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Insights from home entertainment industry experts. Home Media blogs give you the inside scoop on entertainment news, DVD and Blu-ray Disc releases, and the happenings at key studios and entertainment retailers. “TK's Take” analyzes and comments on home entertainment news and trends, “Agent DVD Insider” talks fanboy entertainment, “IndieFile” delivers independent film news, “Steph Sums It Up” offers pithy opinions on the state of the industry, and “Mike’s Picks” offers bite-sized recommendations of the latest DVD and Blu-ray releases.


Opinion
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8 Feb, 2004

Could Tiered Pricing at Theatrical Be Viable?

The movie business began the year much like it ended last year, with a slight dip in movie attendance. Only a moderate hike in the average ticket price is keeping revenues level.

But the theatrical business will have to do something else to counter the falling attendance other than raise ticket prices, because it's already obvious that that combo is just going to hasten the downward spiral of movie attendance. While there's no doubt that higher ticket prices have made the “I'll wait for the video” decision even easier — to the benefit of those of us in home video — in the long run, a declining theater audience is not good for home video either.

Declining theatrical attendance and revenue could mean fewer “serious” films get financed in favor of the sure hits targeted at young males (and their dates), and less money spent on marketing those more serious films that are made. This, in turn, could lead to a drying up of both secondary product and consumer awareness of those modest-budget films that traditionally have rented well and sold well in the previously viewed arena.

So what's the solution? How about tiered pricing — not just as a way to get more people in theaters, but also as a way to build a bigger audience for the film's home video release? I know there are a million variables and as many arguments for why it can't happen, but perhaps it's time for Hollywood to run the numbers again.

The concept (if not the execution) is simple: People pay a higher price at the box office for the big-budget blockbusters and a lower price for the smaller films. Theater owners and studios would have to work together to make the financials work on both ends — particularly for the smaller films. A lower ticket price would require a longer run to maximize revenue; studios accustomed to taking the lion's share of ticket sales in the first few weeks a film plays would have to rethink their strategy.

For arguments sake here, I am being very simplistic, but think about it. With ticket prices spiraling upward — not to mention the cost of soda and a tub of popcorn — the theatrical business may be slowly pricing itself out of existence. Families trying to decide between a night at the movies or a DVD at home are doing the math and voting with their feet.

If, on the other hand, there were a range of prices and films, I think you'd not only see more people in theaters, but you'd also find more willingness to take a chance on something other than the big-budget flavor of the week.

Tiered pricing may not make a huge difference, but I think it could benefit both the theatrical and home video businesses enough to justify serious consideration. By maintaining the flow of secondary titles — and increasing consumer awareness of them due to their longer theatrical runs and more attractive ticket pricing — studios could maintain and even grow the flow of independent, genre and other so-called “rentable” films into video stores. And with consumers continuing to transition into movie collectors, it's not implausible to suggest many of these films could sell as well, particularly on the previously viewed front.

It's time Hollywood takes a look at its product offering and begins to price accordingly given the fact that DVD, home theater systems and the coming high-definition era will only continue to usurp that movie-going experience. Tiered pricing could be a win-win situation, not just for studios and theater owners, but also for video retailers. But perhaps the biggest winner would be the consumer — and isn't that who matters most in this whole equation?


5 Feb, 2004

A Deliberate Death

I came across an interesting USA Today poll recently. Readers were asked, “Has DVD won the day, or is VHS still putting up a creditable fight for your business?”

The majority of the respondents were split between answering, “I'm all-DVD and wouldn't go back on a bet” (44.6 percent) and “I'm buying and renting DVDs from here on out, but I still have important stuff on VHS” (44.13 percent).

Just 11 percent of poll respondents said they're still stuck on VHS.

The death knell has certainly sounded for the videocassette, and I wouldn't be surprised to see studios stop releasing product on VHS before too long — say, by summer. Already, the big anime suppliers have ditched VHS entirely, and Warner Home Video is now releasing all its sports programming exclusively on DVD.

Now, I know there are a lot of people out there who maintain VHS could have lived a little longer had the studios not been so aggressive in pushing DVD. I continue to hear cries that the studios prematurely killed off VHS, primarily from retailers with large VHS inventories who waited too long to dump their cassettes and now can't give them away.

Did the studios kill off VHS, or has it simply been a matter of changing tastes? Hard to say. But I will tell you, if the studios deliberately hastened the demise of the videocassette, I, for one, can't blame them.

It's a matter of simple economics. I just came across a report from Jessica Reif Cohen, the Merrill Lynch analyst who is held in high esteem by much of Hollywood's power structure. She analyzed the cost factor of DVD vs. VHS and found that the gross profit potential of a single DVD unit is nearly twice that of a videocassette.

The breakdown: Videocassettes have an average wholesale cost of $12 vs. total costs of $6.65 ($2.25 for duplication, $2.75 for marketing, 75 cents for packaging and 90 cents for distribution). DVDs, by comparison, have an average wholesale cost of $16 against total costs of $5.45 (a buck for duplication, $2.75 for marketing, 90 cents for packaging and 80 cents for distribution).

Granted, this differential didn't exist in the early days of DVD, when revenue-sharing was just beginning and the rental-priced cassette still ruled the day.

But once the industry began tilting toward a sellthrough model and consumers could buy any movie they wanted on DVD as soon as it came out, rather than having to wait six months for the price to go down as was customary on VHS, the old economics got tossed and the new reality set in.

I remember those turbulent, confusing days. No one knew whether rental pricing was really, truly headed for extinction, and whether pricing everything for sellthrough would put a serious dent in studio profits.

As it turned out, rental pricing did die, but studio profits rose. So did consumer spending on video. The home entertainment pie's individual slices got smaller, but the number of slices proliferated to the point where the pie got bigger than anyone even imagined — heck, it became an entire pie shop.

And in the hustle and bustle that continues to describe the DVD business, the humble old videocassette simply got in the way.


3 Feb, 2004

Who's Knocking At Your Side Door — And Who's Answering?

So long ago I hate to admit I remember it, a musician named Gil Scott Heron had a great revolutionary anthem called “The Revolution Will Not Be Televised.”

With the way politics are going in this country right now, I was starting to think that might be wrong. With the eradication of the middle class, corporate corruption and the ongoing export of American jobs, I keep wondering when it will all hit a critical mass that has Americans mustering torches and pitchforks to march on their state and federal capitols. Drama like that would be on every TV channel available.

But it's not going to happen that way, even though more than at any other time in history, we live in a media culture. Anyone who doesn't believe that need look no further than the California governor's office. OK, so that little skirmish in the revolution was televised. But that was more of a revolt than a revolution; Californians got tired of stupid spending and lax oversight (and the jury is still out as to whether Gov. Ahnold will change any of that).

I no longer think the revolution will be televised, at least not in any recognizable form. But it is going on all around us, and in much more insidious ways than public marches.

We are in the midst of what I call the “side-door revolution,” a term I coined after a friend related an incident in which he got a piece of merchandise for about a third of the retail cost by buying it from an employee at the supplier's side door for cash. Free downloading is another part of the side-door revolution. A lot of the people snatching music and movies off the Internet for free are sick of what they perceive as corporate greed and are rebelling in their own quiet way. If you own a business, these things may be costing you money.

Controlling “shrinkage” — that marvelously understated euphemism for employees stealing — is nothing new to retailers. But if things keep going the way they are, I think it's likely to get worse both in scope and dollar value.

One commentator I quoted a few months ago noted that the selling price of a used DVD doubles the hourly wage of most drug store workers. That's onesy-twosy compared to the Target loss control manager in Michigan who was charged for allegedly taking DVDs and games out the store's back door and selling them at a Game Station store a few miles away. I'm sure the motivators range from people stealing a little on the side to make ends meet to just plain greed.

I suppose this is a political rant, but anyone who is not treating employees fairly is, in my mind, more likely to suffer these kinds of problems than employers who take care of their people and treat them with dignity.

If you are in business, make a point to set an ethical example for your employees. Make an effort to provide them with the kind of pay and benefits that keep employees loyal and honest. I guarantee most employees who perceive their bosses as fair and honest will try to step up to that standard.

Remember, the revolution will not be televised. Probably not even on your video surveillance system.


2 Feb, 2004

HDTV Is the Wave of the Future

I have seen the future at the Super Bowl — and it doesn't involve wardrobe malfunctions.

It's HDTV. My neighbor, who is an engineer, rigged a setup for the Super Bowl.

I have never seen greener grass or a clearer picture. The white and black stripes on the referee uniforms were crisp and clear — as was everything else (even wardrobe malfunctions).

It reminded me of the Microsoft demonstration of the high-def version of Terminator 2 during last year's “DVD in 50” conference. In a shootout scene involving a bouquet of red roses, the reds were the clearest red I've seen without looking at an actual rose. (Unfortunately, we never did get it to work on our home computer.)

High-def will most definitely become the new standard. It's head and shoulders over what you can see on even the best TV with the most pristine DVD. It's truly a leap forward, and the home entertainment industry will have to be prepared.

No doubt, I'm not the only viewer who sampled the HD broadcast of the Super Bowl. Each such HD event will cause more consumers to clamor for the same picture quality for everything they watch on television — including packaged home entertainment.

I look forward to the same picture quality on disc — and certainly the rest of the consumer public does, too.


1 Feb, 2004

Movies and Politics Collide in High-Profile Season

The timing of the Iowa caucuses and New Hampshire primary bumping right into the Golden Globes and the Academy Award nominations couldn't have been better.

In our celebrity-inebriated society, the only thing that captivates our attention more than preening movie stars on the red carpet are politicians throwing sound bites and barbs at each other in the run up to their own party nomination.

And this year, both are colliding together in a compressed period of time that must be causing delirium among those that happen to be both movie fans and poiliticos.

Other than Arnold Schwarzenegger's recent coup as the new California governor, I am not sure there has been too much on the political front for home video retailers to take advantage of. But the current electoral process sweeping the country, I think, offers some real opportunity.

Perhaps an endcap featuring a selection of political films might be just the thing. I have polled my colleagues here at Video Store Magazine, and, sure enough, there's a decent-sized list of movies (not to mention documentaries) you could use for your promotion.

Consider The Candidate, Wag the Dog, Primary Colors, All the President's Men, The American President, Dave, My Fellow Americans, Mr. Smith Goes to Washington, and the list goes on.

Keep an eye open as to when your state's primary election takes place, and make sure you're prepared.

But even as compressed as the political primary season seems to be getting, video retailers now have an even more compressed entertainment awards season to take full (and hasty) advantage of. The Golden Globes were still safely tucked under the pillows of the lucky winners who received them Jan. 24 before the Oscar nominations hit the public full force last week in an accelerated run up to the big awards show Feb. 29. And squeezing in between there with its own awards is the Screen Actors Guild, which will hand out its hardware Feb. 22.

At no time during the year are movies as a general topic of discussion as high on everyone's minds as right now, and historically, home video retailers have been aggressive in mining that awareness for not only the films nominated this year that are already on video, but past award winners as well.

As you'll see in this week's issue, we have several stories and charts on who has won or been nominated for what, and which titles are in stores now or shortly to arrive.

As with everything else in our increasingly time-compressed society, home video suppliers know they have even less time today to take advantage of the moment before it gets drowned out by the next media blitz that turns consumers' heads.

Studios, as well, will move fast on select winning or nominated titles that can get a big bounce on home video from their moment in the sun. Because the next set of primaries is always just around the corner.


29 Jan, 2004

Let's Make a List of the Dumbest Moments in the DVD Business

Business 2.0 is out with its annual list of the 101 “dumbest moments in business,” and this year's installment contains some real doozies.

A few of my favorites:

* Seafood restaurant chain Red Lobster's “bottomless bucket of crab” promotion. It worked — too well: The company subsequently announced lower-than-expected earnings, with CEO Joe Lee noting, “It wasn't the second helping on all-you-can-eat, but the third.”

* Kraft's ad campaign to promote its new presliced, cracker-size cheese. The slogan: “We cut the cheese so you don't have to.”

* Urban Outfitters' Ghettopoly, a Monopoly knockoff. The top hat, shoe and car are replaced with a machine gun, marijuana leaf, basketball and rock of crack cocaine. Reacting to protests, the edgy retail chain promptly yanked the game from its stores.

* Sony filing an application to trademark the term “Shock and Awe” for a video game — just one day after the U.S.-led invasion of Iraq. Sony later pulled the filing, calling it an act of “regrettable bad judgment.”

Our industry didn't have any humdingers worthy of mention — or at least none that popped up on Business 2.0's radar. But over the years, we've certainly had our choice moments.

Who can forget the flap Free Willy caused overseas when marketers belatedly realized “willy” was slang for a certain part of the male anatomy?

Or the clear-as-day rendering of that same male part on the cover of the original videocassette release of Little Mermaid, cleverly hidden inside one of the castle spires? Disney denied it ever happened, but when Little Mermaid was reissued a few years later, the cover mysteriously changed.

We have some present-day issues the editors of Business 2.0 might also want to check out for possible inclusion in next year's list.

For starters, what could be a dumber moment in business than the decision by the big retail chains to sell hot new DVD releases for below cost their first week in stores, at a loss, when they could easily make a nice profit without appreciably affecting sales? I understand they want to drive traffic, and DVD is a most compelling lure — but why go so low? They're not only losing money, but they're also lowering the value of DVD in the consumer's mind — and those $5.88 catalog dump bins only make matters worse.

Then there's all that hard-to-remove tape on three sides of most DVD releases. Isn't shrink wrap enough? It's not only an annoyance, but it also can damage the cover art, particularly on Warner's cheapo cardboard “snapper.”

I also don't get the scheduling of TV DVD releases — and I'm talking about current series that are still on the air. Some “complete season” sets come out at the end of the old season; others come out at the beginning of the new season; some are a year behind; others two, three, four or even more. Take a cue from the networks: they all bow their new seasons in the fall, at the same time, creating anticipation and huge front-end viewership. Might not such a strategy work for TV DVD as well?

My “dumb” list doesn't end there. Let's also include listing Dolby and subtitles as “special features”; not including English subtitles on DVDs at a time when most Americans have come to expect them (and appreciate them, if they happen to have noisy kids and/or spouses); putting out crappy direct-to-video sequels with none of the original stars, another notch on the “devaluation” scale; menus on kidvids that don't automatically switch to play after a minute or two (my poor kids once spent half an hour watching the menu to some big animated feature, disappointed that nothing was happening); and separate units for full screen and widescreen, something that confuses consumers and really isn't necessary, given that you can easily put both versions on the same DVD.

Readers, I'd be interested to hear your own nominations for “dumbest moments in the DVD business.” Please e-mail me your suggestions, and we'll revisit this topic in a few weeks.


27 Jan, 2004

Look at Awards Shows as Glitzy DVD Promotions

As an avid hater of awards shows, I had to force myself to watch the Golden Globe circus Sunday night. But I know it's important to what happens in our trade over the next few months, so I took one for the team.

It turned out to be more interesting than I thought, but probably for the wrong reasons. I just caught up on some of the inside jokes and Hollywood gossip I would otherwise ignore entirely.

For example, at first I wondered why the always-adorable Renee Zellweger was looking so zoftig. Then I realized she had bulked up for the sequel to Bridget Jones's Diary, a snippet of dish I had read — sans pictures — a month or so ago. But we will all get to see the results later this year.

My viewing companion and I were trying to figure out if Mary Louise Parker had gotten a boob job, right up until she told the audience she had, sort of — courtesy of her newborn son. Bravo to her for proving that moms can still be hotties.

No such explanation for Al Pacino's garish shave. Besides the fact he looked like an unmade bed overall, when the cameras zoomed in on his rap it was clear that either he or his barber was inebriated when that goatee got shaved. He looked so bad the cameras cropped him out of the Angels in America ensemble shots.

I even felt sorry for Michael Douglas, who looked perplexed at the jerky video montage of his life's body of work, set to a rendition of “What I Did For Love.” While the sentiment might fit, the music was entirely the wrong rhythm and tempo for the clips. Douglas was visibly disappointed that his life was reduced to this. So was I, considering the opening red carpet montage was put together better.

I don't know how much a Golden Globe by itself helps a movie. I know that the more awards people see on the box art, the more likely many folks are to pick the title up to rent or buy it. So let the lovefests begin, it's all good for business.


25 Jan, 2004

What's Your Move With VHS This Year?

Ok, so we agree the future and the focus in home video is in and on DVD, but I'm going to be just as curious to see how the humble VHS cassette fares in 2004. I think this may well be a very telling year, indeed.

As I talk to studio and retail executives what I hear is still the same split personality response to the VHS question. In the one camp you have those who decry the premature abandonment of a format on which 40 percent of the country still relies to view home video. The other camp says VHS cannot support itself or justify its retail or warehouse inventory shelf space and will be virtually dead by the end of the year.

The early numbers don't bode well. According to Nielsen VideoScan, VHS unit sales dropped 44 percent in the first week of January this year compared to the same period last year. And VHS unit sales dropped a whopping 65 percent in the second week of January compared to the same week last year. While these numbers must be viewed as being indicative and not totally comprehensive, it is a strong market indicator of things to come.

If what I am hearing is right, and the above numbers seem to indicate a reality that is definitely upon us, here is what I think we could see this year.

--Studios will significantly increase the number of titles with a DVD-only release in 2004, primarily in the mid-level theatrical range of $0-$50 million and special interest and TV fare, certainly. Theatrical hits, childrens and fitness will continue to be offered in VHS, but we may see a few studios take up Warner's lead and decide that, like The Matrix Revolutions, it's only worth doing so at a rental price point. Sellthrough is DVD's domain, and even in previously viewed VHS commanded a 35 percent share in 2003, according to Video Store Magazine Market Research and that was with an average price of $7.80…a price point I bet was much lower by year's end.

Even the kids market and fitness have made great strides into DVD. Preschoolers now have a DVD they can “pop-n-play” thanks to Lions Gate Family Home Entertainment, avoiding the problem of menus they cannot navigate. And many fitness titles are using DVD technology to allow users to fashion their own workouts instead of following a linear program.

--Specialty retailers, pressured by a flat rental market will continue to dramatically reduce their VHS catalog space so they can devote that space not necessarily to DVD catalog, but to emerging opportunities in more previously viewed/used and new video sales and video game sales and rentals. An earlier survey of retailers by VSM Market Research indicated that 8 percent of respondents said they were planning on eliminating VHS from their rental business in 2004. I think it might be higher by year's end. And I think that the business of catalog rentals is going to be significantly impacted by the decent of the VHS format in 2004. DVDs in catalog rental have not performed as well simply because so many of the titles are available for sale at very attractive new and used prices for someone who really is a fan of a particular title.

I know there will be those pockets of the market that are not going to hustle VHS out the door as quickly, and I am still—in my heart of hearts, as I have been saying since I began writing this column several years ago—reticent about saying that retailers should be moving away from VHS with much haste. I'd be interested to hear from retailers around the country as to what they anticipate their moves will be with VHS in 2004.


22 Jan, 2004

DVD's Widespread Appeal Sets Stage for Sales War

It's funny how DVD has become not only the preferred way to watch movies at home, but also a bona fide pop cultural phenomenon.

Ads for DVD have become ubiquitous on television and in magazines. Top consumer newspapers like USA Today, the New York Times and the Los Angeles Times have launched dedicated DVD sections and special gift guides. And while the DVD market's overall growth rate is flattening out now that more than half of all U.S. households have at least one DVD player, most studio presidents with whom I've spoken recently expect software sales to continue surging upward for at least another two years — and by then we'll probably have a next-generation successor, and the process can begin all over again.

Unlike so many high-tech advancements, however, DVD is not just a guy thing. And that's a pronounced shift in the home entertainment business, which since day one has been geared toward males and only seen women as a conduit to sell or rent children's and family product.

This past fourth quarter, it became most evident that women were not only buying DVDs for their men and their kids, but also for themselves. There were inklings of this happening in previous years, but never was the point driven home so clearly as now.

As a result, you're seeing a big push for Valentine's Day. In years past, the focus was always on rental — rent a romantic comedy and watch it as a couple. This year, the mantra from the studios is sell, sell, sell. DVDs are getting pitched as a nonfattening, non-wilting alternative to candy and flowers. MGM, also on top of the game in packaging catalog titles, has put together a “contemporary romance collection” and will likely sell tons of product. Fox, too, has a Valentine's Day promotion in the works with 18 titles, from Moulin Rouge to Ever After. Universal has Lost in Translation and several other current titles it's pitching to sweethearts everywhere, while Disney is hot with Under the Tuscan Sun, starring the red-hot Diane Lane.

It's a precursor of things to come. The battle for DVD sales of hot theatricals this year is going to be brutal and cutthroat, and the only wiggle room is in nonhit fare — specifically, catalog and niche.

The big studios that have a lot of theatrical product coming their way will, of course, dump huge wads of cash into consumer advertising and marketing, and keep their fingers crossed that they break out ahead. But they'll depend heavily on nonhit product to break out of the pack.

The studios and independent suppliers that don't have much theatrical product in the pipeline are, in many ways, better off. They don't have to wage war on the front lines; they can devote all their time, energy and other resources toward crafting diverse release schedules and clever marketing campaigns to sell product that goes beyond the flavor of the week.

Hopefully both sides will end the year with a good taste in their mouths.


20 Jan, 2004

Does Bleeping Out Naughty Comedy on TV Sell DVD?

I think the cable networks may finally have discovered the ultimate weapon against home recording of shows: censorship.

I understand their need to keep prime-time programming clean enough for family viewing, but there has to be a limit.Over the weekend, I watched a couple of standup comedy shows on Viacom’s Comedy Central channel.

A few of these shows survived intact, but an astonishing number of them had visuals or sounds bleeped out.

I was a little surprised when one comedienne’s physical comedy included flipping the audience off, and the channel — perhaps at the insistence of my satellite provider, DirecTV — pixellated the obscene, although commonplace, gesture so home viewers wouldn’t be able to see it.

But by far the worst massacre of any program I have seen on the channel to date was Saturday’s broadcast of "Queens of Comedy," a 79-minute revue of female African-American standup comics.

Admittedly, the program, directed by Spike Lee and starring comics Miss Laura Hayes, Adele Givens, Sonmore and Mo’Nique, is a bit raunchy. But whoever was doing the audio bleeping on this program got completely out of control, obliterating so much of some routines that there was no point in watching the show at all unless the viewer was skilled in lip reading.

Now, this was prime time in California, but it was the East Coast feed, so it would have been showing as a late-night program back east.

I couldn’t help wondering: Is this a ploy to keep the channel in a basic cable/satellite subscription package? A new trend in family-ifying entertainment that was intended for a more mature audience? A teasing infomercial for the DVD?

The title has been available from Paramount Home Entertainment since Feb. 27, 2001, for $24.99. I didn’t see the overlay, crawler or spot for the title on DVD during the time I spent watching.

Personally, if I like a comedy program that is available on DVD, I will get it so I can watch it more than once. Comedy is a uniquely social event that lets us communicate with like-minded friends. More than with feature films, my brothers and I — as with most people, I suspect — pick up lines from routines we all like and use them to communicate in a form of shorthand or to reflect on experiences we shared growing up.

The editing completely destroyed the program, so I had to change the channel. With these cuts, it was just too much like watching a train wreck.

I don’t know what’s going on with Comedy Central (please write to me if you notice cable providers doing the same thing with this or any other channel), but intentionally or accidentally, it looks to me like a great pitch for the DVD.

By nature, we are creatures drawn to the forbidden. If I had this disc in rental stock, there’s a good chance I would promote it with some type of shelftalker advertising that it is the version you won’t see on TV.

Dangle that forbidden fruit, and I’ll bet people will pay to see it.