Film industry strikes back: DVD market boosts biz at post houses.

When business started dropping at Visual Concept Engineering in Sylmar, Pete Kuran realized his post production company needed to find revenue somewhere else.

The answer came in what is perhaps the fastest growing sector of the entertainment industry.

Skyrocketing growth in DVD sales has created a brisk demand for film restoration, a process that cleans and removes scratches from original film so that it can be transferred to the new digital formats.

Film restoration has been a technique in use for many years, but with so many studios reviving older films for DVD formats, the work has been given new life.

"We had a restoration business, but we weren't really emphasizing it, so we looked at it and felt we should really try to push it," Kuran said.

Visual Concept Engineering is one of many post-production firms that are actively marketing their restoration services and boosting their revenues by anywhere from 10 percent to 20 percent as a result.

"We saw the writing on the wall and we realized we needed to change," said Rick Morris, president of CCI Digital Inc. of Burbank of the shifting landscape for post production houses that once earned a living strictly on new film production projects.

CCI saw its post production work from traditional new film production sources slip by about 20 percent in 2001. By ramping up marketing of its restoration work, CCI was able to increase that segment from about 2 percent of the business in 2001 to about 20 percent now, with growth poised to make up about 30 percent by year's end, Morris said.

Movie studios have been producing fewer films, but they are also reissuing older films for DVD in far greater numbers.

According to most recent figures from the Motion Picture Association of America, there were 354 films released in 2001 compared to 372 in 2000.

The major studios also saw a drop in the number of films released.

Warner Brothers in Burbank, for instance, went from releasing 35 films in 2000 to 28 films in 2001. Likewise, nearby Universal Studios saw its production go from 28 films in 2000 to 23 in 2001.

But as sales of DVD players have doubled over the past two years to about 17.1 million in 2002, the demand for content is soaring.

According to the Video Software Dealers Association, sales of DVD titles grew to $8 billion last year, compared to $5.3 billion in 2001.

In addition to releasing new films in the format, studios are dusting off their libraries to develop DVD's, with dusting off being the operative word.

"The issue is that when you transfer an old movie onto DVD, the dirt and scratches on the film just don't transfer and the computer can't read it so it gets stuck," said Chip Potter, director of marketing for 10 Film, a North Hollywood-based post production company.

"We can see from the amount of business we're getting that (new film) production is down," said Potter. "We've managed to get a major studio which is interested in restoring a lot of its old material for the DVD market and that's really what's driving this," Potter said.

Having restored 50-year-old animated classic, "The Tortoise and the Hare," for an American Cinematheque tribute to the film's director and producer, Ray Harryhausen earlier this year, the company has begun restoring a number of older films for Universal and other studios.

The need for new products in the rapidly growing DVD market has also been fueling the film restoration business in the past year at FotoKem Inc., another post production company in Burbank, said Jerry Roskilly, vice president of film preservation services for the company.

In a rough economy, studios are looking to improve revenue by reissuing their restored old films and TV shows on DVD, Roskilly said.

"It's very cost effective for the studios to reissue their old inventory and get a freshly restored product out on DVD," he said.

FotoKem's restoration efforts have increased by 20 percent in the past year, with an additional 20 percent growth predicted for this year, Roskilly said.

Most recently, the company has begun working with Sony Pictures Entertainment in restoring all the episodes of the TV sitcom, "I Dream of Jeannie." It is also working with Paramount Pictures, to restore episodes of "Hogan's Heroes" for DVD distribution.

Visual Concepts sales are still off by about 10 percent, Kuran said, but the company has definitely seen improvement thanks to the new business emphasis.

"It helped offset some of the business we lost in this down economy," said Kuran.

And some companies have found that they can also boost sales by focusing on newly-made films that need to be cleaned up or repaired using some of the same processes.

CCI has also emphasized its work in cleaning up or repairing scenes in newly-made films that would otherwise need to be re-shot because of mistakes made in production.

"If a boom gets in the way or the set is too short and shows up in the frame, we can extend it digitally or erase the boom," said Morris.

"Budgets have been very tight and we've had strikes and the economy has caused everyone to step back and re-evaluate things," Morris said.