Blu-ray and downloads help to put Zoo back in the black

The group, which develops and licences tools to help media firms automate production ranging from DVD menus to film downloads, said the six months to the end of September showed significant improvement on a year earlier, when customers froze spending.

Sales increased 5.6 per cent to $6.2m (£3.9m). Zoo reported operating profits of $199,000, versus $1.1m losses a year earlier. Pre-tax profits were $30,000.

Zoo, based in Sheffield and Los Angeles, added it continues to develop new tools, including a cloud-based subtitling product launched earlier this year, which has won a number of customers.

“We go into the second half with a broader product set and many opportunities to diversify our customer base and we remain cautiously optimistic,” said chief executive Stuart Green.

Zoo’s trading was set against a “particularly awful” six months in 2011, said finance director Helen Gilder, when its Hollywood studio customers cut the number of new home entertainment products they launched.

But according to industry body Digital Entertainment Group, consumer spending on home entertainment rose by 0.24 per cent in the third quarter of 2012 year-on-year.

Growth in newer areas such as video on demand, electronic sell-through (where consumers pay for downloads) and Blu-ray discs offset ‘mature’ parts of the market, such as DVDs.

The group added while it has won new clients in the e-book market, big publishing houses have yet to commit to converting their libraries of illustrated books into e-books. Zoo’s tool allows publishers to create electronic versions of printed titles quickly and easily for viewing on iPads and Kindle readers.

“It’s the chicken and egg situation,” said Mr Green. “There’s not a significant established market for illustrated books.

“The whole thing needs to be crystallised by these publishers essentially taking the plunge and starting to convert their back catalogues.”