View From The Top: Steven G. Brown, Cinram International CEO
One year ago, former automotive executive Steve Brown was named CEO of the world’s largest optical media and entertainment supply chain services company, Toronto-based Cinram International. This year, he’s back at the industry’s leading event for entertainment operations executives with a new logo, a new message, record-breaking financials, and answers to several questions the industry has been asking of the company.
What are Cinram’s plans to recoup the lost Warner business? What is Cinram’s digital strategy? Brown isn’t avoiding the tough questions, though they’ve already been answered on analyst and investor calls. However, he’s an executive with a clear focus on how Cinram can weather this storm and maintain the course of operational excellence that he adopted when he took over the company’s reigns in June 2009.
How has your business strategy changed since the Warner announcement last January?
People need to understand the transition that we have had over the past year. By the time the Warner news hit we were already six months into a plan that has put Cinram in a much more stable position. Over the past year we have reduced our debt by over $300 million. At the same time our DVD units produced grew by 13 percent in Q1 year over year, and our gross margin was up over 24 percent in the same period. I don’t know of many companies that can tell that story. I’m not trying to underestimate the weight of the announcement but our strategy would have remained the same even if we had kept Warner as a customer.
You see, I came into this business with a different perspective. I had spent the last 20 years running automotive companies, in an industry where there is absolutely no ability not to be the best you can be. Cinram already had a fantastic foundation but it was clear by the time I came in that the business of optical media was peaking and that we had to accept this fact and position the company accordingly. Our belief was that if you focus on excellence you could weather any storm.
Can you go into more details about your plan?
We established a five-year strategic plan that is going to take us from a best-in-class media and distribution company to a world-class company in every discipline. We still believe the plan is correct, the focus is still correct and the team is still correct. Good management is good management whether you lose a $300 million customer or gain a $500 million customer. If you are leading your market, you are going to be much more attractive to your existing customers to stay and to new customers to join and even to former customers to decide to return. In today’s marketplace there is unprecedented pressure to drive more value and more excellence into your products and services.
This is being pushed down from the top by the consumer who is walking down the aisle at retail, to the retailers themselves, to our direct customers, which ultimately adds pressure throughout the entire supply chain. I have a saying that high pressure produces one of two things: dust or diamonds.
So how are you creating diamonds rather than dust from this high-pressure business environment?
By providing end-to-end services that drive costs out of the supply chain. We are talking to existing and potential customers and addressing their individual needs with new and innovative value propositions from the front end to the back end of their value chains.
One of our advantages is our global position. Both sides of the Atlantic offer individual advantages and disadvantages, from which we can learn and offer proven solutions to our customers. The complexity of the European market has helped us become a better company in ways that we can now bring over to our North American customers.
Meanwhile, North America is a more demanding retail environment, which allows us to offer new insights to our European customers. We do our benchmarking on a global basis as well as across the various media markets of home video, gaming and music, which puts us in a unique position to cross-pollinate ideas, test and prove new business practices that are not distinct to any media type or market.
What about a digital strategy from Cinram?
My view is that the consumer likes physical media. It’s collectible and giftable.
There are those who are impulse buyers and renters. The kiosk business is changing business models. New ideas will continue to keep home entertainment on optical media alive. Nonetheless, we announced earlier this spring that there will be digital announcements coming from Cinram within the next 90-100 days and that we will be moving into that market. We have set up digital groups, and our new logo, which is being introduced this week, has been stylized to illustrate that there’s a bridge between the old Cinram and the new Cinram, a bridge that will include our continued support of our core physical market as well as a bridge to the next digital media format. Regarding digital, we don’t intend to be pioneers. We intend to be in the business, but we will buy it, lease, create it, whatever it requires.
But there are other areas of digital to consider than just the Internet. That includes our work in telecommunications packaging out of our Dallas/Fort Worth plant where we work for Motorola. Entertainment media is making big inroads on that market as well and people will increasingly watch entertainment on their PDAs or smartphones, which provides us with a tremendous opportunity to link our two divisions. This will manifest itself in several ways and in various forms that will come to market later this year.
So you’re ready to deliver entertainment whatever form it takes?
Cinram has a history of reinvention. We started in vinyl, moved to cassette tape, then to optical media and will provide entertainment in any form our customers want and require. We are not delivering a format to the consumer. We’re delivering excitement.
One of the catch phrases in our new ad campaign is that “it takes cool heads to deliver hot stuff.” We have 13,000 employees worldwide and we deliver 300 pieces of excitement per minute, 24 hours a day, 365 days a year. Lets keep entertaining the world; that’s what it’s all about.