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CEO: Genius Aims to Halt Sideways Buys

22 Nov, 2006 By: Erik Gruenwedel

If Trevor Drinkwater were running for office, his campaign couldn't be any busier. The president and CEO of Genius Products has been on a whirlwind mission to establish the second mini-major after Santa Monica, Calif.-based Lionsgate.

The former Warner Home Video executive, who joined Genius a year-and-a-half ago when it was known primarily for its dollar DVDs and “Baby Genius” infant titles, showed considerable moxie this year when he shrewdly sold 70% of the company to Bob and Harvey Weinstein's The Weinstein Co. (TWC).

The move, he said, gave Genius “credibility” among both retailers and the industry at large. Plans include releasing between 250 and 300 DVDs next year, including about 30 theatrical features, 24 from TWC and six from producer Bauer Martinez.

Drinkwater then jettisoned the Baby Genius brand, supplanting it with major content partnerships with ESPN, World Wrestling Entertainment and Discovery Kids.

Last week, Drinkwater put himself at ground zero in the highly publicized exclusive rev-share rental distribution agreement between Blockbuster Inc. and TWC, with Genius Products acting as official distributor. With the Weinsteins and Blockbuster chairman and CEO John Antioco proclaiming mutually assured success on the deal, we wanted to get Drinkwater's take on the deal and what it means for Genius.

  • HMR: The First Sale Doctrine clearly states “the distribution rights of a copyright holder end on that particular copy once the copy is sold.” So, despite the steps you take to prevent renting by non-Blockbuster rentailers, by law, they can do what they want. How do you plan to police this agreement?

  • Drinkwater: Without getting into a legal discussion, copyright laws don't prohibit The Weinstein Co. from deciding how to best distribute and promote its products, and the Weinstein Co. has determined that having an alliance with Blockbuster as its exclusive rentailer will best promote and enhance the value of its products to customers. Because our agreement with Weinstein requires us to honor the company's commitments to Blockbuster, we are implementing our new distribution policy to do so.

    The Weinstein Co. discs at Blockbuster will carry the Blockbuster logo. In addition, sellthrough product will carry a message telling consumers that the disc is intended for purchase only, and if they have rented it, they will be encouraged to call a toll-free number. In addition to prevalent consumer messaging, we also are considering utilizing visual and digital technologies to mark and track products throughout the supply chain.

  • HMR: If your other distribution/retail partners do deviate from your agreement and sell to other rentailers, what steps will be taken?

  • Drinkwater: We expect our distribution partners will comply with our new distribution policy.

  • HMR: Will Genius continue to do business with Netflix?

  • Drinkwater: Absolutely. We will continue to service all of our rental and retail partners with product outside of The Weinstein Co.-distributed slate.

  • HMR: Looking forward, how do you think the The Weinstein Co.-Blockbuster alliance will affect Genius' other distribution relationships?

  • Drinkwater: Our philosophy as a company is to provide individualized distribution and marketing programs to each of our partners based on their needs and target audience. This service is why so many content providers choose us as their distributor. We will continue to seek new opportunities for both our retail and content partners that are distinct and strategic and best serve their interests and products.

  • HMR: Given that the Weinsteins own 70% of Genius and have great influence on how Genius conducts its business, why should excluded rentailers support Genius' lesser-known titles when they are being shut out of what might be called your “commercial” titles?

  • Drinkwater: The alliance between the Weinstein Co. and Blockbuster is exactly that, an alliance between The Weinstein Co. and Blockbuster. It is no different than a distributed line of any of the majors making a decision concerning their own content. Genius' product line is filled with great content that doesn't fall under the Weinstein banner, such as ESPN, WWE, IFC and Discovery Kids, and is therefore not restricted by the alliance. It is our belief that non-Blockbuster rentailers will recognize the value of this content.

  • HMR: How are independent rentailers going to be impacted/appeased?

  • Drinkwater: Again, our philosophy as a company is to provide individualized distribution and marketing programs to each of our partners based on their needs and target audience. Many of the content providers we represent value the independent rentailer, and we hope to continue to service them with this content.

  • HMR: Is this the first deal of its kind?

  • Drinkwater: Definitely not. A number of home video brands have exclusive distribution agreements, and many companies provide exclusive lines or products to specific retailers. Furthermore, this is a common practice in many other industries, including Pay TV and Satellite Radio.

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