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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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23 Jan, 2003

Pricing is In Limbo But the Question Is, How Low Can You Go?

If you've happened to walk into your friendly neighborhood Wal-Mart recently, one of the first thing s you see, in the high-traffic aisles, are huge dump bins of DVDs selling for $5.88.

This isn't budget fare, either—virtually every title I picked up was from a major studio, albeit deep catalog.

Wal-Mart isn't talking, but sources within the industry say this signals the start of a major initiative for the giant discounter — selling DVDs for rock-bottom prices. One studio executive, speaking strictly off the record, even said he was urged to lower list prices so Wal-Mart could offer more catalog product for less than $6 a pop.

Talk about price erosion. Indeed, falling prices, particularly on the catalog end, are apparently causing some studios to think twice about opening the floodgates on their vaults, as they had planned on doing in the first quarter of this year.

“I'm not going to put stuff out there and have it sell for $5,” said one irate executive. “There's no money in it for us, and it's a complete waste of time.”

Rather, he said, he's going to focus on selectively releasing catalog product in pricier “special edition” versions.

I'm quite certain that DVD pricing is going to emerge as the hot-button issue of 2003. I don't think we're going to hear much about two-tiering or rental models, particularly now that Tom Lesinski is over at Paramount, the last of the old-school studios. This business clearly belongs to sales, and any retailer who questions that need only look at Blockbuster to see how wrong some of our industry's brightest minds were about the future of our business.

But I do think we're going to see a lot of tinkering with price points, as studios try to achieve a balance between maintaining margins and giving retailers what they want.

In the fourth quarter, we saw new release prices plummet to unheard-of depths, with the big chains selling virtually everything that came in for less than $15, at least for the first week.

We also saw catalog prices steadily decreasing — and this trend appears to be picking up.

Sooner or later, prices are going to have to bottom out. The question is, how low will we get?


21 Jan, 2003

Whose Reality Is It Anyway?

I don't know about the rest of you, but I've had just about enough of "reality programming" cluttering up the airwaves.

I suppose "Candid Camera" was the first reality programming. Then one of the networks figured out outtakes -- marketed as "Bloopers" -- would get viewers. Then that wasn't enough and they had to expand the concept to "Bloopers and Practical Jokes," which used outtakes and set-up jokes on TV cast members.

Even "The Osbournes," which I do not watch regularly, had some tabloid appeal. Tabloids make their millions by airing the sordid or just plain mundane details of celebrities' lives. What I suspect amuses most fans about "The Osbournes" is seeing some utterly nontraditional people dealing with the same unglamorous tasks we all face, like feeding pets and taking out the trash.

But like any good thing, the concept fast becomes too much when the media conglomerates seize on it. That's why every diva hopeful on talent search programs sounds like Mariah Carey or Celine Dion. That's why we have Brittney Spears and Christina Aguilera. Too many executives with cookie cutters and 90-day profit reports.

This year we have a raft of "reality" shows, although I can't see much reality in any of those I've peeked in on. The ones in the pipeline seem even further from most people's reality.

So far the only thing I've seen in these shows that approaches reality is the caption IDs on the first episode of "Joe Millionaire" (which I have not watched since). For about half the contestants, it was the same line: Name, 24, Loan Officer. Cha-ching! Who'd have guessed!

I won't even try to remember the names of some of the new ones, but a sample of plotlines: eight wacky American families compete to see which is the funniest, to win their own sitcom; a young man's parents grill a potential love interest and her former boyfriends and give the thumbs up or down on the new relationship; a network plucks up a poor family and puts them up in a Beverly Hills mansion, a la "Beverly Hillbillies."

About the only good thing about these programs is that they only compete with other viewing on a one-to-one basis. Even the network programming executives dismiss the possibilities of releasing "Survivor" or "Who Wants to Marry A Millionaire" on home video. The only reason anyone watches is to see how it will turn out. Kinda like how once you know the chick in The Crying Game is really a guy, the mystery is over and most people won't watch it again.

Then again, maybe all this broadcast detritus is good for the home video industry. Broadcast programming is going down the same, self-destructive road as the music industry, chasing the flash in the pan and, for the most part, not bothering cultivate real talent with some future potential.

One look at the TV guide most nights is enough to send any thinking person scurrying for the nearest video shelf, whether it's in the home or down the street. Maybe we need to start a new industry marketing campaign to remind viewers there are alternatives to this dismal programming. Our slogan could be, "Get Unreal! Rent A Movie."


20 Jan, 2003

Sellthrough Cannibalization Isn't Just About BuyingVersus Renting

An industry pundit once told me it isn't just the fact that people buy, rather than rent, a sellthrough title that hurts rentals, it is the fact the once consumers own a title, they can watch it over and over again. When a consumer watches a title in his or her library — say, The Lord of the Rings: The Fellowship of the Rings as I did this weekend — that consumer isn't renting a new title to view.

There is only so much entertainment time available to consumers, and sellthrough titles compete for that time not just on a one-to-one basis with a rental, but almost indefinitely. One a consumer buys a title, that title can compete with any rental going forward. If there's nothing particularly compelling at the video rental store, the consumer can always pull a title from an ever-growing library and watch that instead. Or, the ease with which a consumer can pull something from his or her own movie library could prove a tempting prospect when considering whether or not to get into the car and take the time to choose a movie rental.

Certainly, many consumers buy titles that they never watch more than once. Many buy titles just to have them in their library, without ever watching them at all. But as consumers' libraries grow, the chance that they will compete with the rental market grows as well.

In the end, it's not only Wal-Mart and other video discounters competing with the local rentailer, it's consumers' own libraries.


19 Jan, 2003

A Visit To Gadget Heaven

I am still reeling a bit from some of the wondrous visions I beheld at the recent Consumer Electronics Show In Las Vegas: A man playing bad chess against a very good robot who kept up a steady stream of patronizing banter at his befuddled opponent such as “Well, now, that's a move I hadn't considered!” A stupendous black Ferrari bejeweled inside with an array of video and audio equipment that would have me living in that vehicle if I could figure out a way to squeeze in a porta-potty. And, of course, the already famous Microsoft Dick Tracy-like wrist watch.

But back to more mundane things like home video, it was clear that home entertainment is making quantum leaps, not so much in new forms of electronic entertainment, but in streamlining and consolidating what we already have strewn about our living rooms, home offices and bedrooms. It's a simple a concept as the home theater in a box was a few years ago, but now it's reaching the far ends of the CE spectrum.

In virtually all of the major hardware brand booth spaces I wandered through I saw variations of this theme. The combination of TV/DVD/DVD Recorder/PVR/CD technology and control interfaces to let users enjoy multiple applications simultaneously.

Oh, yes, I also saw an off-site demonstration of the an Internet-enabled DVD console running software from Phoenix Technologies, designed under DVD Forum's preliminary iDVD standards (still in the final stages of approval), to bring CD-ROM applications to the TV set, among other interactive and Internet-based applications, through such things as DVD consoles, set-top boxes, etc. So you can add some Internet functionality to this scenario in the near future as well, and that brings in music and video downloading into the picture.

And of course Microsoft's own media player initiatives, combined with wireless connectivity in the home (and those nifty new PC tablets I saw at the show as well), makes the concept of an integrated home entertainment, multimedia center far closer to reality in the next several years than I would have thought prior to attending CES.

But outside of the few new DVD/VCR combination decks I saw at the show, it's also clear we are entering another phase of the digital revolution where, because our entertainment is becoming all digital, we can use digital means to control and blend this content.

I think we have many, many years to enjoy the fruits of DVD as a storage medium for collectible entertainment. But with HDTV moving fast down the pike, and our cable/Internet-connected home entertainment systems encapsulating every known application of digital playback (and some with storage) known to man, the short-term consumption of nonpackaged entertainment (e.g. VOD) will have a snug little home in which it may reside. The technology is here. It's now a matter of how fast it is adopted into American homes.


16 Jan, 2003

For somebody somewhere, the third time is a charm

People within and outside the industry of it are trying to read things into the recent departures of three of the six major studio home video presidents, one after the other.

I just got an email from the entertainment editor of a big newspaper asking me what it all meant.

I'll tell you what I told her: Nothing. There is no connection between the departures of Pat Wyatt from Fox, Warren Lieberfarb from Warner and Eric Doctorow from Paramount. One left to start her own business, one got fired because he angered the wrong people and the third simply did not have his contract renewed.

It's not a mass repudiation of DVD policies, nor a power grab among theatrical honchos who feel that with DVD the home video units are becoming too big for their britches. It's coincidence, that's all — nothing more sinister than an affirmation of the adage that things seem to happen in threes.

That said, I will say that one change is afoot: The so-called “Lieberfarb strategy” of low DVD prices and mass distribution appears to be gaining acceptance at more studios, most notably Paramount, where I can just imagine studio chief Jonathan Dolgen waking up in the middle of the night shortly before the New Year wit h the startling revelation: DVD just might be here to stay and the VHS cassette may, in fact, be on its way out.

The Lieberfarb strategy certainly appears to be working, as studios that have embraced it — Warner Home Video, of course, along with Columbia TriStar Home Entertainment — are enjoying banner years in the sales department. Other studios pushing the proverbial envelope on DVD, like Fox, are also reaping the rewards. Maybe Dolgen just felt it was high time Paramount joined the party.

But at the same time the Lieberfarb strategy appears to be well on its way to becoming the Magna Carta of home entertainment, there's a warning in some circles that perhaps it is time we apply the brakes.

One studio chief who asked his name not be used is thinking twice about releasing loads of catalog product in the coming year. Prices have come down way too far, and way too fast, he says, for a speedy migration of all things catalog to DVD. Better to sit back and play the high-priced special edition game than dump everything into the market all at once and end up being priced right out of the profit picture by studios that have already gone to the vaults once and now are selling almost everything they've got for $10 or less.

Hmmm. Focus on quality special editions that retail for around $20 or more and hold back on the catalog until prices stabilize a bit? That sounds an awful lot like what Paramount was doing all along.


15 Jan, 2003

Welcome to the Wild, Wild West

A few months ago Stephanie Prange wrote a column about how what's old is new again. She was right (but don't tell her I said so).

I suppose everything runs in cycles. I saw this when my second cousin opened his birthday presents recently at a family gathering: among other gifts he got a fortune-telling eightball and a box of Sea Monkeys. I thought I was having a bad flashback until he opened the robodog.

Now AOL Time Warner is getting ready to launch a six-week summer test of a new variety show that incorporates the ad pitches right into the content. That may be a new phenomenon for anyone who doesn't remember vinyl records, but folks whose memories stretch back to the dawn of television will recognize this as a throwback to the days of “Texaco Star Theater” and “Howdy Doody Time.”

What is new is that it's a response to the rapid uptake of Personal Video Recorders (PVRs) like TiVo and ReplayTV. The ad-skipping feature in these hard-drive recorders is so popular with users that broadcasters and advertisers are scrambling to find new ways to reach viewers.

I guess Pepsi and Nokia will find out if this approach still works, or works again. But I'd say it's safe to assume we will start seeing more prominent product placement – like the truckload of Go-Video (Sonicblue's brand) VCRs a petty crook admitted he stole from Circuit City on a recent episode of Fox Network's “The Shield.”

It's just one more area in which Hollywood is going to look like Dodge City this year. I think we are in for a year of the Wild West, complete with dueling formats, technology showdowns and new sheriffs in town.

What do you think?


13 Jan, 2003

The Blockbuster Road Show

Blockbuster Inc. chairman and CEO John Antioco tried to allay analysts' fears about the chain's recent stock slump in a presentation last week during the Salomon Smith Barney Entertainment, Media and Telecommunications conference in La Quinta, Calif.

Addressing the stock-punishing cut in Blockbuster's 2002 profit estimate, Antioco blamed a unique business environment in the fourth quarter for the unexpected slowdown in the chain's business. Among the unique circumstances he listed were the release of a large number of highly collectible titles in the fourth quarter, below-cost DVD pricing, a shorter shopping season and new DVD adopters building their libraries. The shorter season and new DVD adopters may be unique, short-term problems, but the other circumstances could prove longer-term dilemmas.

Looking ahead, Antioco said the first quarter includes more releases with rental, rather than sellthrough appeal and that, nevertheless, Blockbuster can make its way in the sellthrough arena with higher margins by offering selection and convenience. “We have no intention of competing on price,” Antioco told analysts.

How the tables have turned. I don't remember how many independent retailers I've talked to who declared they would compete with Blockbuster on selection and service. Many of them went out of business trying. Also, many retailers have had a hard time selling at a higher profit margin and competing with Wal-Mart. High-margin music retailers have taken it on the chin as discounters such as Wal-Mart drew away customers with lower pricing.

Antioco may have a point on convenience. Finding the video section among the apparel, food items and car tires can be a definite inconvenience at the nation's discount king.

But Big Blue's crystal ball seems murky.

At the same conference, Antioco's boss, Viacom chief Sumner Redstone, voiced support for the Blockbuster chief, telling analysts the chain had the strongest rental day in its history on New Year's day, suggesting the fourth quarter revenue shortfall was a blip. "Business has been strong since and John ... says we are going to have a great 2003," Redstone said. "We changed an industry with revenue-sharing, so don't blame me for having confidence in this man."

The road show appears to have had some effect. Blockbuster stock has edged a bit higher, but Wall Street seems in a wait-and-see mode. Despite executive assurances that things are back on track, all eyes are on those post-holiday numbers, which should tell us much about the future of the chain and of the business.


12 Jan, 2003

Will Blockbuster's ‘Statement of Frustration' Work?

Blockbuster's decision a little more than a week ago to violate street date on Buena Vista Home Entertainment's Signs on a national scale sent shockwaves through the industry.

First, let's get past the idea that this action is one way that Blockbuster is responding to the recent lawsuit brought against it by Buena Vista, in which the studio alleges improprieties and discrepancies involving the now-cancelled VHS revenue-sharing agreement between the two companies.

Yes, the timing of Blockbuster's action and the choice of a title with which to make its “statement” have raised eyebrows. But there is no indication that street date violations for Signs were any more severe than any other hit title of late. Retailers responding to VSM articles on the topic and posting messages on the VSDA's discussion board, by and large, reported they saw very few violations. However, a few did report early, er, signs of Signs in some stores, and VSM staff caught at least one drugstore with Signs out on the floor almost a week early.

Blockbuster, though, is adamant that its action has no relation to the suit, and there's no point in wasting time and print space in refuting that. Blockbuster president Nigel Travis has stated he ordered the one-time action as a response to what the retailer saw as significant reports of street date violations for Signs, and as a way for Big Blue to make a major statement of frustration with what it sees as the continuous and pandemic practice by retailers of all sorts who choose to ignore the street date, and the studios' lack of resolve to aggressively punish offenders.

The street date issue has been with us for years. Indies point the finger at mass merchants as regular culprits (though indies, too, are sometimes caught in the act), mass merchants say offenses are sporadic and often the result of an ill-informed stock clerk; and studios say they deal with it appropriately on a case-by-case basis.

While I'm glad that Travis, who co-chairs the VSDA's Retail Advisory Committee, plans on bringing the issue front and center of the association later this month, I wonder if it was necessary for Blockbuster to choose such drastic means to make its point.

I agree with Mick Blanken, a former VSDA board member himself, who sent me a note the other day expressing his dismay over Blockbuster's move. While he said Blockbuster is not responsible for opening this Pandora's box, its action “risks tearing the lid completely off and creating chaos where the demons can no longer be contained at all.”

Let's hope this radical “statement” causes more good than harm in the long run.


10 Jan, 2003

Where have all the presidents gone?

Shock and sadness accompany the surprising announcement Thursday that yet another veteran home video president, Eric Doctorow, is leaving.

Doctorow, the third studio video president to exit his post in the last month, is a smart business executive and a gifted marketing executive. While he's kept a low profile in recent years in keeping with the tone of what industry observers call "The [Jonathan] Dolgen Doctrine," Doctorow has assembled a remarkable track record in his 20-year stint at Paramount, the last 10 as president.

It was on Doctorow's watch that Paramount rang in the sellthrough era with below-$40 pricing of Wrath of Khan. It was on Doctorow's watch that Paramount shipped 30 million units of Titanic, setting a new VHS ship record. It was on Doctorow's watch that Paramount introduced virtually every price point in the sellthrough ladder, all the way down to $14.99. It was under Doctorow that Paramount entered the DVD arena (and promptly chalked up the

first million-selling disc with Titanic) and adopted VHS revenue-sharing with key retail accounts.

Personally, Doctorow is known for his great relationships, both with his staff and with retailers and distributors. He is an extremely talented marketer as well, with a long history of ambitious, cutting-edge and enormously successful catalog campaigns.

Under Doctorow, Paramount also became the first studio to abandon suggested retail prices in favor of minimum advertised prices. Doctorow ran a lean ship, with sharp cost controls and a heavy eye on profitability and margins.

And the successful joint venture with Universal Studios to distribute product internationally -- an area in which costs were also reduced through a seamless move of the joint venture's base of operations from overseas to Los Angeles -- underscored his savvy in global matters.

Doctorow also gets plaudits for Paramount's successful distribution of MTV, CBS and, in particular, Nickelodeon product in the home video arena. On his watch, Paramount elevated Nickeloeon product into a viable and popular brand at the mass merchant level -- something previous video distributors failed to even come close to achieving.

I should also say that Eric Doctorow is a long and dear friend of mine, dating back to the days when I was the rock critic at the Daily Aztec newspaper at San Diego State University and Eric was my college rep for Epic Records.

Take it from me, this is one smart, classy guy. Wherever he lands, his new employer will get a winner.
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How do you think the recent top home video management changes at several major studios will affect the business?Talk About it Here!


7 Jan, 2003

Shadowing the Underground DVD Economy

This holiday season taught me a few things about the shadow DVD economy, not the least of which is how much DVD traffic can't be quantified.

Online rental, with Netflix in the lead and a half-dozen other sites following the model, flies pretty much under the radar. We know how many subscribers Netflix has, but not how much they are renting. Since the online rentailers don't report their rental data to anyone outside, we can't tell how much business traditional rentailers are losing to that model, as opposed to sellthrough.

As far as I know, nobody is yet attempting to measure sales of used DVDs (those consumers buy and then sell or trade off to a merchant, as distinguished from “previously viewed” rental copies). That's a brisk business, especially online. In fact, just yesterday a site called skinnyguy.com announced its new barter program, in which the customer sells his or her discs online and uses the credit to buy discs from the site. The site sends the customer the order with instructions on how to use the same box and prepaid shipping label to send back the discs he or she is selling. Wherehouse has operated similarly on its site for some time. I'm sure these merchants know just how much business they are doing this way, but they aren't telling.

Another segment nobody can plumb is what Blockbuster CEO John Antioco calls the video “sharing” economy. Because DVD emerged on sellthrough pricing, consumers started owning it a lot sooner in its technology life cycle than VHS. The next natural step is for neighbors to borrow DVDs along with that cup of sugar or tray of ice they borrow over the fence. Mine do. One copy, several users.

Which, incidentally, leads to another unquantifiable aspect of the industry: Hollywood moguls spent an inordinate amount of time on Capitol Hill last year complaining about how online movie piracy is decimating the industry's profits, citing declining sales. But in an industry that relies, as the cable and broadcast folks put it, on eyeballs, nobody in Hollywood can tell how many people didn't buy or rent a title because they watched their neighbor's copy, as opposed to who didn't buy or rent it because they watched a pirated copy online. Why spend two hours (at best) downloading (plus $3.99 if you want to do it legally) what I can borrow from next door and be watching in five minutes?

Now here comes the next wave in the share economy, one I suspect never took hold on any serious level with VHS: A friend I spoke with after Christmas talked about how nice her family's celebration was. They had a nice dinner and exchanged gifts and then, to round out the evening, everyone labeled the discs they were tired of with Post-Its and they sat around trading. Everyone got “new” movies and extras without shelling out another cent. My brothers used to do the same thing with baseball cards.

I believe DVD has made the pie bigger, as most new entertainment technologies do. But it has also splintered the portions, scattering them to places nobody measures. This means many of the traditional measures no longer apply because they overlook sharing, trade in used copies, online rentals and other subscription rental models that make statistics like turns per copy more or less irrelevant.

And who really knows what else we aren't counting?