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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.

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26 Aug, 2003

Sometimes, the Best Laid Plans Backfire

I can't help but be a little awed at the way this industry keeps mutating, and it's not lost on me that every time the studios and networks try to lock in a greater share of profits for themselves, they end up shooting themselves in the foot.

One example is the network bugs and graphics I wrote about in my last column. In their haste to recapture a few hundred thousand ad-skipping Digital Video Recorder (DVR) users, the networks are alienating the millions of the rest of us with their annoying clutter. In my case, and I'm sure many others, it fuels the defection.

Another example is the past five or six years of home video history. First, the chain rentailers got preferential terms — by design or default — under revenue-sharing agreements. The indies were on the ropes when the studios got scared of the big rental chains and pushed sellthrough-priced DVD into mass merchants. That put indies on a more comparable footing, with much less disparity in their cost of goods. Plus, they are no longer bound to keep product on the shelves for contractual periods of time; they can sell off pre-viewed copies as soon as they stop renting — even sooner, if they like.

Ted Engen, president of the Video Buying Group, recently told me he knows dealers who buy more copies of new releases on DVD than they used to on VHS, but only because they know they can sell them off after as few as five turns per copy.

I'm sure the high value consumers see in used DVD is also part of the motivation behind self-destructing discs; but they'll be a tough sell, since fully loaded used discs cost about the same as the expected price for expiring discs.

At the VSDA show, analyst Tom Adams said the studios make $2.5 billion a year on rental; when VHS dies its inevitable death, that figure will drop to $1.5 billion.

No wonder the studios are scrambling to come up with new revenue-sharing programs with terms attractive enough, they hope, to get the indies back on board. I predict the success of those new deals will hinge as much on the selloff date as the price.

There's a large segment of this industry that started to make real money again when it was released from the bonds of compulsory shelf life. And no matter how hard they try, the studios can no longer guarantee they can ever get that genie back into the bottle.

25 Aug, 2003

The ABCs of Moving Kids' Titles From VHS to DVD

Many have noted that children's titles — slower than some other genres to transition to DVD — have begun to make that move, and a look at the top kids titles in our recent kidvid genre section adds fuel to that contention.

One of the most interesting parts of our new genre sections is the charts that show the top sellers year to date in each category. In our most recent kidvid section, the top three titles in both DVD and VHS sales are the same, although the order is slightly different. Disney's 101 Dalmatians 2: Patch's London Adventure, Jungle Book 2 and Atlantis 2: Milo's Return all appear among the top three sellers on each chart, although Jungle Book 2 is the top DVD and 101 Dalmatians 2 the top cassette in sales year to date ended July 27.

One indication that online video sales were moving beyond a merely high-tech fan niche was when online top sellers began to match sales in store. The same mainstream adoption growth pattern seems to be happening on the kidvid front. Parents that buy stuff for their kids are now buying it on DVD as well — and it's not just the stuff for older kids. Disney's titles are firmly youngster territory, and that studio used to more clearly dominate the VHS sales charts. Now, Disney's titles have taken over the top spots on the DVD charts as well. In part, it's a testament to Disney's successful branding of the Disney DVD, but it's also an indication of mainstream adoption of the disc.

While many parents initially worried about how DVDs would stand up to kids' rough treatment (at least one of my neighbors lost a Monsters, Inc. DVD when her 3-year-old decided to polish the floor with it), parents seem to have gotten over that fear and are purchasing the same young-skewing titles on DVD that they are on VHS. Chalk up another victory to disc, which is successfully converting almost every genre, except perhaps fitness. Today kidvid. Tomorrow fitness.

24 Aug, 2003

Copy Depth May Put Pressure on Other Areas of Business

A couple of weeks back at the VSDA show, I was moderating a panel on how retailers are managing the transition from VHS to DVD. One of the interesting points made during the discussion was the fact that, while DVD had surpassed VHS as the leading platform for new-release rentals, VHS still held significant command of the catalog rental business.

The home video business has always been a hits-driven business, made even moreso as copy depth increased during the era of VHS revenue-share deals and then, on a broader scale, with DVD sellthrough pricing.

Studios have doubled their output into the rental pipeline in recent years as both large and small retailers upped their buys on new-release DVDs, many of which eventually find their way onto the previously viewed sales shelves.

As Melinda Saccone, Video Store Magazine's senior market research manager, indicates in her analysis of this trend, this copy-depth nirvana also has meant a faster turn on the rental shelves as turns per copy have dropped by half as volume has increased.

Not only has this meant that second-tier titles get less attention from retailers, it also means that the growing population of DVD customers, often guaranteed their fill of any new releases, are not finding their way into the catalog area.

As DVD penetration continues into 50 million domestic households and upwards, what can we expect for the catalog rental business? If we're getting our fill of new releases at rental and or at retail (either new or previously viewed), and we can buy much of our old favorites at bargain prices at the mass merchants, it would seem that the catalog business at rental could be a real challenge in the future, and also for the second-tier product on the supply side.

Studios such as Warner, in conjunction with Rentrak, are developing aggressive revenue-sharing programs geared to ensure that retailers pick up some of their second-tier product after they have stopped feasting on new releases. But that might eventually lock out suppliers that can't be as competitive.

Retailers should be thinking creatively in terms of luring people into the catalog sections, looking for themes and current theatrical hits that can make for interesting endcap displays of related catalog product. The indicators seem to point to a struggle ahead for this area of the business.

I'd like to take this opportunity to welcome the newest member of our editorial team, Erik Gruenwedel, who joins us as a senior reporter. Erik was most recently a reporter at Billboard, and before that he wrote for Adweek. He has experience in entertainment and business journalism and an MBA to boot. We look forward to Erik's contributions.

21 Aug, 2003

Indie Retailer Resilience Pays Off in the DVD Era

Independent video retailers are a resilient lot. During the recent VSDA convention and, a week later, at Sunsplash, I had the chance to chat with more than a dozen indies, all of whom have weathered the various Great Shakeouts and are still in business today, long after many of our industry's top minds predicted they would be gone.

One studio executive recently told me that indies still account for about 40 percent of the rental business. And if rentals are up, as our market research department and most other credible sources report, then the indies must be doing quite well for themselves.

My conversations reinforced that view, for the most part. Low-unit pricing for DVD and the virtual disappearance of the rental-priced cassette have rendered the level-playing-field debate all but irrelevant for most.

And the booming market for used DVDs lets retailers not only squeeze every last drop of dough out of their over-the-hill rental titles, but also counter the new sellthrough focus of the big chains. It's one thing to try to sell new copies of Chicago for $15, as Wal-Mart is doing. It's another to offer your loyal customers previously viewed copies for $10 just a few weeks later.

Video Store Magazine market research estimates PVT (previously viewed title) sales generated more than $100 million in July, up 29 percent from the average monthly take in the first six months of this year. My prediction: By the end of this year, we're going to see average monthly PVT sales double.

One reason: eBay. The online auction house is mounting an aggressive pitch to get retailers to sell used videos (particularly DVDs) online. EBay “instructors” were at both the VSDA convention and at Sunsplash, and in each case their talks were so convincing that retailers who might have gone in with a ho-hum attitude were eagerly scribbling notes and peppering the instructor with questions before the seminars were half over.

This was clearly an encouraging sign, and one that attests to the resourcefulness of retailers who in the past 10 or more years have encountered all sorts of obstacles and hurdles, from the near-recession of the early 1990s to the near-recession of the new millennium, from the rise of the big chains to the pre-DVD wearing-off of the video rental habit.

There's an old saying: Only the strong survive.

Rest assured, they have.

18 Aug, 2003

Downward Spiral of VHS Shows Up in CEA Numbers

While many in the industry anecdotally say VHS is on its way out, it's interesting to see quantitative evidence.

Recently released numbers from the Consumer Electronics Association show a 78.4 percent drop in VCR deck sales to dealers for the four weeks ending July 25 compared to the same four weeks last year. July 2003 VCR deck sales to dealers tallied a mere 295,972 (versus 1.36 million last year) while July 2003 DVD player sales were nearly 1 million.

Even more telling about the shift to DVD is the growth in TV/DVD combo units. These are not the units new DVD adopters would typically purchase. Your first DVD player purchase is typically a player-only device you can attach to the TV with the best picture in the house. TV/DVD units, I would surmise, are usually the second or third DVD player purchase for a household – something to put in the kids' rooms or for older kids to take to the dorm at college.

Year-to-date, sales of TV/DVD combo units are up a whopping 233.4 percent. Looks like lots of households are buying their second and third players.

While many say the VCR will hang around for a while, I'm beginning to wonder. It didn't take long for me to jettison my turntable when CDs came around. As my VCRs begin to break, I find it hard to justify fixing or replacing them. We used to have two, but now we're down to one. The only family members that even watch videocassettes anymore are the kids, and if I had to choose between a TV/DVD combo for the kids and a new VCR, I'd probably choose the combo unit. Looking at the numbers, lots of other families are doing just that.

17 Aug, 2003

Back Next Week

Kurt Indvik has been out on vacation. His column will return next week.

15 Aug, 2003

Greetings from Sunsplash!

Thomas K. Arnold is taking a much-needed rest after attending Sunsplash. He'll be back soon with plenty of keen insights to share.

12 Aug, 2003

Crawling Through Hollywood

It took nearly 100 years, but I think they have finally come up with the most annoying device in broadcast history.

I'm referring to the station ID bugs, banners, crawlers and other animated graphics that networks now feel compelled to stamp into the corner of the TV screen over every broadcast. It's the TV equivalent of interminable pop-up ads on the Web.

By far the most intrusive one I've seen yet is the helicopter on TNN, announcing the impending change of identity to Spike TV. It's a yellow-green helicopter that rises from the bottom of the screen, crosses about a third of the way up and swings a searchlight around to show a drive-in movie type screen, also about a third of the screen height, with the message on it.

Thank the TV gods the only stuff I watch on this channel is coming out on disc. I can barely tolerate an episode of the once-enjoyable “Highlander” series on TV because of an ugly, oversized graphic that obscures everything from swordplay to hot romantic scenes. Not to mention the absurd contrast of a police chopper flying across a screen that's playing out a scene recalled from the Scottish highlands of the 17th or 18th Century.

This may be how Hollywood's battle to squash Digital Video Recorders (DVRs) like TiVo and Replay TV backfires in a big way, to the benefit of packaged video dealers. Because like Web pop-ups, once you know a site will feed you a bunch of them, you find other places to get what you want sans the clutter.

I'm sure the reason we all have to endure those in-your-face TV graphics is because the networks are terrified of a few hundred thousand ad-skippers. Since they skip over the promos, the networks have to force-feed their messages to all of us from every nook and cranny of the screen during the program.

That hideous TNN helicopter is enough to send me scurrying for Anchor Bay's “Highlander” boxed sets (just the first two seasons are yet available) and Paramount's “CSI” set (season one is out, season two streets Sept.2).

In case you aren't listening, network programmers, that means I'm not only skipping your ads, I'm skipping your programming as well.

It used to be something you heard only when a group of friends was deciding what movie to see in a theater. But at this rate, the new TV series mantra will have that familiar ring: “I'll wait for it to come out on video.”

11 Aug, 2003

Watch Out for Disney's Holiday Tidal Wave

Many are talking about Disney's winning summer with Pixar's Finding Nemo and the Johnny Depp actioner Pirates of the Caribbean, which have helped make the Hollywood studio the first to hit the $1 billion mark at the box office. The Mouse House also may be looking at one of its best fourth quarters ever with the DVD and VHS release of Nemo and the highly anticipated The Lion King Special Edition, among other titles.

The Lion King, the longtime record holder as the top-selling video of all time with 25 million units sold, just might see its record fall to Nemo this fourth quarter – in a curious case of Disney competing with itself. Buena Vista Home Entertainment SVP of brand marketing Gordon Ho noted that the titles have been separated by a “whole month” – The Lion King streets Oct. 7, Nemo Nov. 4 -- and are designed to promote rather than cannibalize each other's sales.

Still, with DVD player households reaching 50 million, the little fish has a fighting chance at taking the record.

Boosted by this menagerie, Disney can look forward to quite a quarter, especially if Pirates of the Caribbean falls into the December time frame as many expect it might. And don't forget about the critical favorite Holes, which comes out Sept. 23 just before the fourth quarter holiday rush.

Every studio has its great years, and this year seems to be golden for Disney. Whether the Mouse roars or swims to success, it's certainly got the goods this holiday season.

8 Aug, 2003

Ready for an Overheated Holiday?

According to Video Store Magazine market research, we're going to see upwards of $2.5 billion in major theatrical box office power hitting the video shelves this fourth quarter.

To heck with holding anything back for the so-called “fifth quarter” post-holiday sales period when new owners of shiny DVD players are looking for something exciting to watch. Last year's early first quarter releases included such hits as Signs ($228 million), The Bourne Identity ($121 million), Sweet Home Alabama ($127 million), and My Big Fat Greek Wedding ($241 million), and totaled about $1.4 billion in box office punch.

To date for Q1 2004 we have about $246 million lined up so far in box office hits in January (based on receipts as of Aug. 3), including Bad Boys 2, Spy Kids 3-D: Game Over, Lara Croft Tomb Raider: The Cradle of Life, and Johnny English, to name some which have either announced dates, or which are VSM estimated release dates. Certainly that list will grow, but it's apparent it isn't going to come close to last year's line up.

What's changed in a year? Well, check out the cover article in this week's VSM, penned by Thomas K. Arnold for some studio and retailer exec insights. There is also a chart showing what's on the way for fourth quarter.

The bottom line is that home video is becoming such a major component of studios revenues, and the audience for DVD has reached such proportions, that studios are simply not going to pass up the holiday season to release their major 2003 hits, no matter how crowded the slate might be. Theatrical runs are getting shorter, theatrical marketing is getting more expensive, and its becoming incumbent on home video to deliver the goods to ensure a films overall financial success.

It's going to be a wild and wooly Christmas at the sellthrough counters, no doubt. But studio execs had best be very careful in their shipments numbers, even as they battle for shelf space and consumer attention in this overheated holiday, lest they suffer from a serious dose of holiday hangover as those returns start to mount in Q1, 2004.