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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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3 Jun, 2003

Like June, Kiosks Are Busting Out All Over

Among other trends I'm seeing as DVD matures, it looks to me like independent video dealers have been looking over the wrong shoulder – at video-on-demand (VOD) – for possible competition.

If Netflix has proved anything, it's that nobody needs VOD to pull business away from the brick-and-mortar video rental market. The physical world still holds its share of competitive cards.

Another model poised to make inroads in the next year with existing technology is the video vending machine. Sure, you can pooh-pooh this kind of business as a flash in the pan, but it just may work for some companies.

One company's presentation to potential franchisees even touts the 24/7 convenience of vending machines as a counter to video store hours, locations and the time lag from selection to play that is endemic to online rental. I have yet to experience a video emergency personally, but you never know – maybe there are tweakers out there who can't wait another minute to see The Anamatrix and will race out to rent it at 2:57 a.m.

I can see a host of potential problems with vending machines (did you see Barbershop?) but if the vending machine folks can work the bugs out, I can also see a lot of potential. Much of it from outside the video retail and rental core.

In a society that thrives on immediate gratification, it just might work.

2 Jun, 2003

Yet More Praise for DVD, Which Is Helping to Save Old Movies

Introducing the Los Angeles Chamber Orchestra's gala premiere of Charlie Chaplin's masterpiece City Lights May 31, gala co-chairman and Turner Entertainment Co. president and COO Roger Mayer credited the market for DVD with helping to preserve old movies such as the one being screened.

While the DVD hype can often be overblown, I can't help but take pride in the fact that our business is helping to safeguard old treasures in the studio vaults. Studio execs salivating over potential disc profits are taking the time and money to restore and preserve old celluloid. Indeed, City Lights was so pristine it almost looked as if it were shot yesterday; on disc, it will be preserved in numerous homes in wonderful condition. Add to those feature masterpieces the odds and ends of outtakes and shorts through which studios are sifting to find extras to feed the DVD market, and you've got a medium that not only satisfies consumer appetite but preservationists and historians as well.

It's not often that commerce can serve such a good cause. DVD will assist in creating a legacy that will be appreciated for years to come. Mayer marveled and took obvious delight in the fact that the cause of old movie preservation had found a friend in DVD. It's a kudo that should go to the whole industry, especially Warner Home Video, the studio releasing the Chaplin collection on disc, for providing the kind of cash flow that can help studios preserve film history.

1 Jun, 2003

Grocery May Be The Best Spot for Disposable Discs

It doesn't appear that many specialty retailers see a disposable disc product like the one being tested by Buena Vista Home Entertainment in August as something that could benefit their business. At least that's the way our most recent online poll shows it. It was a poll that drew a heavy response, which obviously indicates a strong interest and concern about the upcoming test.

When asked “Where do you think the EZ-D self destructing disc will sell well?” only 4.4 percent of respondents said specialty retail outlets. Another 34.6 percent don't seem to think the discs have much merit in any retail outlet and voted for “nowhere.”

However, 42.86 percent did say they felt that convenience stores, gas stations and grocery stores, places that get high regular traffic and offer the highest impulse purchase options, could likely do well with a disposable DVD display. Another 18.13 percent of respondents chose mass merchants as another potentially successful retail environment for disposable DVDs.

I agree that supermarkets, especially, may indeed find the disposable disc concept a very attractive way to get back into the rental market again after so many grocers abandonend that part of the business a number of years ago in the heyday of VHS and complicated, high-maintenance, rev-sharing deals. In mid-2002 supermarkets generated 4 percent of overall VHS rentals and 3 percent of DVD rentals, according to figures from Alexander & Associates. That's quite a drop from the 11 percent of the rental market supermarkets had about a decade ago.

I would not be surprised to see a number of supermarkets participating in the August test. If this product can work anywhere, grocery may be the ideal retail environment.

30 May, 2003

How Does the DVD Garden Grow?

I think if there's one thing we can, and should, all agree on, it is that the preservation of software is essential to the continued survival of the home video business. Despite platitudes and reassurances, I don't think physical stores, video or otherwise, will ever be a place where people will go to download something — heck it's too easy to do over your own computer.

Stores are where you go to buy something, something you can see, touch and feel; this is why we need to make sure software remains the ultimate (and most popular) end destination for movies and other forms of viewable entertainment.

That said, I must applaud the folks at Artisan for releasing a high-definition version of Terminator 2 that's playable only on high-end computers that run Microsoft's Windows Media Player 9. Short of true convergence — where your home computer is the main operating console for your TV, your stereo and everything else — it is unlikely that Microsoft's entry into the increasingly crowded next-generation DVD arena will be the one to ultimately triumph. The other guys are focused on technologies for set-top players, not computers, continuing in the path of current DVD.

But the Windows route is certainly an interesting detour — and evidence, once again, of the creative ingenuity for which the home entertainment industry has long been known. The days when this business consisted of a bunch of aging refrigerator salesmen hawking used movies on cassette are already a hazy memory; home entertainment now is a seedbed of ideas, evolutions and marvels. Just look at all the special features on DVD— and the DVD format itself — to see how creative we've all become, so much so that directors and other talents are striving to jump on the bandwagon—instead of being chased by it.

The Microsoft take on high-definition DVD is a dark horse, but the mere fact that it's even running should be applauded. There's an adage that maintains, “Change or die.” If the ideas, the new concepts and strategies, stop coming, we run the risk of stagnating. And who knows—given the steady rumblings about convergence, Windows Media might just be a window into DVD's future, after all.

28 May, 2003

School's Out. Time For Ratings Education

June is “Ratings Awareness Month” for the home video retail industry, declares the Video Software Dealers Association. For the third year now, the VSDA has chosen June — the month when kids get out of school for the summer — to remind retailers of their role in working with parents to ensure they understand the ratings system for both movies and video games, and to make sure parents understand the parental controls they have in restricting, or not, their kids' access to ‘R' rated movies and ‘M' rated video games.

The irony of the timing of this campaign won't be lost on anyone this year in light of the Washington state law signed a couple of weeks ago, making it illegal to sell or rent to minors video games that depict violence against law enforcement officers. The fact is that the VSDA has long held that voluntary standards at retail and parental controls are much more effective in keeping objectionable (to some parents) material out of children's hands, without trampling on First Amendment rights.

The VSDA launched its “Pledge to Parents” program way back in 1991. That program provides a free kit to video retailers (whether you are a member or not) that includes posters spelling out the MPAA film ratings and ESRB video game ratings for parents, as well as other promotional items about the program. As far back as 1987 the VSDA endorsed the MPAA ratings and encouraged retailers to adhere to the same voluntary practices in renting videos to age-appropriate customers as the theaters use in selling tickets. In 1994 the VSDA also endorsed to ESRB ratings. In 1999, in the wake of the shootings at Columbine High School, the VSDA “relaunched” the Pledge to Parents program to drive home to retailers the sensitivity of the issue and the important role retailers play with parents.

Today, according to the VSDA, the use of some parental control program is “almost universal” in the video retail business, whether it's the Pledge to Parents program or a chain-branded program. And for good reason. The fact is that despite what legislators say they are hearing from their constituents, anecdotal reports to the VSDA from retailers is that industry-voluntary programs work. Parents can set their authorization for whatever rating level of movie or game for any family member on their card when they sign up. They can change those authorizations. They can override them with a phone call or a note. In short, they have the right to make the decision as to what their kids can, or cannot, consume in the way of media.

Will some kids find a way to get around the system? Of course. Do some kids sneak into ‘R' rated movies once they get inside the Cineplex? You bet. Do you see any legislation on the horizon that will make it a crime for movie theater owners to sell tickets to minors for ‘R'-rated movies. No. But, hey, when you're facing reelection you can never go wrong attacking violence in the media.

27 May, 2003

A Word On Practicing What We Preach

I can't help but be a bit amused about the Video Software Dealers Association (VSDA)'s online pitch to get members to join its benchmarking survey.

“Am I overstaffed? Is my wage structure out of line? Am I maximizing revenue?” goes the animated e-pitch, which purports to offer answers at a later date for those who participate.

Funny thing is, members are asking the organization those very same questions about VSDA over on the discussion boards. Mainly they are asking board candidates to account for the money VSDA takes in every year and how it is spent, since only board members who meet in secret get complete reports.

I'm guessing – yes, guessing – that participation has been low this year. The deadline got pushed back from May 15 to June 6. If you judge by the discussion boards, some folks aren't sure VSDA can answer the very valid questions it's asking.

I'm not dinging the survey. It's the kind of exercise that could help a lot of businesses tighten up and solve problems that might otherwise drain their profits.

I am, however, struggling to keep from laughing at how an organization that won't reveal its own business practices can expect to comment on anyone else's – at least with any credibility. While VSDA is benchmarking you, who's benchmarking VSDA?

Am I off base? Tell me what you think. Just push that little reply button down there and lemme have it. I make my comments right out here in the open. You can too.

26 May, 2003

In Praise of the Middleman

Studios are realizing that retailing just isn't their game. Walt Disney Co. is planning to close or sell its Disney Store outlets, which have been a problem for years. Warner likewise pulled out of its Warner Bros. stores a few years ago.

As much as the studio execs like to rail against external middlemen, they are finding that being their own middleman isn't all it's cracked up to be. An independent middleman offers perspective. Like a Hollywood agent, he or she knows how best to sell a client. A client (actor or actress) often has a skewed vision of his or her best attributes. In short, not many people know how to best sell themselves. But a middleman does.

It is understandable that the studios would try to cut out the middleman. After all, they create (or more accurately they pay to create or market) the product. Why should they allow anyone else to take a cut?

I would say the answer is focus. The middleman, once removed from the creative process, has a clearer view of a product's value to the customer. In our business, that translates to a retailer or distributor who knows which movies his customers will want to rent or buy better than the studio that creates them.

As studios move into the brave new world of video-on-demand, it is interesting to note that the record-label-backed Web sites are going the way of the Disney and Warner Bros. stores. Roxio has hired Napster creator Sean Fanning and is buying up Pressplay, started by record labels Sony and Universal, with plans to turn it back into Napster, reincarnating that most vilified middleman of legal battles past. (As proof of the vilification, the major music labels are suing the venture capitalists that backed Napster, claiming they fostered copyright infringement.)

So, hats off to the middleman. Everyone is trying to cut him out (or sue him into oblivion), but, in the end, he's often a necessary component – some say evil – to good business.

25 May, 2003

Late Fee Customers At Risk

It's no surprise that what consumers most dislike about renting videos is the return trip to the store and, if they failed to make the return trip on time, the second most disliked aspect of renting videos is paying the late fee. So said a recent intercept poll of video rental consumers Video Store Magazine market research conducted in support of an article in this week's edition looking at Buena Vista Home Entertainment's upcoming test of the Flexplay disposable DVD.

It is these two negatives that have given life to the online rental business, such as that of market leader Netflix, and have also been the impetus for technological strategies to deliver more convenient home entertainment, such as VOD and, of course, the concept of a throw-away DVD.

I looked at the top 10 rentailers in VSM's Top 100 report published in April of this year and calculated that of the seven in that group that imposed late fees, revenues from that much-despised practice averaged 12 percent of total company revenues, according to VSMmarket research. That, my friends, adds up to $694 million in late fees from just these seven chains alone, giving Blockbuster credit for generating about $392 million of that,

The next 40 on the Top 50 generated about $23 million more in late fee revenues. My point here is that a million here and a million there for the other thousands of retailers in this business and we're talking real money.

And it's real money to the minority of video consumers that pay that tab. Let's say that our unscientific poll could be extrapolated. That means that the 24 percent of respondents who picked late fees as the most irritating thing about video rental could represent 24 percent of your customers put “at play” and possibly wooed away by any technology or service that renders late fees a thing of the past.

Certainly, Netflix' million-plus customers may be testament to this dynamic. And there is no doubt that some customers are choosing to spend more of their dollars buying new (and, yes, previously-viewed) discs as another option to avoid the rental hassle in general.

It's understandable that some rentailers may have just become accustomed and attached to that late fee revenue, but it also may be time for these same rentailers to seek out ways to help their customers avoid that late fee, however it may work best in their stores. Subscription programs with unlimited viewing policies are certainly one answer, and Blockbuster, among others is pursuing these.

The pressure is building on this “at risk” portion of your customer base, and those rentailers that blithely continue to whack customers with late fees without seeking some other alternatives, may find themselves losing customers at some point, if they haven't already.

22 May, 2003

Steamroller VOD Campaign Signals VOD Getting Tough

I received a lovely gift basket the other day from Cox Cable. It came to my home in Carlsbad, Calif., from the publicity department of the San Diego Cox affiliate. The contents are all movie-related, from a promotional T-shirt for The Ring to Hollywood brand cookies.

A rolled-up “Media Alert” was attached to the cookie box, and as I read it I almost lost my cookies. Cox is launching a VOD service in San Diego, and targeting video stores with one of the most vicious assaults I've ever seen.

“10-Ton Steamroller Smashes Hundreds of Videotapes at Cox Communications, Rock 105.3 Block-Buster Rally,” the headline screamed. “Join the Entertainment on Demand revolution and say good-bye to video stores forever.”

The media alert claims “the number of people renting videotapes and DVDs is in decline.” Citing an uncredited “2002 marketing survey,” Cox claims “only 50 percent of those surveyed had rented videotapes within the past month, a 16 percent decrease from 2001,” and that “there was an 11 percent decrease in the number of people who rented DVDs.”

To drive home that point, Cox is banding together with a local radio station to sponsor a rally before an indoor football game by the San Diego Riptide. Patrons, armed with “sledgehammers and bricks,” will demolish videotapes and vie for prizes, including a 65-inch high-definition television.

“The ultimate Block-Buster, a 10-ton steamroller, will bulldoze hundreds of videotapes to show Entertainment on Demand's superiority over renting videos,” the media alert continued. “Your home is your video store. No late fees! No waiting in line. No leaving the comforts of home.”

The alert advised, “Don't forget to bring your unwanted video store membership card to the Entertainment on Demand Block-Buster Rally and watch it go up in smoke.”

Well, there's certainly a lot of smoke here, and it isn't coming from burning cards. But I have to admit, Cox has me captivated. I had no idea the video rental industry was going down the tubes — our own research shows quite the opposite, with DVD rentals doubling in 2002 — and I guess soaring DVD sales really aren't a factor in all of this.

I'm also very anxious to see how Cox intends to show VOD's superiority over renting by bulldozing “hundreds of videotapes.”

My curiosity, however, has been aroused. I dug deeper into my basket, hoping for a manual of some sort, and was immediately rewarded with a “Cox EOD Tutorial.”

On a videocassette, no less.

20 May, 2003

Ghost Stories

Well, the Buena Vista test of the Flexplay expiring disc seems to be the topic of the week for the industry, so I might as well jump in.

I can't help but be amused at the rampant comparisions to Divx, the proprietary delivery system on which, according to published reports, Disney and Circuit City took a $130 million bath. Except for the two-day play window, EZ-D is not even remotely like Divx.

Why not? Because Divx required a separate set-top box. The discs wouldn't play on ordinary players and the set-top had to be wired to a phone line so someone at the headend could charge users for renewing content. Comparisons to EZ-D are misguided.

What is much more like Divx, however, is The Walt Disney Company's announced Mickey-come-lately foray into video-on-demand (VOD), MovieBeam.

The plan there is to rent proprietary set-top boxes to consumers. The boxes will come loaded with 100 titles and Disney will offer about 10 more per month for a fee, according to announced plans. If there are still a lot of unanswered questions about EZ-D, MovieBeam looks downright hare-brained by comparison.

I predict MovieBeam is destined to go the way of Divx for the same reasons it happened the first time: proprietary box, no portability and limited consumer choice.

Analysts have reacted the same way I did: are consumers really going to make room for yet another box in the house? Not likely. Especially not with the percentage of homes that already need a box for cable or satellite. Which, incidentally, offer several Disney channels as well as pay-per-view.

I had cable, but one of the reasons I kicked Time Warner to the curb (aside from absolutely dismal service and overpriced surcharges for digital programming) was the high fees to rent their set-tops and remotes. For two rooms, hardware was about 20 percent of the monthly cost of getting cable and digital service added another 10 percent.

While all the savvy programming providers are getting wise to space-conscious households and trying to consolidate devices into fewer and smaller boxes -- industry nemeses TiVo and ReplayTV, for example, are building DVD players into their set-tops -- Disney lumbers up like the adult elephants in Dumbo and will try to get consumers to pay for the privilege of putting another ugly box in the living room or family room.

And so far I've heard nothing about how installations will work as a practical matter. Is Disney prepared to hire and field an army of installers like the cable and satellite companies (which, by the way, often struggle to pay the field force)? Or just send these boxes through the mail and hope consumers can install them themselves, which would require on-demand tech support by phone? And all of this just to get only Disney content? Because, like Divx, other studios are unlikely to support another format. And what about the euphemistically named "universal" remote control. Will they work on MovieBeam boxes?

Sorry, Disney, I just don't see this one working. Call it MovieDream, because that's all it will ever be. Try putting as much whimsy and creative energy into creating the content as you do to protecting it and you just might be a going concern again.