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Ditan, Sonopress To Expand Direct-To-Store Shipment Program

10/22/2003 02:21:00 PM Eastern

New York - Disc replicator Sonopress and Ditan, the direct-to-store shipper of videogame software and select electronics products, will expand their existing videogame-software distribution partnership to accelerate shipments of music CDs and video DVDs to stores.

With its warehousing and logistics infrastructure, Ditan ships game software directly from replication factories to the individual stores of such major retail chains as Best Buy, Blockbuster and CompUSA. In bypassing each chain's distribution centers (DCs), Ditan cuts the time between replication and in-store delivery to one or two days from 11 to 14 days, said Ron Novotny, company founder and president. Speedier in-store delivery cuts chains' inventory handling and carrying costs and, at both the factory and retail level, reduces the potential for inventory shortages and oversupplies.

'There's an opening for a new service in town,' Novotny said. 'Video games, DVD-movies and music, all from multiple publishers or studios, can be consolidated in the same box going to the same store.'

The conventional approach of selling through DCs, he continued, 'is slow, increases the potential for errors, and often times, the inventory isn't always where it's supposed to be.'

Ditan distributes about 35 percent of all video games sold in North America and pressed in the U.S. by U.S.-based replication factories, including Sonopress’ Weaverville, N.C., plant. From that facility, Ditan currently ships X Box, Game Boy, Game Cube and PC games manufactured at the site, as well as PlayStation II games packaged at the site.

Now, the two companies plan to extend their partnership to the music CDs and movie DVDs manufactured in Weaverville, where Sonopress presses CDs for sister company BMG and for more than 40 independent music labels. Also in Weaverville, Sonopress replicates movie DVDs and, for DVD-Audio discs, sister company BMG. The plant also packages SACDs made in Sonopress' German facilities.

Direct-to-store software shipment got its start in the videogame business in the late 1980s, when game publishers were abandoning rack jobbers and chains were abandoning their DCs in order to get software into stores faster than ever, Novotny said. The direct-to-store model took hold because, as game software became more sophisticated, game companies found themselves working feverishly 'up to the last minute' to develop and debug games so they could be shipped in time to meet street dates, he explained. 'There was no time to get a rack jobber involved or distribute through DCs.'

For the music industry in particular, the Ditan/Sonopress model will vastly accelerate shipment time for new releases, the companies said. For a new release from the big five music companies, it can take from four to six weeks from the time that replication starts to the time that the discs are delivered to individual stores, said Andrew Dapuzzo, Sonopress's director of audio sales. That time frame includes about a week for manufacturing, which includes mastering, replication, and the printing and packaging of CD booklets and tray cards. The time frame also includes the time it takes for an order to go from the retail chain to a major music company's distribution arm and then to the replicator. Once the discs are replicated, they're sent to the major music companies' distribution centers, which then ship discs to a major retailers' DCs.

Big-five discs headed to independent music retailers are sent from the music company's distribution center to a one-stop distributor in lieu of a DC. The one-stop then resells the discs to small independents.

As for the distribution of independent labels' CDs, Dapuzzo said, replicators ship to multiple venues, including national independent distributors that might in turn ship the discs to a chain's DCs or to one-stop distributors serving independent retailers. Replicators, however, might also ship direct to a chain's DCs or to rack jobbers supplying such chains as Wal-Mart.

Music companies, Dapuzzo said, have a 'long and entrenched way of doing business' compared to the younger videogame industry. Now, the music companies are showing interest in changing their ways, but not just to reduce their own expenses as CD sales slide. 'They want to get the disc out as fast as they can before it gets on the Internet,' he contended.

For their part, movie studios will gain because returns will decline, said Per Save, Sonopress's sales and marketing VP. Speedier time to market is also in the interest of studios that ship TV episodes on disc and want to get the latest episodes out as soon as possible, he contended.

In a way, consolidating shipments isn't new to Ditan, whose 'virtual warehouse' business unit already consolidates direct-to-store shipments of videogames from multiple replication plants located in one area, Novotny said. Four of the company's eight U.S. warehouses are each near multiple replication facilities, he said.

The company's Indianapolis warehouse, for example, inventories game software from Sega, LucasArts, and Ubisoft but is also 'ideally located' near warehouses for EA in Louisville, Ken., and Take-Two of Cincinnati. 'A retailer can order from each of these suppliers, and Ditan can retrieve the goods and consolidate these suppliers' products into single-store shipments on the day the goods become available,' Novotny said.

Likewise, Ditan's Seattle-area facility is near Nintendo and Capcom warehouses. As a result, a chain can place orders with both Nintendo and Capcom, and Ditan will pick up the products and consolidate them into direct shipments to the chain' stores nation wide. 'The products are in our warehouse for just a couple of hours,' Novotny noted.

Retailers do not have the systems capabilities to consolidate orders from multiple plants in a region for shipment to their stores nationwide within a day, he said. It would take 11-14 days using their DCs, he said.

Ditan also ships cellphones, PDAs and PC monitors direct to Best Buy.

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