From vinyl to VOD - how to strive in a changing marketplace

French independent family-owned replicator MPO has been a key player in the development of virtually all home entertainment media. Looking to the future, LOIC DE POIX, the company Chairman, tells JEAN-LUC RENAUD why the industry should focus all its energy promoting the optical disc format itself, not just Blu-ray.

How did MPO start?

Everything started in 1957 when the small town of Villaines-la-Juhel in the Mayenne region decided to develop some cultural activities with the help of artists who wanted to establish a record manufacturing plant. Out of their depth, they approached my father, who came from a family of industrialists, to set it up and run it. My parents founded Moulages Plastiques de l’Ouest (MPO) with four employees on their nearby Averton estate.

My father went to see Eddie Barclay, a well-known music producer in Paris who gave him a few vinyl titles to press, though he suggested he was already working with Pathé Marconi and saw no need to call on the services of a small manufacturer in Mayenne.

The company grew to become the largest record factory in France. After a few years spent in the accountancy sector, I joint the family business.

We expanded international operations in the Netherlands and the United Kingdom. A key date for MPO was 1980-81 when we heard about the manufacture of Compact Discs. We visited Philips, the CD progenitor, at Eindhoven, who looked us down wondering aloud if a small manufacturer could commit the heavy investments necessary and handle the very complicated pressing technology. After some persuading we signed the contract for the production of CDs. We were the first European company to sign a contract with Philips.

You then migrated to CD?

Repeating our experience with the vinyl in 1957, our team of technicians quickly acquired a know-how in all facets of the CD manufacturing process. Our meeting with Sony in Japan was instrumental. Via the good offices of the French ambassador in Tokyo, we met Sony co-founder Akio Morita. This encounter helped us understand the potential of this new format as well as provide us with pointers on the manufacturing process. In fact, Sony was more helpful than Philips, in those days. We had turned down Polygram that wanted to sell us their own – very expensive – manufacturing system.

We return to Europe with the adrenalin flowing after this Japanese trip and we started production of the first CDs on 7 December 1984. It was treated as a scoop on French radio. We meet Canadian officials at MIDEM who wanted to start a disc manufacturing operation in Quebec. Disc Americ was established in which MPO had a 30% ownership with the provincial government.

We expanded our activities into computer-based software. In 1987, we arrived in Palo Alto, California, with a software, the result of a partnership with a small US company who had developed a special mastering process even before Bertelsmann/Sonopress in Europe. Together with Jouve, a French partner in Mayenne, we developed the first CD-ROM and we secured European patents. We became a CD-ROM leader, an activity we kept for a long time.

Were you involved in the laser disc and CD-i formats?

Let’s keep in mind that the CD, while so far used for audio, was based on a Philips concept that opened the door to video. With customary vision, my father foresaw the time when it would be possible to expand outside the world of audio and enter the world of video. At the time video games were not much talked about.

We quickly developed video discs and laser discs in association with the inventor Pioneer that had set up the Laser Disc Association, of which MPO was the only French member, indeed the only European member for a long time.

We created a disc called CD-tel. Philips asked us to drop it when its own CD-i format won the day. This product introduced for the first time the concept of bonus, that we now have on DVD and Blu-ray. I should add that before the arrival of CD-i we had already produced CD-ROM interactive for the medical sector to assist diagnostics.

We were not involved in the VHS cassette replication business, moving directly to DVD. We produced the first DVD in France, Microcosmos, for Montparnasse Multimedia.

How do you see the development of Blu-ray in the context of the DVD market?

I deeply regret that the industry focuses all its energy on the promotion of Blu-ray and not on the optical disc itself. The DVD is a fantastic product, let’s not get rid of it for the benefit of Blu-ray. Blu-ray should be promoted as an extension of the DVD. We ought to promote the optical disc, which includes several family members such as the audio CD, CD software, games, standard- and high-definition discs.

We should also promote video itself, and 80% of the video is on optical disc – the DVD. By putting all the emphasis on Blu-ray we give the impression that DVD is finished. The DVD+BD combo is an interesting concept that could help maintain the dominance of the optical disc support.

You have expressed concerns about the way Blu-ray emerged

Obviously, it would have been easier to proceed with HD DVD, the logical extension to DVD, and easier and cheaper to produce. Like others we set up HD DVD manufacturing capabilities and, indeed, produced some 400,000 discs for StudioCanal.

Unfortunately, a few Hollywood majors put their weight behind Blu-ray, which tipped the balance in favour of the Sony format. It’s a lot more complicated and expensive to produce BD discs. Sadly, it makes Blu-ray much less accessible to independent publishers, which constitute the majority of our clients.

Will Blu-ray ever replace DVD?

I don’t think Blu-ray will ever replace DVD. I reckon it will take 30% to 40% of the optical disc market. I hope I am wrong because it would mean that Sony has taken the entire market. Today, there are 100 DVD manufacturers in Europe, but only 7-8 BD replicators. If we want to ensure a greater market penetration of Blu-ray we need to create the conditions for more independent BD replicators coming onto the market.

What does Sony’s dominance of the market mean?

On the global scale, Sony will operate 150 BD lines. All the others are Lilliputians. Investment into BD is very heavy. Sony is a replicator, player manufacturer, studio owner, and patent holder. Access to Sony’s BD manufacturing tools is difficult if not impossible and prohibitive. While giving the impression of overture by boosting a large roster of supporting companies, Sony essentially is proprietor of the format, especially when it comes to servicing the PlayStation.

In fact, what I find objectionable is not so much Sony’s sustained effort to promote an unparalleled level of high-definition quality for home entertainment. It is that they do not allow our clients involved in CD-ROM and DVD games to let us or other independents replicate their games for PS2 and PS3. This restricts small independent games publishers’ access to the PS consoles.

How much of a problem is AACS licensing to independents?

AACS has essentially been designed for the Hollywood majors that insisted on its compulsory use. Because it is such an expensive system, it keeps some independents out of the BD market. Efforts have yet to be made on the licensing and royalties front, still very onerous. All together these account for nearly 30% of the total cost of producing a disc.

Make no mistake. To protect content and fighting piracy are critical. I am glad to see that the HADOPI laws on the illegal downloading of copyrighted material off the Internet has been voted by the French National Assembly. It ought to have an impact on the behaviour of some categories of customers who do not wish to be caught in the net. These may prefer buying a DVD, now quite cheap, rather than face a fine.

How about BD-Live as a unique selling proposition?

I am doubtful as to the importance of BD-Live for the success of BD. It is an important addition, a bridge between physical media and the virtual world of Internet. However, I repeat, one should focus on the optical disc.

What about holographic disc and 3D-TV?

MPO owns patents on a 100GB disc, developed with Thomson. That’s a storage media. Do we need more than 50GB to distribute a high-definition quality video? I do not think so. As for 3D, let’s first digest the launch of Blu-ray and let’s not confuse the consumer with multiple visions. We are going through an economic crisis, after all, which, combined with technical complexity, makes the growth of BD currently very challenging.

In time of uncertainty, it is said diversification is key to survival. What is MPO’s strategy?

We have not waited the economic downturn to expand the range of services to the home entertainment industry.

Manufacturing-on-demand is becoming a buzzword, but we started to implement MOD solutions since 2002, with the arrival of the Internet. We developed online services for the music sector, notably via CD manufacturing-on-demand. Earlier this year MPO further developed its online services related to CD and DVD manufacturing-on-demand for audio and video publishers who want to sell their catalogue stock directly to consumers via portals or from their own websites.

Back in April 2007, we set up MPO eMedia, a joint venture with Ipercast, to offer digital asset management and distribution of VOD over IPTV, Web and Mobile networks. We offer the full range of services that the digital content industry requires, including encoding content from and to all existing formats, secured storage, content distribution, transcoding of content for optimised distribution over any platform and rights management.

MPO Group has created a dedicated packaging division, M’Pack, which designs and manufactures packaging. It includes a range of eco-friendly products as well.

On the logistics side, the MPO group combined forces with one of Europe’s leading logistics company Fiege to form Fiege MPO. With 10 centres, we can provide a pan-European logistics and distribution network for home entertainment products.

MPO is a family-owned enterprise. Are there any advantages?

I intend to keep the company in family hands even if one could envisage outside participation. The advantage is the ability to react quickly when taking decision. It also enables the top executives to be closely involved in all facets of the business. Golden parachutes, end-of-year bonuses are not what I am thinking of, nor running away with the company pension fund, like some CEOs!

With my brother Serge, who joined me in 1983, our philosophy is to stay close to both our employees and our clients. That’s the values we defend in the MPO family.

Contact: www.mpo-international.com ...

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