Movie future: DR Group started out selling surplus stock and now helps aspiring filmmakers by providing digital facilities and consulting.

LOWELL Kay had been in Prague, running his own catering business as the Czech Republic was moving from Communism, when his father called with a business proposition.

Melvin Kay wanted his son's help in starting a business to purchase surplus film stock from the studios and resell it at a discount to students and independent filmmakers. Lowell didn't take long to decide he would rather work in Hollywood than serve food to American expatriates. He closed his business, came home and Dr. RawStock was born.

Kay has built a cold-storage and testing facility that has since grown beyond celluloid--offering digital post-production services based on Apple Computer Inc.'s Final Cut Pro editing software for the Power Mac. Last year, the company was renamed DR Group to reflect its expanded focus.

DR Group still sells 35-millimeter and 16-millimeter Kodak motion picture film, but in the past six years it has become one of Apple's top resellers and trainers for Final Cut Pro and related software.

The company rents out professional editing suites at its Hollywood facility and manufactures specialized media storage devices. It also provides mobile editing units for on-location film productions and televised events such as the Grammy Awards.

As the venture expanded beyond its original concept, Melvin stepped back and let Lowell take over. His latest venture is consulting and installation services for companies that want to set up their own all-digital facilities.

"In the next five years I see that the majority of our business will come from consulting, digital-studio building and work-flow management," said Kay. "We're well placed because of the chance we took investing in the Final Cut Pro end of our business six years ago. We have a head start on everyone else."

Sophisticated yet affordable at less than $1,000, Final Cut Pro is among several technological innovations fueling a democratization of the movie and television industry--similar to the desktop publishing revolution more than a decade ago. (In the publishing industry, the Internet is now driving further change.)

Prominent film editor Walter Murch created a stir when he used Final Cut Pro instead of the industry standard Avid system on "Cold Mountain," which received an Academy Award nomination for film editing in 2004.

'Out of necessity'

But back in 1999, the industry's direction was less clear. Kay had begun noticing a drop in 16-millimeter film sales as student filmmakers turned to lower-cost video camcorders. After researching digital technology, he had a hunch that Final Cut Pro, then owned by Macromedia Inc., held the most promise for low-budget filmmakers wanting the ease and creative advantages of digitally editing film and video.

"A lot of what we began doing came out of necessity," said Kay, who honed his technical skills as a music composition major at the University of Southern California. "We began building our own drives because we could build them to our needs better than the company we were sourcing from."

New features in Final Cut Pro make it easier for upstarts looking to compete with larger post-projection companies. "Our company wouldn't be here without it," said Jason Levine, president of Gas Station Zebra, a producer of movie trailers, teasers and commercials and one of DR Group's first consulting clients.

When Gas Station Zebra opened shop five years ago, it cost $1,200 a week to rent a conventional Avid suite, compared with $200 a month for a comparable Final Cut Pro set-up. Budding filmmakers often would take jobs at companies with Avid equipment so they could use the suites after-hours for their own projects. Gas Station Zebra, which has grown to 11 employees from two, recently expanded into a 10,000-square-foot campus created from 1920s-era cottages in Studio City. A high-speed network of desktop editing suites, designed and built by Kay's company, allows Gas Station Zebra editors to work simultaneously on the same project and review the results in real time over the Internet with their studio clients.

While film still offers a higher quality image for big-screen productions, high-definition digital video has narrowed the gap, particularly in television.

"I'm not sure that film will be dead anytime soon but as digital becomes more of an accepted medium, film will become less important," Kay said.

DR Group's growth has not been without road bumps.

Not long after the company gutted an old Ice Capades warehouse on Santa Monica Boulevard and built 8,000 square feet of offices and post-production suites, the entertainment industry was hit by the 9/11 attacks, the threat of an actors' strike and the market downturn. Investment capital for independent films and related commercial productions dried up.

"We survived because we were well capitalized," said Kay, noting that aside from a construction bank loan, the company financed its own expansion without outside investors. "We already knew we were taking a chance because we were investing in a new technology that at the time wasn't really proven yet, so we knew we needed enough money to get us through the burn period."

Business eventually picked up, with revenues growing 10 percent, to $5.5 million in 2004. This year, Kay expects to benefit not only from Apple's marketing campaign for its latest version of Final Cut Pro, but growth in the consulting service.

"We think this year and the next few years are going to be fast growing ones for us," Kay said. "All the vision we had six years ago is taking shape now."

PROFILE

DR Group

Core Business: Products, services and consulting based around Apple's Final Cut Pro digital editing system

Year Founded: 1992

Revenues in 2003: $5.2 million

Revenues in 2004: $5.5 million

Employees in 2003: 15

Employees in 2004: 17

Goal: To be the firm that entertainment companies turn to with their Final Cut Pro and digital content creation needs

Driving Force: Helping studios and production companies set up their own Final Cut Pro-powered facilities