For the movie fan who delves deeper than just the latest Hollywood blockbuster, tracking down that one title they’ve been dying to get their hands on can be a challenge.
Mark Pytel knows the frustration. As an avid film buff, the 28-year-old Kenosha, Wis., resident has accumulated a collection upward of 4,000 movie titles.
Being relatively young and fond of older films, Pytel didn’t have the chance to see those older movies in the theater. But a growing trend among the major Hollywood studios and movie retailers offers a solution: media on-demand production, or MOD. And a Twin Cities company called Allied Vaughn is playing a major role behind the scenes.
Pytel was able to get his hands on DVD titles like the 1972 French thriller “The Outside Man” and the 1974 detective flick “Busting” on Warner Archives (www.wbshop.com). Both titles are available for about $16.95 each. Once he hit the “buy’’ button, Edina-based Allied Vaughn duplicated the movies onto a DVD and shipped them out.
Allied Vaughn works with the major Hollywood studios to get licensing to movie titles and then stores the films on the company’s giant servers. When a customer purchases a title from one of the roughly 200 online retailers that the company supplies, Allied Vaughn makes the DVDs one at a time.
“Every entertainment has a life span,’’ said Doug Olzenak, president of Allied Vaughn. “You introduce it, advertise it. It becomes popular, and then it starts coming down.’’
Typically, the average title’s life span plays out like this: studios know at the outset that they can produce a million copies and they will most likely sell without a hitch. The tricky part comes once the title has reached its sales peak. That creates a dilemma for studios: should they continue production — and if so, at what level?
If a studio were to produce 10,000 copies during the post-peak period, they could be on the hook for shipping and warehouse costs for product that might just end up sitting on a storage shelf. It can be a costly endeavor for studios to continue production on a title with waning popularity.
One solution? Allied Vaughn started offering an on-demand media production service — matching the exact consumer demand by duplicating DVDs one at a time and only after the titles were sold.
Getting a foot in the door
When the company first started pitching the idea to the major Hollywood studios, Olzenak met with resistance.
“I remember the first meetings that I tried to get with studios, I would’ve been pretty happy if I got a meeting with the head of janitorial services,” Olzenak said. “They would say ‘You’re making discs one at a time? Isn’t that expensive?’ ”
The answer was yes — and it still is. But it was a matter of preparing for the future, something Olzenak said big studios are reluctant to do when they’re rolling in cash.
In order to get the attention of the major studios, Allied Vaughn had to talk in terms of dollars. Sure, it may not be feasible to use a media on-demand production method for the blockbusters that sell millions of copies.
But as Olzenak points out, major retailers only carry about 1,000 movie titles. That’s a far cry from the nearly 130,000 titles that the movie studios have sitting in their vaults, many of them never released. The key for maximizing profits from content is to optimize the product’s life span in the most cost-efficient way, Olzenak said.
Allied Vaughn now works with the major studios, including Warner Bros, MGM, Sony and Fox.
The company has been in the media manufacturing business through various incarnations since the early 1980s. The company became Allied Vaughn in 1999 and started developing the Media On-Demand process in early 2001 after buying Denver-based on-demand CD manufacturing company Tangible Data. Media on-demand has become a core focus of Allied Vaughn in addition to its library management division.
Isaac Cheifetz, president of the IT executive search firm Open Technologies in Minneapolis, likens the MOD business model to a fast-food operation.
“It doesn’t make sense to make the same amount of food during late-night hours as you would during peak hours. So it moves to a just-in-time model at night, making the food as it’s ordered.”
A ‘long-tail’ strategy
Cheifetz believes this process lends itself well to a more boutique model rather than the big in-store retailers that tend to only stock the big sellers. This retailing strategy is sometimes called the “long tail’’ strategy, a statistics terms that refers to selling a large number of unique items (movies in this case) with relatively small quantities of each sold.
The long-tail model works well with the niche online retailers because there is a larger variety of titles and less intense demand, Cheifetz said.
Although the packaged media industry — CDs and DVDs — is steadily declining, Olzenak believes the media on-demand sector will continue to grow as more and more titles are brought out of studio vaults.
Olzenak doesn’t know when packaged media will become totally obsolete but he’s betting on the media on-demand segment to become a bigger share of the industry.
“The future is unclear but we believe it will grow to hundreds of millions in retail revenue. It’s just a matter of how that will come to be,” said Olzenak.
Justin Miller is a University of Minnesota journalism student on assignment for the Star Tribune.