BusinessTN

It’s not as sexy as claiming to be the birthplace of rock ’n’ roll, but Memphis now can say it also houses the world’s largest home entertainment distribution center.

More than half of the DVDs packaged and shipped in North America are processed in Memphis at Technicolor Home Entertainment Services. Massive growth is on the horizon as the DVD market is expected to grow by double-digit percentages in the coming years.

To prepare for this growth, Technicolor recently invested $50 million to add an 806,000-square-foot facility and more than 400 jobs at its Memphis distribution centers. This new high-tech facility has the ability to process 1.2 million orders a day.

That brings total square footage for Technicolor in Memphis to 4.3 million with three large distribution facilities and several dedicated warehouses. The company employs 2,614 in Memphis.

The company has made such a commitment to Memphis because of the available tax abatements, as well as the obvious logistical reasons, Technicolor’s Memphis Operations Vice President Bob Linne says.

“Memphis is the ideal shipping location in North America because of its central location and the ability to quickly distribute product anywhere,” Linne says.

Eighty percent of the U.S. population—including key customers like Wal-Mart, Kmart and Best Buy—can be reached via ground transport in two to three days from Memphis. Memphis is also the location of major hubs for FedEx and UPS. The shipping giants’ ground services make up more than half of all Technicolor shipments.

Along with packaged DVDs, Technicolor also ships out VHS tapes, Microsoft Xbox games and point of sale materials for various packaged media.

But DVD is the hottest sector, and players and movies are expected to be in two-thirds of all American households by the end of the year, according to Adams Media Research.

“At the moment, consumers are voting with their dollars,” industry analyst Jim Bottoms says. Bottoms monitors entertainment content and distribution industries for U.K.-based Understanding and Solutions. “They are saying they prefer to access content via DVD than any other medium.”

Worldwide DVD production volume in 2003 was up 48% from 2002, and volume is forecasted to increase 30% this year. Double-digit growth is expected through 2007.

Company-wide, Technicolor must grow to maintain sufficient capacity to meet all this demand, spokeswoman Dana Banks says.

“And there must also be sufficient packaging, distribution, returns processing and warehousing capacity to support the production of DVDs,” Banks says.

Technicolor—whose parent company, France-based Thomson, trades on the NYSE as “TMS”—is a leading DVD replicator worldwide. Only Toronto-based Cinram International and U.K.-based Rank Group’s Deluxe Global Media Services can compete on the same level, according to Daniel Frankel, an associate editor of Variety.

Technicolor entered Memphis in 2002 when it purchased Panasonic’s DVD operations worldwide. This and other acquisitions have been key to making Technicolor the world leader in packaged marketing, Bottoms says.

But if digital distribution of media becomes easier or if a new format gains popularity, could DVDs become the next 8-track?

If media delivery changes, Technicolor says it will change with it, as it has ever since the early days of processing film for Hollywood movies, Banks says.

“We will be positioned to deliver entertainment in any way the studios want to distribute it,” Banks says.

Bottoms says packaged entertainment in general is making a comeback because the downloading experience has frustrated a generation of media consumers.

“The downloading phase showed people how valuable packaged media can be,” Bottoms says. “You can count on quality, and the prices are going down. Packaged media has a long future.”

IN THE NEWS

MEMPHIS—A drug to treat advanced Parkinson’s disease will be distributed by Memphis-based Accredo Health (NASDAQ: ACDO) subsidiary Nova Factor. The drug, Apokyn, is the first therapy approved in the U.S. for use as an acute treatment of Parkinson’s-related episodes.

The Church of God in Christ (COGIC) said it will keep its annual 50,000-person convention in Memphis through 2007, after the cost of renting the Pyramid was waived. The Memphis-based congregation, which includes more than five million members globally, attempted to negotiate various price concessions for its members and itself.

Atlanta-based Cousins Properties (NYSE: CUZ) is building an 800,000-square-foot “lifestyle center”—The Avenue Carriage Crossing—in Collierville. Construction has started and the project is expected to open in October 2005. This open air “Main Street”-style lifestyle center will include distinctive architecture and design features, heavy landscaping, upscale merchants and outdoor pedestrian plazas. Tenants already confirmed are Dillard’s, Parisian, Abercrombie & Fitch and Ann Taylor Loft.

A new FedEx (NYSE: FDX) service aimed at the exotic or collectible car market will ship cars around the country. The new FedEx Passport Transport service charges $1,000 to ship a car from New York to Miami, for example, for those willing to wait six days after pickup for the delivery.

Memphis-based First Horizon National Corp. (NYSE: FHN) is opening a lending office in Winston-Salem. The move could mean the company will pursue opening bank offices in central North Carolina. With the new push, the $25-billion-in-assets First Horizon will target businesses with $20 million to $250 million in sales and typically makes loans ranging from $5 million to $20 million.

Grand Casino (NYSE: CZR) in Tunica plans to build a $65 million water park on 30 acres to win some family business to the casino mecca just 30 miles south of Memphis. Gaming revenues have been flat and the water park would be a way to attract tourists who don’t normally come to casinos, Grand officials say. If approved by local governments, the park would start construction this fall and be finished by next summer.

The Greyhound Bus Terminal, located downtown across from Auto ZonePark will be moved near Memphis International Airport. The site could eventually become part of an intermodal transportation facility, linking Greyhound to Memphis buses or a proposed light rail system. The project would cost about $12 million and would not be completed until 2007.

The silvery glass hotel on I-240, which was the Adam’s Mark and then the Park Vista, is now the Memphis Hilton. It became a Hilton (NYSE: HLN) property in April and renovated its rooms, lobby, bar and signage.

Nike distributor Menlo Worldwide Logistics plans to expand its local distribution operations, build a $5 million facility and hire an additional 40 workers. The expansion is needed to accommodate Nike golf products.

Memphis-based National Commerce Financial Corp. (NYSE: NCF) will be sold to Atlanta-based SunTrust Banks (NYSE: STI) for $7 billion in a deal that will likely close by the end of this year. NCF will add $23 billion to SunTrust’s assets, bringing that bank’s total to $148 billion and making it the nation’s seventh largest commercial bank. The merger could mean the addition of some high-paying jobs in Memphis in wealth management and bond sales. But the deal probably will cut about 100 back-office jobs in Memphis.

Plans for turning The Pyramid into an aquarium continue to be floated. Ripley Entertainment Co. officials say the idea intrigues them and they may pursue it. A local architect firm, Archimania, has studied the idea and predicts the venture would succeed. Memphis and Shelby County will have to do something, as The Pyramid will lose most of its business this fall with the departure of NBA and college basketball games and the opening of the FedEx Forum.

Methodist Healthcare-operated UT Bowld Hospital likely will close by August, with its transplant services transferred to Methodist University Hospital. Methodist took over the 162-bed UT Bowld hospital in 2002. More than 300 people are employed at UT Bowld, but officials did not disclose what would happen to them.