FORM 20-F THOMSON multimedia - Technicolor

we initiated at the end of 2001 our TWICE program to expand our business offerings and our client
base, including an emphasis on geographic expansion.
) Technicolor businesses
In March 2001, we completed our acquisition of the Technicolor businesses and assets from
Carlton. Technicolor, the largest contributor to DMS consolidated net sales, is the world leader in
content preparation and distribution services to the media industry based on leadership positions
within each of the services provided. It is a key supplier of digital post-production services and
processes and distributes motion picture film. Based on volume, Technicolor is also the largest
independent manufacturer and distributor of pre-recorded DVDs and, we believe, of videocassettes.
Based in Camarillo, California, Technicolor’s operations are global in scale, spanning nine countries
with twenty-two operating locations across North America and Europe.
Technicolor’s competitive advantages are based upon technical superiority, economies of scale
and an integrated and secure service offering to its customers. Key customers include major film
studios such as Disney, Warner Brothers and DreamWorks, software and games manufacturers
such as Microsoft and Electronic Arts and television stations such as ABC. Most major contracts are
negotiated on the basis of exclusive, long-term arrangements. In any given year certain contracts
come up for renewal. Major client relationships are typically the result of multiple contractual
arrangements which include a fixed duration, a type of service and rights to a particular geographical
zone.
Through Technicolor, we offer a differentiated set of services to both theatrical and broadcast
content creators. For theatrical content creators, Technicolor provides post-production, film
developing, assembly and colorization services prior to the release of films to theaters. For
broadcast customers, services start with its post-production offering through which Technicolor offers
colorization, editing, digitization (where required) and mastering of original content for broadcast
producers. Technicolor recently introduced Technique, a new digital imaging facility, to expand its
digital service offerings and to enable its customers to transition to digital media. With digitalization,
the Technicolor offering evolves progressively towards the management of digital media assets. We
are in the process of evaluating the market for media asset management solutions, which entails the
storage and retrieval of archived content for distribution through several distribution channels.
Technicolor is also a leader in film processing and theatrical distribution services. We believe
that Technicolor holds a 36% market share, based on footage of film sold, of the U.S. and European
film processing market. Our main competitor in this activity is Deluxe.
Because the distribution of content to theaters will progressively employ digital technology,
Technicolor formed a joint venture with Qualcomm in 2000 for digital cinema, of which Technicolor is
the 80% owner. The goal of the joint venture is to provide turnkey digital cinema systems to
exhibitors worldwide based on best-in-class theater management system technologies and to provide
content management and delivery services. The venture delivered its first commercial film release
‘‘Ocean’s Eleven’’ in December 2001.
Technicolor manufactures and distributes videocassettes, DVD and CD packaged media via
sixteen facilities located in North America and Europe. The company also distributes Microsoft Xbox
game consoles. Technicolor provides a turnkey integrated service for audio and video content
creators that spans mastering, manufacturing, packaging, distribution, including direct-to-retail and
direct-to-consumer (e-commerce), as well as procurement, information services and retail inventory
management systems. The packaged media industry continues to grow steadily, most recently
fueled by consumer demand for DVD video as well as game consoles and software. Technicolor’s
main competitors in videocassettes are Deluxe and Cinram, with Technicolor holding, based on our
internal estimates, a 35% U.S. and 30% European market share in 2001. In CD and DVD,
competitors include WAMO, Sony DADC, PDSC, Sonopress, Ritek, Infodisc and Cinram, with
Technicolor holding a 25% U.S. and 15% European market share for DVD in 2001. Technicolor
19