Packaging media in a wide open market

With manufacturing in both Belgium and France and an office in London, BDMO has carved out a strong business with specialised packaging for CD, DVD and now UMD. CEO GEERT CASSELMAN talks to TIM FROST about the realities and future of media packaging.

DVD packaging is probably the most competitive sector of the DVD industry. But you are helping drive the revenue-generating segment of the special boxset for Special/ Collector’s Edition that commands a big retail price. Do you find more of the publishers’ money going into product differentiation packaging and how is the budget decided?

The studios are looking for margin that can be generated with special packaging. So, we have to be more creative, more than just a supplier of packaging. We have to work with our customers to see how we can create new ideas and propose new materials, colours and designs so that it can be differentiated on the shelf.

For us, the value of the packaging is going up and this is in the areas where the quantity is not the main factor, instead it is the concepts and creativity.

If you propose a new concept you still need to know what sort of budget the customer wants to work with, whether its €0.5 or €1 or €2 per piece.

Far Eastern packagers undercut European manufacturers in the standard boxes, in particular. Is there a aspect of the market that cannot be handled by those Far Eastern suppliers either because close contact with the client is a necessity or because sophisticated designs cannot be delegated to far away suppliers, or even because fast turnaround is more valued than ever by clients?

Production in the Far East is a lot cheaper than we have here. Our strong points therefore must come from our flexibility, creativity and especially with the short lead times. For those who do not need flexibility and short lead times, then with lower costs they have sufficiently strong reasons to go to the Far East, but it is not for those who need more.

Most of our customers are in Europe – France, Germany, Belgium, the United Kingdom and The Netherlands – and when you are creative and close to your customer you can react in a very fast way and there we are stronger than our distant competitors.

There is also the language barrier – not every one in the Far East speaks prefect English, so the communication isn’t going to be easy.

You need good communication for fast lead times as you have all the approvals and changes that have to be agreed, and this can take a longer time if you are working thousands of miles away. Then shipping will take four weeks, thus undermining the flexibility and short lead times now essential in multimedia.

Will the emergence of next-generation DVD formats provide opportunities for new, distinctive box products? Is there an industry standard being developed by packagers to differentiate standard DVDs from hi-res DVDs?

We have been in contact with the studios with proposals for Blu-ray and HD DVD packaging. But, for the launches in the US and Europe, the first quantities will be fairly limited and I think it will be so for some time. Therefore, I see new opportunities for the future rather than for now. We haven’t had any genuine enquiries yet.

The first titles will not be specialities, they will not be collectors sets. When UMD started last year, that was introduced with standard titles in standard packaging. For the new formats it will be the same.

We have made an investment in researching what can be done for these new standards. We have proposed some ideas for BD and it’s not clear if anyone wants to do it. The difficulty is compounded by the fact that there is no set standard for either BD or HD DVD. At the start, it is the studios that are putting these products on the market and they sometimes want to introduce their own packaging.

We all remember Warner and the Snapper box, which was popular for some years, so it’s very difficult for us to introduce a standard if the studios are trying to push their own packaging products.

What is important is that these studios do find a standard for which it is easy to do the fulfilment automatically. At the introduction of a new format the quantities are small so it can easily be fulfilled by hand, but as the format develops and the quantities go up then you have to be able to pack large quantities of disc and associated materials automatically. So we should be aiming for something that looks good, is simple, flexible and easy to fulfill.

Do you think the situation will parallel the early days of DVD where no-one used special packaging until the format started to become established?

Exactly. There is no reason to use special packaging if the product is already special because it is a new format. The first users of Blu-ray will be looking for anything that is Blu-ray, they don’t care and are not interested how it’s packed. The most important thing for them is that it is a Blu-ray discs and they can actually go out and buy it. You need to do special things when you have stronger competition - then you need to have an eye-catcher to make your titles more attractive.

Is UMD seen as an opportunity for packagers to develop new products. Is it something you propose to the publishers or is it the publishers who approach package makers?

We already have some packaging projects for UDM. We have the version that can hold two or three UMD discs and a combination of trays that can deliver one UMD and one DVD. We have seen some interest in that product when the same movie is coming out in DVD and UMD and the publisher wants to put them in one package. I think they have looked at the rights issues for that – where they deliver the movie on two formats but only pay one set of rights. So, for UMD we are already active and it has been driven by us approaching the market with these new ideas and designs.

Are the Eastern European countries joining the EU having an impact on the economics of packaging in terms of free trade and lower manpower?

Yes, it is happening in packaging. The market is evolving with activities moving to the East European countries like Poland, Romania and Hungary, especially as they are already part of the European Community.

There is no reason to believe that the people in these countries cannot make product to the same quality as in Western Europe. These people are also motivated and they want to do a good job.

Importantly, the prices are a lot lower than in Western Europe and they are a lot closer to continental clients than the Far Eastern competitors. So, you see replicators moving to these acountries such as Technicolor in Poland. We find we are delivering to places like Poland. So, if it’s less expensive there, why don’t we manufacture there?

It is strategically important to keep an eye on low-cost production to maintain our margin. Of course, we can see these developments in Eastern Europe as being a threat, but we can also see them as an opportunity.

Is the tightening of environmental regulations in an increasing number of countries affecting your competitiveness?

In our countries, the environmental rules are very important. You have to respect the rules and you can’t work the way you could, say, ten years ago. In other countries such as in the Far East the environmental rules are not as strict. The costs obviously rise when you have to meet thougher environmental standards, and from time to time this becomes the motivation for companies to move to territories where the regulations are not so strong.

The restrictions do not really affect the consumer use of CD and DVD packaging as there is a difference between throw-away packaging, such as the wrapping of a bar of chocolate, and packing for storage. CD packing is something you need and cannot throw away, so for that reason the environmental rules are not really a serious issue.

We are seeing consolidation and even bankruptcy around the industry. BDMO itself is an example of consolidation. Why is it important to bring companies together in this way?

BDMO is a consolidation of two major companies, the French Montreuil Offset, which is the number one in France, and the Belgium company Bruggeman & Desouter.

There has to be consolidation. If you want to be an important player, strong enough, you are forced to consolidate. We are seeing that in every activity and certainly it is happening with the replicators.
Bruggeman started in DVD packaging over five years ago, and at the start of DVD the competition was not so strong and there was little pressure on pricing.

But once competition becomes strong, prices came down. At this point, you need to have low-cost production or have machines suitable just for these specific applications. If you don’t you have to invest in the equipment or in companies already working in that area and go for consolidation. That’s what we wanted to do. We couldn’t expand the DVD packaging capability in the way we were organised. So, for us as Bruggeman & Desouter, the fastest and best way was to consolidate with Montreuil Offset.

If you want to be an important player you must have enough capacity especially for the high season and also retain your flexibility. If you only have a small number of lines that is impossible to achieve. By expandind, companies are also in a position to offer a wider range of packing options.

There are several anti-theft packaging systems on offer to retailers. What impact do these have on your projects?

Anti-theft products are not as easy to do in our kind of special packaging products as they are in a standard Amaray pack when products such as Red Tag can be handled easily by the shop staff. In special packaging this is not something you can do easily. The customers do not ask for it – they are not looking for something that is both a special design and has anti-theft devices.

The growth of online delivery is often talked about as killing packaged media, but in volume terms, sales of DVD is still growing. When do you think online delivery will start affecting sales of discs?

You have two different markets – on the one hand you have the standard economical packs and on the other hand you have the special editions where the customer is looking for special packaging. For the special packaging sector I have the feeling that this market is growing and there is also growth in packaging for the multiple DVD sets for TV series.

The packaged media industry is looking for ways to add value beyond the pure content, which can be simply downloaded. That is what a lot of customers are asking us – for something that gives added value beyond the movie. They want to make it interesting for the customer with the bonus materials and with nice packaging.

So do you think that online delivery of movies will eventually hit your packaging sales?

You only have to look at music with the increase in downloading and the emergence of the iPod and we will probably see the same evolution for DVD. But you also have to remember that even in music there is now growing demand for special packaging. Some of this has to do with the fact that a significant proportion of music sales are CDs bought as gifts. That percentage is very important and when you give something you want it in nice packaging and not just the CD-R of a download.

Memory sticks are seen as a potentially important media to distribute films. Are you developing distinctive packaging for it?

It’s hard to say how important this will be – we do not have much information on that market yet, unless something happens with the price of memory coming down closer to the cost of optical media.

What key points do you see for success?

You have to look for the evolution in the market. You must always look one step ahead with what tomorrow will bring and keep an eye on the life cycle of the product. And most importantly, keep a good relationship with your clients....

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