Q: What’s going on in the disc replication industry?

A: DiskFaktory is focused on three specific sectors: data, music and film.
For the past several years, the majority of DVDs and music CDs, as well as large data projects, have utilized the replication process to create millions of copies to meet supply and demand requirements.
There has been a paradigm shift, though, in the way consumers purchase these products. For example, the music and film industries have undergone a transformation driven by what I call a new economic order, where consumers have more choices than in the past of where to spend their disposable income. Recent growth, as well as the expansion of the gaming industry, has stretched the disposal income to a thin line along the entertainment food chain.
This has led to the creation within the music industry of free music downloads, with organizations such as Napster, and the transition from free music downloads to single music downloads, currently provided by Apple iTunes.

All of these points are indicating factors that consumer spending behaviors have changed. With the variety of music artists currently on the market and new artists which are being released to the market, there is not as much of a demand for large orders of music CDs, even though the distribution channels have increased with such retailers as Blockbuster, Wal-Mart, Target and Best Buy. These distribution channels are now set up to be on-demand supply chains.

If a product does not move off the shelf within a certain time frame, and given the fact that retailers’ shelf size is limited, they will return the product back to the distributor.
This is the same issue that is plaguing the film industry with the sale of DVDs. There are companies who will have to restate their earnings due to not meeting their projected DVD sales, because the old economic order stated that DVDs will continue to sell once they have reached the retailers at the end of the distribution channels.

(Sale of DVDs were forecasted and recognized as revenue when the DVDs were shipped to the distributors.) There’s a similar transformation going on within the optical disk media industry, with the short-order model versus the large-order model.
DiskFaktory has focused specifically on the short-order model with an on-demand supply chain to fulfill the ordering process.
By focusing on the short-order model/on-demand supply chain, DiskFaktory stands to benefit from the transition the industry is going through.

Our goal is to transform the industry, like FedEx transformed the package delivery industry, which, by the way incorporates the short-order, and on-demand supply chain.

Q: Do you think a lot of short-order companies will crop up?

A: The industry has finally recognized the value of our business model. A lot of companies are coming out as an entry-level player into this market, but 99.9% are servicing the local market they are operating in. There are only a few players that we consider to be on the national level. We have taken the lead position in this market. Our business model is different from the rest of the industry