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TK's Take

Thomas K. Arnold

TKs Take Blog

, Publisher & Editorial Director

Thomas K. Arnold is considered one of the leading home entertainment journalists in the country. He is publisher and editorial director of Home Media Magazine, the home entertainment industry’s weekly trade publication. He also is home entertainment editor for The Hollywood Reporter and frequently writes about home entertainment and theatrical for USA Today. He has talked about home entertainment issues on CNN’s “Showbiz Tonight,” “Entertainment Tonight,” Starz, The Hollywood Reporter and the G4 network’s “Attack of the Show,” where he has been a frequent guest. Arnold also is the executive producer of The Home Entertainment Summit, a key annual gathering of studio executives and other industry leaders, and has given speeches and presentations at a variety of other events, including Home Media Expo and the Entertainment Supply Chain Academy.

March 16, 2010
Snide Media Jabs at 3D TV

As one of 23 Americans who still uses AOL as their personal email service, I frequently get news updates from a variety of sources right there on my snazzy, newly redesigned AOL home page. But a recent story from WalletPop really ticked me off — not so much the story as the snide headline: "3D TVs hit the market, but do you need one?"

Now, I'm one of those people who really hates any sentence (generally directed at me by my wife) that begins, "You need to...." I only "need" to do three things, and eating and sleeping are two of them. But since when has "need" ever factored into an entertainment option? None of us really "needs" anything — not DVD, not video games, not Blu-ray Disc, not a plasma TV, not any TV at all. Heck, if our entertainment consumption hinged solely on need, we'd be tramping through the bushes, playing hide-and-seek or tag or building rock forts, simply because we'd have to make do with our imaginations. Entertainment is not a need; it's a frill, a perk, an add-on.

And whether or not we choose a particular entertainment option depends primarily on one thing, which can be expressed in several ways: Is it fun? Will we enjoy it? Will it bring pleasure into our lives? Will it bring a smile to our faces?

3D certainly fills the bill. I enjoy watching movies in 3D, and I can't wait to start watching movies in 3D in my home. I'm happy that companies are making plans to sell 3D TVs, and while I won't be among the first wave of buyers, I can certainly see getting one within a year or so. In fact I believe that one day 3D TV will be the new standard.

I'm not saying we're going to watch everything in 3D, or even that we would want to. But I do relish the notion of being able to watch certain movies or programs in 3D, be it Alice in Wonderland or some other colorful, complex fantasy, or the Chargers winning the Super Bowl (come on, it can happen!).

3D is just the latest in a series of enhancements to the basic TV set, which popped into living rooms in the 1940s and 1950s and has been getting better and better all the time. First came color, then stereo, then cable (giving us more programming choices), then VHS, then DVD, then flat-screen, then high-def — and now, in swift succession, Blu-ray Disc and 3D.

No, we don't need any of it. But we sure like it when we get it. And isn't that the whole point of entertainment?

By: Thomas K. Arnold

March 11, 2010
I See, You See, We All See in 3D

I was disappointed, but I went anyway.

Last Sunday night was date night for my youngest son, Hunter, and me. We went out to sushi--hey, I know he's only 7 but he's already got a refined palate--and then headed over to the Carlsbad movie theater to see Alice in Wonderland. I had been looking forward to seeing the film, and even brought along a Tramadol for the occasion (no, not to get high--to ease the pain from my fractured arm injured in a skiing misshap a month ago). Much to my chagrin, there was a sign at the ticket window that informed me that "regrettably, this picture will be shown in 2D because the theater is not currently equipped for 3D performances."

It was late, Hunter was driving me nuts and I didn't feel like driving somewhere else, so I paid for the little fellow and me and we went inside. I thoroughly enjoyed the movie--it's this vibrant, moving collage of colors and cool shapes and characters (and, no, that's not the Tramadol talking!)--but the entire time I thought to myself, "Man, this must look so much better in 3D."

And as I left it dawned on me just how quickly I have been sucked in by this whole 3D experience. I have seen exactly two movies in 3D in theaters, The Final Destination and Scrooge.  And that was all it took to get me hooked. I want to see more movies in 3D, especially ones known for their artsy look, like Alice. Now, if you're wondering why, if I'm such a 3D fan, I haven't seen more than two movies in 3D--heck, I haven't even seen Avatar!--then let me clue you in to my character: As much as I like the movie theater, I am partial to watching movies in my own home, on my 65-inch Panasonic plasma, in the comfort of my own family room, preferably after the kids have gone to bed and the wife is upstairs reading or doing whatever it is wives do at night. I'm one of those consumers who won't think twice about buying a new TV just so I can watch 3D at home, regardless of the price. It's something I want--and it's something I think will catch on pretty quick to the point where it becomes the new standard for home entertainment, just like color TV in the 1980s, cable in the 1970s and home video in the 1990s.

I'm not saying I am going to want to watch everything in 3D. No need to see the news or Leno in three dimensions. I don't even want to watch every movie in 3D. But I sure would like the option, the choice, to watch certain films in 3D, and to me that's the whole beauty of the home 3D juggernaut: It broadens our entertainment choices. I can watch a documentary just to sharpen up on a certain subject, I can watch an old film noir to escape back into the mystical 1940s of Raymond Chandler and Philip Marlowe, or I can watch Shrek or Alice or Monsters vs. Aliens in 3D and have a completely different entertainment experience.

I know there are naysayers out there who think we've seen it all before, that 3D is a passing fancy, having originated with the monster movies of the 1950s and periodically come and gone in the years since. But the new 3D is nothing like the old. Instead of putting on red and blue glasses and getting a headache, you are thrust into the action, into the center of things, and you feel almost physically transported into the movie, if that makes any sense. That's what appeals to me-it's not an enhancement of the viewing experience, like the old 3D, but, rather, it's a completely new experience--and one that I first experienced about two years ago in Panasonic's 3D lab in Universal City, watching a clip of a canoe ride.

That canoe ride forever altered my perception of 3D and left me wanting more. Whenever I watch a 3D movie nowadays, I leave the theater with the same feeling--I want more. But it's more than that--I want more 3D at the time and the place of my choosing, which happens to be my family room. That's why I think 3D for the home will catch on, and catch on big. In this era of personal control and home theaters, I can't imagine I'm alone.

There must be thousands of 3D junkies like me out there, just craving for a fix--on our own terms.

By: Thomas K. Arnold

February 26, 2010
Can Blockbuster Be Saved?

Analysts and observers have been predicting Blockbuster's demise for years, but the death watch has never been more focused than it is today. The chain's latest financials paint a grim picture: Blockbuster says it lost $435 million in the fourth quarter of 2009, with a revenue drop of nearly 18%, from $1.31 billion in the fourth quarter of 2008 to $1.08 billion in the quarter that ended Jan. 3. The news was spread by a widely circulated AP story that quoted BMO Capital Markets analyst Jeffrey Logsdon as saying the company had "a dismal holiday season performance." The AP further quoted Logsdon as saying "revenue erosion is now a defined trend" at Blockbuster, which if true is certainly a kiss of death. Blockbuster has already closed more than 1,300 stores and plans to close up to 545 additional stores this year.

On top of that comes news that for the first time ever, the No. 1 video rental chain isn't No. 1 anymore. Netflix in the fourth quarter of 2009 made more money renting DVDs and Blu-ray Discs than Blockbuster did (see story here).

Blockbuster also has about run out of options to remain solvent in this business. The chain has tried just about everything short of offering customers a fresh-baked pizza with each movie rental, from its own mail-order subscription service (a la Netflix) to its own movie rental kiosks (ala Redbox). But the market leaders in each category have swatted down those attempts like pesky flies, to the point where Blockbuster's only hope of salvation is essentially an unfair competitive advantage.

The chain can only survive — and even chief Jim Keyes intimated as much in a recent call with investors--if other studios follow Warner, 20th Century Fox and Universal Studios in imposing a window on new releases that are sold to Netflix and Redbox. Warner has actually negotiated deals with both Netflix and Redbox in which those two outlets get new DVD and Blu-ray Disc releases 28 days after they come out, and it is widely expected the two other two studios soon will have deals in place as well. (Sources say the prospect of getting new releases a month late isn't nearly as bad as the through-the-roof labor and logistical costs of sending out packs of staffers and temporary workers, armed with gift cards, to Wal-Mart and Costco to buy product sideways. Prior to settling, Warner, like Fox and Universal, simply refused to sell product to Redbox.)

The window — 28 days at Warner and as long as 44 days for the other studios' product — is a ploy by Hollywood to prop up the sagging sellthrough business by forcing consumers to either buy the newly released DVD/Blu-ray Disc or wait. But it's also expected to boost in-store rentals, not just at Blockbuster but also at the remaining independent rental stores, because brick-and-mortar retailers will continue to get new releases the same day as Wal-Mart, Best Buy, Costco and the other big retail sellers of DVD and Blu-ray Disc.

The big question: Will it be enough? Obviously the studios are hoping consumers who can no longer rent new releases the day they come out from Redbox or Netflix will start buying them again, as most of them did before the recession hit. But old Jim Keyes is looking to siphon off at least a fraction of those consumers to Blockbuster, which puts him in a rather delicate spot.

If he fails, Blockbuster may well be finished. But if he succeeds — particularly if he succeeds in a big way — the studios may take a second look at giving store rentals a pass.

My advice to Jim: Fire up Blockbuster's sellthrough presence and make a big splash of the fact that only at Blockbuster can consumers buy or rent new releases right out of the gate. Match the big-box prices on new releases for sale and make sure you have a steady supply of the hits on hand to satisfy both sellthrough and rental customers.

That way you'll be helping the studios achieve their goal of selling more discs to consumers while at the same time protecting your rental exclusive.


By: Thomas K. Arnold

February 16, 2010
Kiosk Wars Are Over!

The Kiosks Wars that have gripped our home entertainment industry for the better part of a year are effectively over.

Redbox has agreed to Warner Home Video's demand that it not carry Warner titles for rent until 28 days after street day (for more details, click here). The kiosk operator will most likely experience at least a short-term drop in revenue from not having new releases available for rent right when they come out, but after Netflix, a much larger rental competitor, agreed to similar terms, Redbox really had no choice but to cave — or else risk a costly legal fight that in light of the Netflix-Warner agreement it was probably destined to lose.

Several other studios are still doing battle with Redbox on the grounds that ubiquitous dollar rentals are hurting the sellthrough business, but I don't expect any of those cases to proceed now that a precedent has been set — particularly a precedent that appears workable for both parties. A Pali Capital analyst last week said a month-long delay in offering new releases to kiosk renters could lead to a rental revenue drop of as much as 50% (see the story here) as would-be renters buy the title instead, but I don't think the real impact will be anywhere near as much. In fact, I think this could be a boon for the entire business.

The studios will have a month-long window in which to sell their new releases, which is bound to lead to a surge in sales. And Redbox has a chance to make up this lost revenue — as does Netflix — by aggressively pushing other titles, the way retailers used to do in the days before copy-depth and widespread revenue-sharing. Factor in a sharply reduced cost for new releases and both Netflix and Redbox stand a good chance of at the very least maintaining their profits. Overall revenues may be a bit lower (sorry Pali, not by 50%), but so will expenses.

In any event, I don't think Redbox had much a choice. A nasty and expensive legal battle can be detrimental to any business, and at the same time the kiosk operator's cost of acquiring product "sideways" — sending people out to buy new releases at Wal-Mart and Costco and Best Buy — was spiralling upward with the big chains imposing limits on how many copies they would sell to a single person. Buying, say, 20,000 copies of Michael Jackson's This Is It, five copies at a time, would require 4,000 separate transactions — a logistical nightmare and a financial one as well, with a bloated work force of people entrusted solely with buying new DVDs, five at a time, over and over again on a single day, as at many different retailers as they could hit.

I can't help but chuckle at the irony, however. Studios say cheap rentals are hurting the sellthrough business so they declared war on kiosks in the hopes of giving people no choice but to buy. And yet one of the tools they used to bring Redbox to its knees was limiting the number of DVDs people could buy.

Only in Hollywood....

By: Thomas K. Arnold

February 09, 2010
Movie Gallery Train Wreck Not Unexpected

Movie Gallery's second bankruptcy filing in three years was hardly unexpected. The rental chain, No. 2 behind Blockbuster, was a train wreck waiting to happen.

I remember years ago, when the business first shifted toward sellthrough and Blockbuster was facing all kinds of problems. Movie Gallery financials were remarkably stable, and executives with the chain gloated that customers of their video rental stores, primarily in rural areas in the South and Midwest, were perfectly content with the traditional rental model and didn't seem inclined to change their ways.

For awhile, that held true, but eventually prices for hot new DVDs got lower and lower, making them increasingly attractive as a purchase item. At the same time we saw new ways to rent movies emerge, first Netflix and then Redbox, that offered such convenience and simplicity that even the good old boys (and gals) who frequented Movie Gallery stores were enticed to switch.

Blockbuster is in pretty much the same boat, but you have to give the No. 1 rental chain credit for at least trying. Blockbuster over the last decade has been a hotseat of experimentation, and while its efforts to compete against first the rising tide of sellthrough discounters and then the new breed of video rental services haven't exactly panned out the way executives might have hoped, at least Blockbuster still has a stake in the game. Blockbuster might be battered and bruised, but it is still a player.

Movie Gallery, on the other hand, has done practically zilch in the innovation category — and what it has done has been too little, too late. Remember the ill-fated purchase of MovieBeam, the download service birthed in 2003 by the Walt Disney Co.? Disney unloaded it just two years later after failing to make any significant inroad into the market, due to the relatively high price and cumbersome method of piping movies into the home. For two aimless years, MovieBeam wandered on its own, only to be snatched up by Movie Gallery in 2007 when it already was on life support.

Now it's Movie Gallery's turn to be hooked up to the machine, and the prognosis certainly doesn't look good. The chain is immediately closing 760 stores and warns it "anticipates" closing more stores. Revenue in 2009 fell by a staggering $550 million, or nearly 30%, to $1.4 billion. And the chain's fourth-quarter operating loss grew to $129 million in 2009 from $84.8 million in 2008.

I hope Movie Gallery somehow manages to pull through and will once again complete a successful reorganization plan, as it did in 2007. But even it does, I'm afraid the chain will be living on borrowed time unless it somehow manages to develop and implement an entirely new business model.

By: Thomas K. Arnold

Insights from the "voice of the home entertainment industry." Thomas K. Arnold gives the inside scoop on entertainment news, DVD, Blu-ray releases, and what's happening at the key studios and retailers.


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