While encouraging progress continues to be made in developing ZOO Digital’s products that address the eBooks and wider publishing markets, the turmoil and changing dynamics within the home entertainment industry has continued to impact upon the financial performance of the company, a provider of software and software-led services for the filmed entertainment market.

Announcing its financial results for the six months to 30 September 2011, ZOO’s revenues are lower at this stage of the year than last year at $5.9 million (2010: $8.1 million) which has led to an operating loss of $1,087,000 for the first six months (2010: profit of $880,000).

The decline in DVD sales has been well documented. Although ZOO’s revenues are not directly related to the number of DVD units sold, its large customers are reducing the number of titles being released on DVD and this leads to a decreased number of titles being processed by ZOO’s software tools and by its production services team in Los Angeles.

The decline in the number of new episodic TV releases on DVD, which have made up the greatest proportion of ZOO’s volumes, has been particularly sudden since the summer months, says the company.

ZOO have already reduced its US staff and restructured its cost base to give a lower fixed overhead.

In contrast to the decline in its traditional business, there has been an increase in the number of titles that are being prepared using ZOO’s software for both Blu-ray and Electronic Sell Through platforms. The company expects this trend to continue, although it has not yet been sufficient to offset the decline in the DVD market.

ZOO has changed its operations and focus markedly over the last few years “to ensure that it can respond to the changing needs of the industries in which it operates.” This is evidenced by the company’s increasing participation in the eBook market.

ZOO also continued to make progress with its iTunes Extras and iTunes LP software, which eases the process for content owners of movies, TV programming and musical albums to provide and regionalise enhanced content for the EST market.

Within the six month period the company could also announce the first significant contract to be won through its collaboration with MPS, working with a leading international videogame publisher to regionalise their packaging materials for multiple territories and languages

Story filed 19.12.11