posted 07-18-2011 12:01 PM                

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Hollywood's rapid march to digital technology is bringing arch rivals Deluxe Entertainment Services Group and Technicolor Inc. together in an unusual partnership.

The companies announced today that Technicolor will subcontract its 35mm film print business in North America to Deluxe, the postproduction company owned by MacAndrews & Forbes Holdings Inc. In turn, Deluxe will farm out its 35mm print distribution business to Technicolor, the French-owned company that is the world's largest maker of film prints.

Financial terms were not disclosed.

As a result of the move, Technicolor will close its film lab in Mirabel, Canada, outside of Montreal, eliminating 178 jobs. Earlier this year, Technicolor announced that it was shutting its lab at Universal Studios after losing its contract with Universal Studios to Deluxe.

Technicolor is opening a smaller, 40,000-square-foot-lab in Glendale that will release 60-to-70mm film prints for Imax and other big-screen theaters.

The partnership with Deluxe reflects the rapidly reduced demand for film prints as more movies and TV shows are released digitally. Nearly half of the 42,000 screens in the U.S. have been converted from film to digital technology.

"Today's agreement with Technicolor is the result of significant changes in our industry enabled by new digital technologies,'' said Cyril Drabinsky, president and chief executive of Deluxe Entertainment Group. "This agreement will help maintain a high consistency of service for our customers through the remaining life of film.''

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