A pressing need

By Denise McNabb

Tuesday 1st October 2002

DVD production? With Taiwan and China pumping them out by the millions at peppercorn production prices, you'd be bonkers to play that game, surely?

Well, it all depends on how you do it, says Vaughan Stebbing, co-general manager with brother Robert at Auckland family business Stebbing Recording Centre. It has just started manufacturing DVDs - the first in the country to do so.

Production depends on your target market, says Stebbing. You'd never make money here churning out blanks for computer CD-ROMs, for instance. Even Asian companies make only a few cents profits on every million, he says. Nor would you try mass-producing blockbusters for world markets. As lucrative as that may be, New Zealand can't create that level of production capacity as economically as other countries.

"We are producing 800 units an hour at the moment, whereas some big releases require an output of 500,000 units a day [nearer 20,000 an hour]," Stebbing says. The company also produces 1800 CDs an hour.

The business has, however, established several niche markets. Film buffs buy licensing rights to classic movies, for example, and have them replicated on DVDs for rental stores. Or a company might want a small run of a recent movie for just the Australian and New Zealand markets. Others want replication of New Zealand films.

"The good thing for us is that we are getting in on the ground floor and growing with the market, whereas when we got into the CD market, it was already mature," Stebbing says. "But we still see DVDs at this point as a boutique specialty. It is a very small part of the business."

Stebbing is one of only a handful of DVD manufacturers in Australasia that invested in the expensive mastering (creating a master disc of a video, CD or multiple sources) and authoring (a system for creating the content of a DVD using text, graphics and audio) side of production as well as replication (making copies by duplicating the master disc). It also does labelling and packaging of DVDs and CDs for clients. It is, in effect, a one-stop shop from recording to presentation.

CDs and DVDs share technology and start from the same basic plastic disc. (DVDs are two discs sandwiched together with the sound and picture embedded in them). Three years ago the company invested $12 million to build high-tech, temperature-controlled premises in Ponsonby and equip it for CD production. In the five months since it spent $3 million on adding the DVD plant, production has averaged 6000 DVDs a day. This, says Stebbing, is just the warm-up. "We have capacity to do runs of up to 20,000 to 50,000 at a time."

Stebbing admits that leaping into the DVD market was a big and expensive decision. But it was one the family could not afford not to take. "We first heard about DVDs six years ago and we were pretty sure they would be the next big thing," he says.

Electronics retailers have since confirmed their hunch. This year DVD players are the hottest selling item and the pace is picking up as prices fall. Better still for Stebbing, there is some way to go. It is estimated DVDs account for 15% of rentals in the New Zealand market compared with 40% in the US and about 35% in Australia. In Singapore, videos are virtually obsolete, replaced by DVDs.

"In most cases DVDs are better than normal television and they are watched over and over again, especially by children. It's the quality thing. And you don't need to have an expensive digital television to watch DVDs," says Stebbing.

The Stebbing business today is a quantum leap from 50 years ago when the Stebbing brothers' father, Eldred, heard about recorded music overseas and set up a recording business at his Avondale home.

Now 81 and still chief executive of the family firm, Eldred recorded many budding artists, including Ray Columbus and the Invaders singing "She's a Mod" and "Till We Kissed".

In 1971, he built the soundproof studio in Herne Bay's Jervois Road on riverbed stone to absorb vibrations of passing traffic. The world-class studio still operates there as an adjunct to the new CD/DVD plant down the road.

In the early days, radio stations didn't have recording facilities for commercial production. Eldred filled the gap, making award-winning commercials such as Toyota's "Welcome to Our World" and the "Crunchie" train jingle in the 1980s.

Pressed vinyl records were soon on the way out and studio recording was not enough for the company's future survival. So it started cassette and video manufacturing. In the late 1980s, it was replicating 2.5 million music cassettes a year. When, in turn, CDs started dominating the market, the company invested in the CD plant.

Computer technology has made it relatively easy these days to make CD recordings. Stebbing says the business has maintained its edge by offering quality acoustics. "DVDs are not an easy product to manufacture because production quality has to be very, very high," he says. "And the plant requires a lot of expertise and maintenance."

Some of the 12 specialist staff were hired from overseas when CD manufacturing started. All have since become experienced in DVD production with on-the-job training.

The DVD hardware itself was shipped from Holland and Sweden and commissioned by the manufacturer's engineers. The big-ticket item is the direct stamper recorder, costing around $3 million. It is the machine that stamps the masters for reproduction. Stebbing says the investment means the company has quality control over replication of master copies. And that brings repeat business. "Essentially we push the quality aspect with sound and video engineers who can give a lot of advice. It's a people-specific industry."

Because it is a private family business, Stebbing won't disclose turnover or profit but he says it's a medium-size company with 36 staff in total. Stiff investment costs give the balance sheet an occasional hammering and Stebbing says the company needs to produce 2.5 million CDs a year to break even. But it is already doing that. And growth in the DVD market will add the icing to the cake.

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