
Both companies have moved into digital delivery. Technicolor’s French parent, Thomson, which was known for set-top boxes and other consumer-facing hardware, has adopted the better-known Technicolor name. Today Technicolor-branded broadband gateways connect 25 million homes worldwide; another 40 million sport Technicolor set-top boxes.
Deluxe, too, finds taking Hollywood is not enough. “Our customers won’t just be the studios,” predicts Deluxe prexy-CEO Cyril Drabinsky. “They will be ‘rentailers’ (like Netflix), retailers, OEMs, handset operators and some of the cable head-end guys as well.”
Drabinsky maintains that while Deluxe is privately held, which typically limits access to capital, its spate of buying hasn’t exhausted its resources. If anything, Drabinsky said, Deluxe is “under-leveraged,” though it would not disclose its earnings.
After a rough first half, publicly traded Technicolor achieved $5 billion in revenue, down 1.2% over last year. CEO Frederic Rose declared an end to Technicolor’s “restructuring phase.”
Technicolor indicated that its buying phase is over in the short term. “We’re counting on innovation to drive organic growth, rather than simply acquiring market share,” said Joe Berchtold, prexy of Technicolor creative services. The key to serving today’s clients is “reducing complexity.”
Deluxe says its file-based workflow tools give it an edge. But so does Technicolor. In fact, they’ve been instrumental in disseminating common-language color tools, something cinematographers shuttling between Technicolor and Deluxe facilities worldwide appreciate.
“Both companies have been cornerstones of the industry who have had to confront the new reality of a hybrid imaging environment,” said Curtis Clark, a d.p. who chairs the technology committee of American Society of Cinematographers. “I’m not privy to their business models, but they’ve done an effective job of integrating digital into a traditional film workflow.”
Clark contends that Hollywood productions are heading toward critical “inflection points.” The industry is much closer to reaching some (digital cameras, which dominate TV) than others (the replacement of the film release print and digital archiving), so the reinvention and adaptation of labs like Technicolor and Deluxe, as well as smaller labs such as Fotokem and Laser-Pacific, will be important to achieving the end-to-end concept.
Ironically, the technology Technicolor and Deluxe developed to gain an advantage has made it easier for d.p.’s to move between facilities. Cinematographer Beristain said, “It’s the only way (Technicolor and Deluxe) are going to survive.”