Small Business

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Staying ahead of the technological curve can be tough for a small business. So it was with no small amount of trepidation that Crest National Digital Media Complex, a family-owned post-production company in Hollywood, plunked down several million dollars three years ago to expand into the emerging DVD market.

“It was a very big decision for us,” said co-owner and President Ronald Stein. “But we saw where the market was going, and we feel that, in order to keep our edge in this marketplace, we have to be constantly looking at new technologies and finding out how we can make these work for us.”

The result is an optical media manufacturing facility that takes up the ground floor of an industrial building in Hollywood, where the company oversees all aspects of production for DVDs, audio CDs and CD-ROMs.

About 60 percent of Crest’s revenues now come from the CD/DVD side of the business, according to Chief Financial Officer Eric Loong. Video services and film laboratory services account for 30 percent and 10 percent, respectively.

Besides comprising the bulk of overall revenues, the digital operations are fueling growth. This year, Loong expects revenues to be 61 percent higher than they were in 1998.

While the major studios handle their own in-house DVD development and production, there are still enough smaller distributors to provide Crest with a steady stream of business. The company has done a large number of titles for such distributors as Trimark Pictures and Polygram Filmed Entertainment.

And as more and more consumers trade in their VCRs for DVD players, demand for new titles is expected to increase. Last month, Crest shipped 150,000 copies of the horror classic “Halloween,” just in time for the holiday.

Besides digitally encoding motion pictures for DVD, Crest also develops additional content for the DVD version of films, such as the director’s narration, biographies and filmographies, as well as the design of the interactive menus that are an integral part of DVDs. The editing and creation of additional content is done at the company’s video services facilities, adjacent to its DVD facilities.

Stein said the push into digital media comes from one of the company’s main niches, the airline industry. Since the early 1970s, Crest has been a provider of in-flight movies. As airlines were looking to introduce digitally compressed video to replace the old-style video projectors a few years ago, Crest approached a number of the companies that were developing the software applications for the widely used MPEG compression code. This translates video images into a digital language so that large movies can be stored in a relatively small computer file.

Besides preparing the company for its forays into DVD, which uses an advanced version of the same MPEG compression code, the move secured Crest a strong position in the in-flight movies market.

“This used to be a straightforward industry,” said Doug Cline, president and chief executive of Sony Trans Com, a subsidiary of Sony Corp. that provides airlines with entertainment systems. “The introduction of digital entertainment has made the competition for the management of the content side much more intense. Crest made an investment in understanding the MPEG compression technology early on, and that has made it one of the leaders in this industry.”

Crest handles about 65 percent of the in-flight movies market.

“We edit different versions for different airlines,” said Stein. “American Airlines and United Airlines are very stringent and conservative in their approach to what can be shown in the main cabin. In first class, people have a choice to watch the theatrical release or the edited version. In Europe, the airlines prefer the theatrical release, but in Arab countries, you can show someone’s head being chopped off, but you can’t show a girl’s arms or knees.”

Crest was founded in 1961 by Maurice and Jeanne Stein, parents of Ronald Stein and Executive Vice President Lorraine Ross. Originally called Crest Film Laboratories, the company did primarily lab work, developing negatives and making prints for newsreels, educational films and commercials. In the 1970s and ’80s it expanded into the video market, and in 1985 it opened a video-duplication facility. The facility remains in constant use today, a huge hall with row upon row of video recorders recording duplicates of videos for airlines and other distributors.

Crest also does work in traditional post-production services including lab services for independent features, as well as an occasional major feature. Just recently, special processing work was done for Warner Bros.’ “Three Kings” that provided the picture with its distinctive high-contrast look.

“We got the work on ‘Three Kings’ because of the reputation we’ve built up as one of the few labs that continuously tries to push the envelope,” said Stein. “The cinematographer on ‘Three Kings’ had found out that we were experimenting with this new processing method and that’s why he selected us to do this movie.”

But Stein is looking ahead at new technological developments that may revolutionize the market once again.

“We’re watching the HDTV (high definition television) market closely, as it slowly develops and matures. We’re still waiting for the final standard for the U.S. market to be locked in place because it is still changing as we speak,” Stein said. “We’re looking to step into that market next year, by providing HDTV transfers for broadcast.”

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