Media Distributors Inc. Core Business: Videotape and film stock sales Revenue in 1998: $2 million Revenue in 2000: $12 million Employees in 1998: 5 Employees in 2000: 35 Goal: To provide cost-effective videotape and film stock to entertainment firms Driving Force: The rapid growth of the use of video in Hollywood Steve Klein has turned Media Distributors into a $12 million business by buying surplus videotape and film stock at the right price AND RESELLING IT When Steve Klein got a bad case of burnout in 1982 from his job editing for film and television, luckily he had a longtime friend, Stuart Wallach, who had a plan: join him in his new venture of reselling surplus film stock. “It was kind of a crazy idea, but I thought Stuart was on to something,” said the 52-year-old Klein, who today is among the most successful videotape and film stock dealers in Hollywood. “He would buy cans of unused and undeveloped film that was left over from one film and then he would resell it to another. It was great.” Wallach taught Klein the ropes and a few years later, in 1986, Klein struck out on his own with Hollywood Raw Stock. He expanded into surplus videotape and ended up selling that company to Los Angeles-based Steady Systems Inc. for $12 million in 1998. Within a few months, Klein was back in business again with Media Distributors Inc. in Burbank. The company has grown from $2 million in revenue its first year to $12 million last year, eventually moving into a 6,000-square-foot facility on Ventura Boulevard in Studio City earlier this year. “It’s all due to the relationships we’ve been able to build over the years,” said Klein, who credits the company’s success to a growing customer list derived from word of mouth and a knack for ferreting out cheap film and videotape. Klein sells his surplus film for about 15 percent below what it would cost to buy directly from the manufacturer. But surplus film has become harder to come by in recent years, so he also distributes Fuji Film. Even though more than two-thirds of his revenue is still derived from the sale of surplus materials, he has moved on to audio tape and digital data storage disks for the entertainment industry. And he has agreements to distribute fresh film stock for some of the top film stock producers. Just last month, the company signed a five-year agreement with Sony Electronics to resell Sony professional quality videotape. Klein said the deal is worth $10 million to Media Distributors over the life of the agreement. Klein also distributes film for Fuji Photo Film Co. and surplus film for Eastman Kodak Co. Audio tape sales to radio stations and recording studios make up about 25 percent of the company’s total revenue. Videotape accounts for 35 percent, film 25 percent and the growing field of computer storage hard disks the remaining 15 percent. “I’ve been very fortunate to be able to make it in a very difficult business,” said Klein, who credits good luck, sound business instincts and being in the right place at the right time for his success. Shelly Christy, co-owner of Burbank-based film and video supplier Christy’s Post Digital Film and Video, said the video business has grown tenfold in the past five years and figures to double by next year. “There are a lot more productions going on today than five years ago and there is a constant demand for product,” she said. Christy said TV producers are turning more and more to video instead of film to reduce costs. A high-quality video cassette capable of taping an entire show will cost $20, while a 1,000-foot reel of 35 millimeter surplus film would cost $500 (or $590 from the manufacturer), and would only record 10 minutes worth of action, Klein said. Even though film stock sales continue to shrink, Klein has a small group of sales people constantly on the lookout for surplus film they can purchase from production companies or studios at a reasonable price. “It’s still a pretty good business for us,” Klein said. Klein’s customers include the producers of TV shows like CBS’s “Yes, Dear” and USA Network’s “Danny.” Post-production firms, advertising agencies, colleges and universities and film students also patronize Media Distributors. “We don’t do any advertising; only now have we started to market ourselves,” he said. But with the advent of digital filmmaking and its high definition digital film cameras making inroads in the industry, Klein says he’s ready to make the switch to digital video as soon as Hollywood is ready. “There’s no problem in getting the digital tape or the disks. But I just don’t think the industry is quite ready to abandon film,” he said. Bob Mayson, general manager of Eastman Kodak’s Cinema Operations Division, said the digital technology’s expense has kept it from replacing film altogether. But he added that once it happens, the company must adapt to the new technology. Eastman Kodak produces most of the estimated $1.5 billion worth of film stock used in U.S. films each year. Klein said that also presages an increase in the sale of digital storage tapes and disks. “It’s going to be phenomenal. I can’t even think how much it’s going to grow. It’ll be huge,” he said.