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The Perils of Box-Jumping in Hollywood

1 Jan, 2003 By: Holly J. Wagner

The industry has been abuzz for the last week or two about a couple of unexpected developments: Blockbuster's admission that sellthrough is cannibalizing rental; and the terse surprise announcement that Warren Lieberfarb would be departing his post as president of Warner Home Video.

The Warner announcement was only more shocking on the heels of Blockbuster's stock tailspin, which seemed to prove Lieberfarb right: make sellthrough DVD cheap enough and it will grow into a big, fat can of Rental-B-Gone.
Lieberfarb acknowledged to The Wall Street Journal that his unceremonious departure from Warner was the result of “policy differences on organization and structure,” but nobody was confirming or denying rumors that he was making a play for control of the entire movie marketing process from theatrical to broadcast.

The sad thing is that most industry observers who would talk off the record believe Warner will probably execute Lieberfarb's end-to-end strategy without him, a backhanded compliment if ever there was one. Anyone who doubts the soundness of the approach need look no further than Warner-distributed New Line's Lord of the Rings trilogy. It seems only logical the division that generates most of the profits for movies should be setting their course.

The lesson in this, it seems, is something I've written about before: that release windows are not merely a profit structure, but the foundation of the entire Hollywood economy and power structure.

The reason Hollywood moguls are mad at the movie masking services for editing out potentially offensive content, I think, is less that they are changing a filmmaker's vision and more that they are shifting eyeballs back several months from the broadcast-sanitized TV version to home video rental. Studio broadcast executives must be quaking in their boots knowing that, played out to its ultimate conclusion, that means today's VP of Broadcast Placement is tomorrow's VP of Bupkis – even if the industry wins on digital broadcast flags.

Lieberfarb's fate is yet another example of how Hollywood institutions hold back potentially profitable technology. It's obvious that DVD and Lieberfarb's strategy for it have begun shifting profits from rental back to studios.

The fact that he's typing “Godfather of DVD” onto a resume this week is a glaring illustration that a few fat cats guarding personal profits, not movie or even studio profits, are in the driver's seat.

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