Warner Home Video notified Toronto-based replicator Cinram it will terminate a six-year service agreement with the company in July, taking its business to Paris-based Technicolor. With the news, shares of Cinram International stock dropped 62% to $1.16 on the Toronto Stock Exchange on Monday.

The Olyphant facility, which manufactures and distributes DVDs and Blu-ray, was owned by Warner. Cinram acquired the former WEA Manufacturing division of AOL Time Warner for $1 billion in 2003, along with the rights to produce DVDs and CDs for Warner Home Video.

Cinram CEO Steve Brown says in 2009, revenues from Warner made up about 28% of Cinram's total consolidated revenues. It represented the "predominant" amount of the local plant's work.” The decision is expected to affect company operations in North America, Mexico, the United Kingdom, France, Germany and Spain – a total workforce 17,000.

Technicolor CEO Frederic Rose welcomed the WHV agreement and said "Combining their expertise in creating entertainment properties and key technologies related to them with Technicolor’s unrivalled track record of technological innovation is an exciting proposition filled with opportunity for both parties."

"The decision to change our video replication and distribution vendor, while difficult to make, is the right one for us at this time," says a WHV statement.

In November, Cinram returned to profitability after a company-wide cost cutting plan that included restructuring its operations and selling off Ivy Hill, a division specialising in printing packages for DVDs. Third quarter profits were $9.5 million on revenue, down 15%, to $351.2 million.

It may be difficult to find another major studio to replace Warner’s loss. "Entertainment groups are looking to minimize long-term agreements with disc manufacturing plants as consumers take increasing advantage of on-demand video and Internet services," said Mike McGuire, digital media expert at Gartner Group, quoted in The Times-Tribune.

Story filed 03.02.10