Zoo Digital looks to a bright future

Zoo Digital, which provides subtitles for Hollywood film studios, said annual revenue edged up to £23m following disruption caused by supply chain changes at a major customer.

Zoo Digital's chief executive Stuart Green
Zoo Digital's chief executive Stuart Green

The Sheffield-based firm refused to name the customer, but analysts said it was Netflix.

Analyst Andrew Darley at FinnCap said: "Disruption in the year due to Netflix supply chain changes, where Zoo remains a preferred fulfilment partner, has slowed down net momentum."

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Zoo's chief executive Stuart Green said: "In the course of the year, this major client made some changes to make themselves more efficient as an organisation. There were a couple of implications of that. One is the way they engage with companies like us changed.

"They consolidated around a smaller number of more capable partners and we were included in that.

"The other thing is they changed the way in which they licence third party content. The result is there was a little bit more uncertainty when projects come through to us whether those projects will actually complete."

Mr Darley at FinnCap said 2020 is the year for decision making for major studios for whom Zoo is a realistic choice as preferred vendor.

"Zoo remains on the front foot for opportunities," he added.

"The market dynamic for digital content localisation continues as further platforms challenge Netflix’s leadership – each representing new large potential clients.

"Zoo’s blossoming is a case of when and not if, and look forward to studio wins and the subsequent revenue flow."

Mr Green said trading in the new year has begun well. Whilst the significant decline in legacy DVD and Blu-ray formats in Zoo's digital packaging segment has continued, this has been offset by strong growth related to Over-the-Top (OTT) delivery.

Over-the-Top content is delivered over the Internet without the use of set top boxes. Zoo expects to be confirmed as a preferred vendor to a number of clients during the year ahead.

"A really interesting thing is happening in this market at the moment," said Mr Green.

"If you look at where this Over The Top market has come from, it's really been initiated by companies like Netflix, but also Amazon and Hulu in the States. They have created new platforms and launched services on the back of those platforms, but what's happened is during that period those players have been licensing films and TV series from the big media companies like Disney and others."

He said that later this year, the big media companies will start to offer their own direct to consumer services.

"So they're going to be launching their own Over The Top streaming services, where they will in some cases retain exclusive delivery of their own content," he said.

"In November, Disney will launch a new streaming service called Disney Plus. All the licenses they have to make that content available to Netflix and others will lapse so if you want to watch Disney movies on a streaming service in November, the only place to do that will be Disney Plus.

"We think that will cause quite a bit of disruption in the consumer market and the knock on effect to us will there are going to be a greater number of significant Over The Top service providers who will have a need for services of the quality and scale that we now offer.

"We have significant opportunity in the OTT market. The market dynamics are all very favourable to us.

"If we were to be selected by even one of these major players, that could be transformative for our business."