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.
If the fourth quarter of 2001 was the breakout for the adoption of the DVD format by the mass market, then this fourth quarter may be the one that truly propels the sellthrough business to new levels.
The momentum for DVD software and hardware units shipped has continued unabated this year since the fourth quarter of 2001, if you consider the numbers released by the DVD Entertainment Group last week.
In this year's third quarter, suppliers shipped 153.3 million DVDs, more than doubling the 75.9 million shipped the same quarter a year ago. It's been that way each quarter all year. Through the third quarter, 425.6 million DVDs were shipped, overwhelming the 364.4 million shipped in all of 2001. According to the DEG, more than 1.1 billion DVDs have been shipped since the format's inception.
If the fourth quarter of this year were to stay on track, we'd be seeing shipment numbers of about 275 million (!), which I'm not suggesting will happen.
But it'll be big.
And, of course, DVD has been the driving force in the fast-growing sellthrough business that promises to continue to grow as the majority of revenue for the industry at large.
Given that, we at Video Store Magazine this week start a series of articles under the banner “Fourth Quarter Unwrapped,” which will look at a broad variety of issues related to the current and future sellthrough business and DVD's impact going forward. These articles will run throughout this pivotal, and maybe historic, fourth quarter.
One talks of units shipped, but the important measure is what's sold through to consumers, so this week Video Store Magazine market research unveils our report on the Top 25 DVD Sellers of All Time (based on units sold through). The recent phenomenon Monsters, Inc. leads the way with 9.2 million units sold through to date. Shrek follows very closely with 9 million units, followed again very closely by Harry Potter and the Sorcerer's Stone with 8.9 million. The Matrix is the earliest DVD release (9/21/1999) to make it to the list (No. 6), clocking in with an impressive 7.5 million DVDs sold through to consumers. In total, the Top 25 have sold more than 126 million DVDs into U.S. homes.
Our market research team used a variety of data, including POS reports from Nielsen VideoScan, supplier shipment and sellthrough figures, and other data to establish these numbers.
Forecasts of a depressed economy and holiday retail slump notwithstanding, DVD should leap that hurdle and enjoy unprecedented success this quarter.
The problem with having a good idea is that invariably someone will steal it.
And when the someone who steals your idea also has a lot more money than you do, and is thus in a position to take the proverbial ball and (proverbially, again) run with it, you might just find yourself in deep do-do.
That's the position Netflix, the pioneering online DVD rental house, is finding itself in with word that Wal-Mart, the mightiest retailer in the world, has entered the lucrative subscription rental market with a model that's eerily similar to Netflix's.
Netflix charges $19.95 a month and lets subscribers check out up to three movies at any one time. No deadlines, no late fees — just send it back when you're done and they'll send you another one.
Wal-Mart charges $18.86 a month and lets subscribers check out up to three movies at any one time. No deadlines, no late fees — just send it back when you're done and they'll send you another one.
Wal-Mart is still in the test phase, saying it wants to fine tune the concept with a limited number of customers before offering it to everyone next year.
But with the chain's famous resolve and a base of more than 2,800 physical stores that smart money says will somehow get involved in this venture, Wal-Mart could be a formidable spoiler in what has thus far been Netflix's game alone.
It is interesting to speculate where a predatory chain such as Wal-Mart will strike next. My hunch: Look for this “subscription model” to take root in physical Wal-Mart stores in an attempt to launch a full-on assault against — yes, you heard it here first — Blockbuster.
It makes sense. Wal-Mart has already said its most profitable stores are its supercenters that sell just about everything, including groceries. And as more and more regular Wal-Marts (and Sam's Clubs) are converted to supercenters, it only makes sense that video rental will be part of the mix, since Wal-Mart will then have the in-and-out daily traffic that supermarkets have—and that made grocers a key player in video rental before the copy-depth morass soured them on the whole concept.
With DVD, there is no copy-depth — just one low price. I predict we'll see a big surge in grocers returning to video rental, and Wal-Mart will be among them.
By: Thomas K. Arnold
I admit it. I am woefully Flinstonian when it comes to home entertainment technology.
I have a DVD player — but I didn't get it until after nearly a year of working for a video magazine.
I have surround sound — but since my boyfriend moved out I don't know how to make it work with the DVD player so I never use it.
And up until recently, the DVD remote often perplexed me. I would push the arrow buttons and watch with increasing frustration as the little blinky thing moved to menu selections all over the screen, but almost never the one I wanted. And then there's that red Ghostbusters circle-and-slash thingie. It actually took me a while to figure out that was the equivalent of my DVD remote yelling “No you dummy! You can't do that now!” I know, I know it's pathetic.
I have Monsters, Inc. and “Buffy the Vampire Slayer” to thank for teaching me how to use my DVD remote.
On a lazy Sunday afternoon a few weeks ago, my 5-year-old neighbor and I had some fun with the Monsters, Inc. DVD special features and played “Boo's Door Game” until my eyes were burning. But, while searching the same screens for the same clues hidden in the same places over and over, I started to figure out how those directional arrows really work. I got into their freaky warped mindset.
Then a few days later, felled by the flu, I began to indulge in my first taste of episodic DVD with the “Buffy” complete season one and season two DVD sets. (I am a recent initiate to the legion of the Buffy-obsessed. A friend loaned me these sets to get me caught up on the backstory. I've been dreaming of either killing or kissing vampires every night ever since.)
After about 10 or 15 episodes I figured out if I hit the double arrow button with a line under it, I could skip the opening credits sequence all together instead of hitting the fat single arrow and fast forwarding through it.
A beautiful thing about the Buffy season two discs is that the episode menus are circular, just like the arrow key configuration on my DVD remote. Finally, the arrows made sense. By the end of season two I was so quick on those buttons I didn't have to wait more than 30 seconds between Buffy doses.
It went something like this: Click “back to disc menu,” pick episode, hit “OK” button (that means play), episode menu loads, hit ”OK” again for “play episode” watch first few minutes of show, hit double arrow thingie to skip opening credits, relax, watch entire episode, as soon as Joss Whedon's name on end credits appears push “menu” key on remote, repeat process. Disc over, push “open” button, scramble up from couch, get next disc, curse at low-end DVD player as it takes 45 excrutiating seconds to read the disc, begin pushing “menu” button wildly in attempt to skip proprietary information, breathe sigh of relief when main menu screen finally appears, start the process all over again.
Whew. At least I can call myself a bona fide DVD user now.
Unfortunately, since my week of living only for Buffy on DVD, I can think about only two things: It is so UNFAIR that Buffy and Angel can't be together, and hey Fox, hurry up with season three. My DVD remote skills may lapse in the waiting.
By: Jessica Wolf
I finally broke down over the weekend and bought a second DVD player. I was thinking about doing it and waiting for the special holiday pricing I think will be inevitable this year. But I was in a Best Buy and spied a special clearance price on a Samsung Nuon DVD player, which intrigued me despite the paucity of Nuon discs.
Samsung came to America as a budget line but has steadily ramped itself up to providing much higher quality equipment and serving a higher-end market than it once did (witness the company's home-networked refrigerator I dubbed the "digifridge" -- it has a screen in the door for Internet or component player viewing). The little Nuon player met my specifications otherwise so I thought, what the heck, it plays all discs.
Since the remaining boxed models had sold out and all that was left was the floor model, I talked a salesman (who, incidentally, didn't know I noticed him clutching a management sales sheet with the hand-scrawled message "Don't Let the Numbers Slip!") down from $99.50 to $79.60. A bargain, even for a floor model, since it was in good shape. It was light, compact, stylish and provides quite a nice picture.
The downside was that it had long since parted with its manual; that's not a tragedy for installation but it sure makes this remote a challenge. It's fairly dripping with bells and whistles -- so many I put my nephew the video game jockey to work on figuring it out.
I was already happy with the price and performance even under those conditions, but Samsung won my loyalty with amazing, yet intuituve service. I e-mailed the company about getting a manual and was directed to a Web site where I could download a PDF copy for free. In my experience most American companies charge a minimum of $10 to send a new one by mail.
During my information search I found Amazon.com selling the same player for $189.99. I also checked out the customer reviews, which were mixed. There I learned that some people had had problems with the unit skipping after using it for a while. Never fear, Samsung has a Web site where customers can go to download a firmware patch that can be burned to a CD-ROM disc and uploaded directly into the player's hard drive. Zip-zip, no more skip.
It's that kind of service that will burn a preference for Samsung gear into my mind. Next time I need anything electronic, I'll find out if Samsung makes it before looking elsewhere.
There's been a lot of speculation about whether price or service will win the retail war this holiday season. Both will present intense pressures in a highly competitive market. I shopped carefully, got lucky and got both, which adds up to genuine value.
By: Holly J. Wagner
Recently, one of the local progressive rock stations in the Los Angeles area, KROQ, interviewed a lawyer who represented artists in their case against Napster. Likened jokingly to Darth Vader and other nefarious characters by the hosts, the attorney defended his court action against a sea of file-trading aficionados that included not only listeners who called in, but one of the show hosts as well. Mind you, this is the same station that exhorts listeners in CD give-away promotions to "win it before you can steal it."
What increasingly became clear in listening to the interview is that many young listeners consider file-trading fair use. That's the fancy legal term that much of this business is based on. It's also what allows viewers to record shows off television and make mix music tapes and CDs for themselves.
While the attorney only half-jokingly called listeners "thieves" and "file-stealers," kids who file trade don't think they are anything of the sort. Many made the argument that what they are doing doesn't affect CD sales at all - that, in fact, they buy more CDs because file-trading has piqued their interest in new music. They blamed the record labels and their overpriced, lousy product for the slowdown in audio sales. They also noted that the music companies have been slow to offer a pay alternative to free file-trading. The attorney rather eloquently rebutted that it's hard to compete with free.
Whether or not any of this is true is somewhat beside my point. What is interesting to me is the perception among many is that file-trading is not stealing. They consider it harmless, and several studies have in fact backed that up, finding that file-trading has minimal, no effect or even a positive effect on music buying habits. File-trading, to them, is like taping a show off television or making a mix tape. To them, it's fair use.
By: Stephanie Prange
Our online reader poll this week on the volume of previously viewed DVD sales underscores an important factor in the equation retailers must solve in determining how much to spend on deepening their DVD copies.
It is heartening to see that about 21 percent of the readers that responded to the poll bring in 26 percent or more of their revenues from the sale of previously viewed DVDs. Almost 25 percent of IVRs get between 11 percent and 25 percent of their revenues from-previously viewed sales. But there is still significant growth to be had, as more than 54 percent of respondents claimed they generate 10 percent or less of their revenue from used DVD sales.
At last week's East Coast Video Show in Atlantic City, several of the seminars centered on the issue of previously viewed as a factor in how to balance one's DVD -to-VHS ratio. Some made the point that retailers need to consider the quick turnaround of DVDs from the rental shelf to the sales bin in their copy-depth calculations. Tom Hannah, owner of Video Quest in Joliet, Ill., calls this a "one-way rental," considering it an extension of the value of his rental inventory.
Blockbuster has spent a lot of marketing dollars educating consumers on the availability of the used DVD as a viable alternative to rushing out to the mass merchants to buy the latest hit when it streets. There will always be those consumers that have to have the product right away and there will always be the blockbuster title that commands that sort of reaction (if priced correctly).
But the "new" vs. "used" decision for consumers can be made easier by the perceived value of the used product and its timely availability, which is why retailers should be buying deeper in DVD and moving a portion of their rental inventory over within a few weeks of debut to the sales bin and repackaging the used product for sale.
It's fair to say that consumers still have a high perceived value of DVD relative to its current suggested retail price, but the growing realization that if they can just wait for two weeks they can buy it for almost 50 percent off is going to continue to fuel this side of the business.
So to those retailers who are still more or less dipping their toes in the previously viewed business with less than 10 percent of their revenues generated from this model, I'd say jump in, the water is fine and getting warmer all the time.
The fourth-quarter selling season has officially begun, and yet the barrage of press releases that greeted each “milestone” DVD release last year at this time is conspicuously absent.
One supplier who has already scored a big success says he considered issuing a press release boasting of his title's strong first-week sales, but thought better of it because he didn't want journalists to start drawing comparisons with last year.
“It's a completely different market,” he said.
It certainly is — which is why I'm going to make a conscious effort to stay away from comparing initial sales of this quarter's big hits with the fourth quarter of 2001's big hits.
Case in point: Much has already been written about how Monsters, Inc. handily outsold Shrek its first week in stores. But that's like comparing apples and oranges; the DVD market is a lot bigger than it was last year at this time (about 35 percent household penetration, as opposed to 23 percent), and study after study has shown us that DVD households have a voracious appetite not just to rent, but also (and especially) to own.
So of course the Monsters, Inc. DVD outsold the Shrek DVD. The market has expanded. Shrek still did incredibly well last year, considering the size of the potential market, and I'm sure if it had come out this quarter instead sales would have been significantly higher.
I think the real phenomenon we're seeing is that the consumer's appetite for home entertainment is increasing and that our ingrained habit of collecting entertainment is truly shifting from music to movies. I just completed the arduous task of alphabetizing all 1,400 or so of my DVDs — something I never did with VHS. In fact, I never accumulated that many videocassettes — they just weren't something I wanted to hold onto.
Smart rentailers are recognizing this major shift in the public's attitude toward collecting movies and are using their rental prowess as an incentive to get consumers to purchase. Blockbuster is giving away free rentals to anyone who buys a DVD, among several incentives; other savvy rentailers are using similar tactics.
Total Movies & Entertainment magazine includes an MGM feature film disc in every issue – about $7 on the newsstands – and is working on deals with other studios. Columbia Tristar has a deal with General Mills that will soon have kids getting a free DVD in boxes of Cheerios and Lucky Charms. DVD has become a party favor.
The future of this business is clearly in sales. Rentals are becoming a loss leader. “Try before you buy” has become the mantra of the DVD retail industry.
And to lift a quote from those great pop culture philosophers Bachman-Turner Overdrive, “you ain't seen nothing yet.”
Once the household penetration rate for DVD players reaches 40 percent, the doors to the studio vaults will fall open. If you think you've seen a lot of catalog product debut on DVD these past five years, just wait until you see what's coming down the pike.
I see a banner couple of years ahead for DVD sales. Eventually, of course, the bubble will burst — there are only so many collectable movies consumers will buy. After that sales will shift to new releases, simply because everything worth releasing has already been released.
But in the meantime, it is incumbent upon retailers and rentailers alike to capitalize on the DVD purchase boom—however and whenever they can.
By: Thomas K. Arnold
Blockbuster Video is aggressively pursuing its competitors in busy markets like mine. The chain is opening stores across the street from its competitors, like the one that opened across the street from my neighborhood Wherehouse a couple of months ago.
So I didn't know whether to be surprised or amused over the weekend when I was in the Wherehouse and a guy went up to the counter to return a rental DVD.
Trouble was, the counter clerk pointed out, the disc was rented across the street and Blockbuster tends to frown on customers returning its discs to competing chains. They're funny that way.
What I got out of this is that no matter how much Blockbuster spends on CGI rodents and sponsoring Christmas parades, this guy was still taking his return where? The Wherehouse. The question is, why?
I can't pin it directly on advertising, having no idea of this man's media consumption habits. But I suspect that straightforward "get it here" advertising does more than warm, fuzzy characters and yippee-skippy event promotion.
I'm sort of assuming another family member checked the disc out and sent Pop to return it. No doubt that led to some confusion. The two stores are directly across the street -- you can look through one's windows and see across the boulevard into the other. He was embarrassed about the mistake.
Another thing I noticed was that the rental box was nondescript. It was generic black and had a computer-generated label that could have been for an Army training video. (Maybe it was a Warner title and had to be put in a plastic case because the Snappers don't hold up).
Somehow, this store was closer to the top of this fellow's mind than the one the rental actually came from. You can get DVD on every corner now -- and that's just the legal outlets. This guy is proof it's getting increasingly difficult to tell the chains apart.
I guess I'm just sharing a reality check, I'm not entirely sure what it means. Except maybe that rentailers should take a step back and ask themselves, "What sets my store apart?"
Better yet, ask your customers and give them what they want.
By: Holly J. Wagner
With the holidays bearing down on us, the experts are telling us American consumers are tapped out, having carried the struggling economy as far as their wallets would allow. Entering the important fourth quarter with a spent consumer is a disaster for many businesses, but history tells us home entertainment holds up fairly well in difficult economic times. So far, indications are good. Monsters, Inc., an early entry in the season, scored record sales for Buena Vista. But it wouldn't hurt to remind consumers the value DVD offers, particularly as a gift.
As the mother of a 4-year-old with social schedule that includes at least one birthday party every month, I can testify that gift-giving can really add up. Compared to the $30 pieces of plastic I've purchased for little birthday girls and boys, DVDs — with prices ranging from $15 to $20 — are a great value. I've seen many a feted youngster toss aside the plastic toy in favor of the prized disc.
One of DVD's greatest strengths is its value. Audio market observers have noted as much, saying DVD offers picture, sound and extras for about the same price as (or less than) a CD. Also, unlike other children's gifts, a DVD is a present the whole family can probably enjoy.
As the holidays approach, retailers should encourage shoppers to economize by buying DVDs. Why be coy about it? Acknowledge to consumers that they're tapped out and remind them they get a lot more for their money when they buy a DVD. Since not every child will need another copy of the hits, encourage gift givers to buy niche and classic catalog titles.
While no retailer relishes entering a holiday season in bad economic times, the video business is better off than most. With aggressive marketing, the industry can attract cost-conscious consumers and survive what looks like a lean fourth quarter.
By: Stephanie Prange
At this week's East Coast Video Show in Atlantic City, the focus will be on managing the core video retailing business efficiently and expanding into new ancillary business as a hedge against the uncertain rental future in a growing sellthrough world.
The Delaware Valley Chapter of the VSDA will host a half-day seminar titled “More Than Just Video.” Attendees will explore a full range of possibilities to add a significant second line of business to their core video rental business.
Interestingly enough, one of the featured presenters at the seminar is eBay, which has a very high profile at this year's show. In a nutshell, eBay is offering its significant e-commerce platform as a way to help specialty retailers participate more fully in the sellthrough business (both with used and new video). At first blush it seems an elegant idea. Rentailers can use the Web to compete in the sellthrough arena, I would guess most effectively in the previously viewed market. It's a great way to extend their businesses in a real transactional Web environment at little cost.
Another ancillary business is the newer iterations of video vending machines being exhibited at this show. With DVD sellthrough pricing (and even lower used pricing), rentailers could use these machines to extend their sellthrough businesses to local colleges and other sensible locations for some revenue-sharing or a fee-based deal with the host location.
Yours truly is moderating a panel on video games as a growth business. It's long been a moderate staple of many speciality retailers -- Video Store Magazine market research puts the percentage of speciality retailers participating in video game rentals and sales at between 65 percent and 70 percent. The VSM Top 100 average pegs video game revenue as accounting for about 7 percent of total rentailer revenue. And it's a business that's on the rise, as more than 50 percent of the Top 100 said they plan on increasing their purchases of video games to rent in 2002. Add to this the growing realization by video game companies that rentals drive sales (Ziff Davis research noted 86 percent of those who consider themselves to be “core gamers” say they have purchased a game after renting it), and the growing prospects for possible revenue-sharing deals for games with suppliers -- a plan Rentrak has promised for the near future -- makes this a potentially very viable and significant business model for speciality retailers.
Rentailers must maximize margins on DVD rentals (even as VHS continues to plummet), extend their sellthrough business and aggressively develop another complementary business to thrive in this changing industry.