Great Lakes Media Technology’s investment pays off
Some businesses succeed by accident. Not Mequon-based Great Lakes Media Technology (GLMT). The 6-year-old Future 50 company was founded with the express purpose of getting where it is today.
The company is one of only a handful of Wisconsin firms to make it onto Inc magazine’s Inc 500 listing of the nation’s fastest-growing companies.
The company started in 1996 with three employees and 10 video and audio duplication decks. It later expanded into what would be a boom market: volume replication of digital discs for CD-ROM, music and other applications
Unlike other firms in the region serving the digital media market, GLMT replicates discs — pressing them from carbon foam — rather than duplicating them electronically on CD-R.
Replication involves additional expense and turnaround time due to the need to manufacture a glass master disc, but it makes for a more reliable end product — a critical factor for its corporate client base.
"This was our goal when we started out," chief executive officer Brian Axtman said. "When we started, we didn’t have the capital or the revenue for the expensive equipment needed for CD replication. Video duplication was cheaper to enter. What we wanted was to get that two- to three-year track record that gains credibility with lenders."
The effort to cultivate lenders has paid off, and on Nov. 17, GLMT purchased the pressing, printing and packaging equipment of another CD replication company, doubling its capacity.
Conservative management has made GLMT one of only three CD replicators nationwide to hold a triple-A bond rating, according to Axtman.
GLMT won credibility not only from bankers, but from corporate clients, including Wisconsin firms such as Kohler Co., Fiskar’s, Carver Boats, Rockwell Automation and Briggs & Stratton.
While GLMT markets itself nationally, it has a greater edge with companies in its own backyard, explains marketing manager Joe Lauerman.
"One of the biggest things to consider is that a box of 1,000 CDs weighs 40 pounds," Lauerman said. "It costs $75 to ship that overnight. To be in a position to hand something off directly to a customer really helps."
Lauerman is responsible for inventing a small but growing product for GLMT: the private-label CD-R. With more and more companies exchanging information with suppliers and customers through rewritable CDs, Lauerman thought it was only logical that corporate users have access to CD-Rs bearing their own corporate identities rather than that of Sony, TDK or other CD-R manufacturers.
GLMT’s branded CD-R line was launched in 2002 and, according to Lauerman, was an unqualified success.
"Wells Fargo uses the branded CD-R," Lauerman said. "Even the Journal Sentinel, which has its own replication facility, buys the branded CD-R from us."
While other manufacturers are hurting, GLMT is shielded from many of the factors that are hurting the production sector.
"There are offshore producers in China, Hong Kong and India," Axtman said. "They have production lines on trucks, and drive around hiding from the government."
However, concerns over intellectual property rights prevent corporate clients from going for the bottom-dollar per-piece price that less reputable providers can offer, he said.
Still, more ethical overseas companies and the brokers that represent them can be alluring to corporate clients.
"In terms of our niche corporate customer, the three-week lead time rules out going overseas," Axtman said, stressing that the time it takes to ship product is a saving grace. "We do struggle competing with brokers. It can be a price-sensitive thing."
But when time sensitivity and price sensitivity collide, GLMT wins. And corporate users, who typically need product in hand to support critical events in the distribution of new or existing products, can not change their marketing strategies, reschedule trade shows or cancel key sales meetings to save a few dollars on CD-ROMs.
"When you are working with a broker and ask if you can get 1,000 pieces of your order sent early, the answer is no," Axtman said. "With us, the answer is yes."
The ability to handle small jobs also gives GLMT staying power. When the company first started replicating discs, Lauerman said, GLMT was unique in that it accepted small jobs other replicators would turn away.
As a result, GLMT, and the size of orders from repeat clients, have grown together, Lauerman said.
"The most efficient runs are 2,500 to 5,000," Lauerman said. "Anything under 1,000 and you have a lot of up-front costs that are hard to defray. Three years ago, our typical order was 1,600 pieces. Today, it is 2,900."
Even a product run of a few thousand is not enough to turn the heads of GLMT’s larger, publicly held competitors. Companies such as Warner Media and Sanyo Laser Products deal in pressings for large consumer product runs and may not, according to Lauerman, offer the type of handholding required of corporate clients who do not manage replication jobs every day.
While GLMT started as a video duplicator, its efforts to cultivate and grow a CD replication business has positioned the firm in front of a trend from one media to another. Although 96 % of households nationwide have at least one VCR, and only 56% have at least one DVD, the wind is blowing hard in the direction of DVD and CD-ROM-based jobs.
"Three years ago, our mix was 80% VHS and 20% CD," Axtman said. "Now it’s more like 30% VHS and 70% CD."
According to the International Recording Media Association, demand for CD replication increased 56 % in 2002 and is on track for an increase of 32 % in 2003. While it took VHS 20 years to reach the level of market saturation it currently enjoys, DVD has required only a handful of years to get into half of all US households.
The direction of the wind is not likely to change anytime soon, according to Axtman.
"There have been other attempts to replace CD-ROM technology," Axtman said. "But with video in the form it is in now, the CD and DVD is lightweight and cheap to ship. It will be another 25 years before chip technology takes over."
Jan. 10, 2003 Small Business Times, Milwaukee
