DVD Manufacturer Technicolor Struggling To Pay Bills (TMS.PA)

The recession has produced a nice boost for the DVD business, particularly the DVD rental industry, since it’s far cheaper to stay at home and watch a movie than to go out to the theatre. But what happens if the recession whacks the people who make DVDs—not the studios, the companies that physically make the discs?

The French parent company of film-production company Technicolor, Thomson (no relation to news agency Thomson Reuters), is having major financial difficulties right now.

Reuters: Thomson SA (TMS.PA) warned it was likely to breach certain debt covenants and needed to bolster its balance sheet, notably by selling more non-core activities, sending its shares down around 20 per cent on Thursday.

The loss-making media technology group said it would sell businesses which contributed around 1 billion euros ($1.3 billion) to 2008 sales, including Grass Valley and the PRN advertising unit, for which it has already received expressions of interest. It aims to focus instead on providing services to media content creators.

The group — which said it was in talks with its main creditors and potential equity investors — also reiterated it could seek assistance from the French government’s 20 billion euros fund…

Thomson SA said it would seek talks with noteholders whose covenants have been breached to avoid early repayment demands, as these “could trigger acceleration of substantially all of the group’s senior debt.”

But what if these talks don’t work out?

Rose would not say what Thomson SA would do if did not reach an agreement with its creditors.

Even if Thomson’s forced to file for bankruptcy, there’s no need to panic. First, the company will probably be able to continue doing business, at least for a while. And if Technicolor goes out of business entirely, this could just provide a much needed boost to both Sony’s Blu-Ray and downloading/streaming movies over the Internet, which is more environmentally sound to boot.

See Also: Netflix Q4 Massive, Guidance Strong
Netflix: Blu-ray Subscribers Up 40% Since September* (NFLX)

DVD Sales Down, Blu-ray Trends ‘Encouraging’ (SNE)

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