SOUTHERN CALIFORNIA ENTERPRISE : Turning Black & White to Green : Colorization Firms See a Rosy Future in Better Technology

Jody Shapiro uses colorization technology to put orange masks on the faces of black-and-white bodies for a rock music video and to turn a sporty pack of BMWs fire-engine red in a commercial for the German car maker.

Where others see black and white, Shapiro sees colors--especially green.

As president and chief executive of CST Entertainment in Culver City, Shapiro is helping colorization stage a comeback. His firm and San Diego-based American Film Technologies are the only colorization companies still in business, and they figure to share a huge greenback pie. Consider:

In 1992, Christmas shoppers purchased 93,000 copies of a black-and-white home video version of “Miracle on 34th Street” for a total of $1.4 million. The next year, they bought 2.3 million colorized versions of the same movie--for $23 million.

That’s a far cry from the mid-1980s, when critics accused colorizers of ruining film classics such as “Casablanca” and “The Big Sleep.” The process, resulting in muddy hues that didn’t always stick to the objects they were meant to color, was likened to vandalism and defacement.

When Shapiro joined CST in 1993, he recalled, “they were afraid to use the word colorization around here.”

Officials at both AFT and CST Entertainment concede that quality was dismal in the early days--so dismal that it almost sank the industry. Two of the four major colorization houses of the 1980s--Colorization Inc. and Tintoretto, both based in Toronto--have shut their doors.

AFT has not worked on a project since it filed for bankruptcy in the fall of 1993 after an abortive venture in animation; CST has been operating in the red until this year.

But that was then. Now that colorization is a digital process capable of producing 16.8 million colors--versus the paltry 16 available for the early projects--the Southern California firms figure it is their ticket to profitability.

In addition to technology, the key to a comeback is the burgeoning demand for movies and television shows that can fill up time slots on the 500 cable channels that are coming soon.

“It’s much cheaper to get black-and-white material and colorize it, as opposed to new production, which is very, very costly,” said John Karl, AFT’s vice president for finance.

The cost of colorizing a full-length film is $110,000, and a half-hour television show runs $24,000, said AFT Chairman and Chief Executive Gerald Wetzler. “But the typical cost of making a new film is $34 million, on average, or $500,000 to $600,000 on average for a new 30-minute TV show,” he said.

Plus, for the first time, AFT and CST are taking ownership positions in the works they colorize, which should mean a stream of profit. They are entitled to 75-year copyrights on their colorized versions of films and television shows from the public domain and can also form joint ventures with firms that own black-and-white film libraries.

CST has also begun colorizing music videos (Janet Jackson’s “You Want This?,” Green Day’s “Basket Case”), commercials (Volvo, Coca-Cola, Chanel No. 5) and even old horror flicks that the company has boiled down into 22-minute episodes--a process it calls “featurization”--which will air on NBC in September.

*

Although it is performed on sophisticated graphics computers, colorization remains a painstaking process. Dozens of CST “colorizers” work around the clock, adding colors frame-by-frame by pointing a cursor and clicking a mouse. It takes one eight-hour shift for a worker to colorize 10 seconds of a film.

The process could breathe new life into old black-and-white classics such as “I Love Lucy,” which may not appeal to the generations who grew up with color television. King World Productions hired CST Entertainment to colorize all 71 episodes of “The Little Rascals” television series.

“It’s so good, it’s hard to tell it’s colorized. You’d swear they shot it in color,” said president and chief executive Michael King.

That will help King World peddle the programs to more television stations and sell more copies on home video, King said. “Kids today don’t watch black-and-white stuff,” he said. “There’s no question that the property’s been revitalized.”

That can happen to hundreds of films and television series, most of which are just sitting around collecting dust, said Lee Isgur, an entertainment analyst with Jeffries & Co. in San Francisco.

“In vaults around the world, there is stuff that can be colorized that will have value,” Isgur said. “There will probably be a great commercial market, whether it is home video or Saturday morning TV of just one of the hundreds of cable channels available. You can really improve the artistic and the commercial appeal of a product by color enhancing it.”

*

That is the sentiment both companies are hoping will reverse their fortunes.

AFT filed for bankruptcy in October, 1993, after sinking millions of dollars into an unsuccessful attempt to launch an animation business with high-tech production facilities in Mexico. The fiasco forced the company to turn its back on its core colorization business, Karl said. AFT expects to emerge from bankruptcy in September with the backing of a major investor, and it has had fruitful discussions with major potential clients, he said.

CST Entertainment has not had an easy time, either. In 1991, the company had $22 million in debt and expensive leases on out-of-date analog equipment, Shapiro said. After swapping debt for equity, the company bought 45 digital workstations and pursued opportunities to diversify into commercials, videos and featurization in addition to coloring movies.

So far, the strategy appears to be paying off. CST’s annual revenue from film coloring has grown from $1.3 million in fiscal 1994 to $4.1 million in 1995. For the quarter that ended June 30, revenue was evenly split among film coloring, film effects (for commercials and video) and featurization. After absorbing an increase in overhead and paying off a $1.8-million debt, CST is expecting to post the first quarterly operating profit in the company’s 10-year history, Shapiro said.

*

Although success is far from assured, the colorization firms share a rosy optimism about their industry’s future.

“The amount of black-and-white material out there to be colorized is tremendous, not only in the U.S. but internationally,” Karl said. “There’s a huge amount of money to be made.”