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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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5 May, 2003

Video Saves the Radio Star

I can't recall hearing a radio disc jockey discuss music on videocassette before the advent of DVD. But I've heard them talk about music DVD several times. While listening to a classic rock station just a few weeks ago, I heard a deejay mention the high anticipation for a Led Zeppelin DVD set, noting rare, unseen footage that complements the music. I've also heard the acts themselves highlight DVDs packaged with their CD releases and encourage music fans to buy the CD to get the DVD extra instead of downloading the album illegally.

Whether it's a marketing tactic, a phenomenon driven by the market or simply the fact that record companies are more comfortable with shiny little discs, the music industry is increasingly using DVD to sell music, treating it as an ace in the hole against file-trading.

Robert Mugge, director of the music documentary Last of the Mississippi Jukes, told Video Store reporter Jessica Wolf “Being able to add nice packaging and added material helps a little to combat this looming industry of pirated music — and now, film,” he said. “You need to be able to have a product that can compete with what people can trade for free on the Internet.”

In these tight times, consumers see DVD as a high-value product, partly because it is sellthrough priced (Wal-Mart blows out catalog at prices as low at $5.88), but also because that little disc is packed with information. As has often been noted, consumers get picture, audio and extras on DVD often for less than the price of a CD, which offers audio only.

Just as television product, both classic and current, has found a friend in DVD, music is finding one as well. As studios go digging through TV libraries to goose the DVD pipeline, music suppliers will no doubt be looking for some video to go along with that classic audio recording and new acts may find video saves the radio star.


4 May, 2003

The Music Industry's Messy Battle Over Copyrights

The Recording Industry Association of America's (RIAA) recent court victory over Verizon to cough up the names of Internet service subscribers suspected of trading in pirated music, and its online consumer enforcement maneuvers is the music industry's latest tactic in battling online downloading and trading of entertainment.

The RIAA's frontal assault on the consumer is made all the more interesting with the recent federal court ruling that companies that provide the peer-to-peer software Internet users employ to share sometimes pirated music cannot be held liable for what these people are doing with their software. The RIAA and the Motion Picture Association of America (MPAA) plan on appealing that decision.

As senior editor Holly Wagner points out in her article, both these decisions push digital copyright enforcement down to the consumer level. This is getting to be a very messy affair for the music industry, with the RIAA sending out hundreds of thousands of instant messages to users of Grokster and KaZaa warning them not to share copyrighted music. They can even reach into online log files and go after individuals trading in copyrighted material.

Privacy groups and online rights organizations are urging Verizon to appeal the ruling, which it has vowed to do.

The battle being fought by the music industry must have those in the movie business who are monitoring this situation shuddering at the thought of such a scenario ever occurring in any possible future digital copyright protection battle for movies.

Even as the music industry tries to construct easy-to-use, low-cost digital download services for its customers, it's engaged in hand-to-hand combat with them regarding free file-sharing. It's a no-win situation for the music industry that, while it has every right to protect its copyrighted product, is finding the Internet an almost impossible environment in which to enforce that protection.

For the time being, the MPAA is targeting hardware providers in state and federal legislation efforts as the point of control for illegally copying and/or electronically sharing copyrighted material. Hardware manufacturers, through the Consumer Electronics Association, are pushing back that they would be unduly burdened with what they feel is a software issue, and by what they feel would be inappropriate enforcement of otherwise fair use practices by customers using their hardware.

The issue may, indeed, come down to fair use and, as some video industry analysts have expected, that could lead dangerously close to aspects of the First Sale Doctrine, on which the development of the video rental business was founded.


1 May, 2003

The Season Has Hardly Begun, But the Playoffs Are Already a Hot Topic

With the summer movie season fast approaching, video prognosticators are predicting a slam-dunk fourth quarter even before the first of the summer blockbusters rolls out in a few weeks.Matrix Reloaded, which opens theatrically May 15, will surely be one of the biggest DVD sellers of the year, and of all time. A video release date, of course, hasn't been set, but most pundits predict a fourth-quarter release, ideally in time for the theatrical bow of Matrix No. 3.The preliminary slate for the fourth quarter already includes a good number of heavy hitters, including The Lion King (Oct. 7), the biggest-selling videocassette of all time.And with DVD increasingly dominating the home video — my hunch is this will be the final year for VHS to even matter — everything's coming out at one low price, making it easy for retailers to sell, rent or do both.But conversations in Hollywood as well as Retail Land aren't limited to the wads of cash most everyone expects will come streaming in. There's still a specter of uncertainty clouding our collective visions of sugarplums, and much of that uncertainty has to do with that onerous “P” word, pricing. I'm still hearing rumblings that some studios are seriously mulling a two-tiered pricing strategy similar to the old (and, as far as I'm concerned, antiquated) VHS model.God, I hope not. Tinkering with the successful DVD sales model would be the biggest mistake Hollywood could make, and I honestly don't think anyone would be foolish enough to give it a go.I firmly believe we're going to see a rental resurgence, as avid DVD buyers fill up their shelves/cabinets/shoeboxes and start getting more selective.But that doesn't mean we should see a comeback of rental pricing. It's simply too late — consumers have grown accustomed to being able to buy movies the moment they arrive in stores and, even if there's a title they don't necessarily want to rush out to buy, they don't like being told they can't.


29 Apr, 2003

Adventures In Retail

Over the last weekend I had a couple of retail experiences that I found a bit harrowing, even though I benefited from them.

Because I am refinishing some chairs, I had to go to a fabric and craft store to get some upholstery supplies. This was not a neighborhood store, but part of a national chain.

I can remember when you had to know at least a little bit about sewing to get a job at a yardage store. I guess home sewing is a dying art, despite what the Home and Garden channel wants us to believe.

I thought it was just lax service when the woman at the home d?cor cutting table sent me to the general cutting table to have my goods measured so she could continue sorting safety pins or whatever trinkets she was pushing into little piles on the table. But when I got to the general cutting table, the young lady there didn't know which direction to measure the fabric. For those who don't know about yardage, it comes in a handful of standard widths between one and two yards. Since I was buying a 7-yard cut, I could have taken advantage and got the whole piece for the price of the yard-and-a-half width. But I set the salesperson straight and we measured the whole seven yards.

The POS system didn't register the advertised discount on one item so she told me to request it at the register.

Once there, I stood in line for what seemed like ages as two clerks closed their registers and the remaining line stacked up behind a customer with two full carts of Independence Day decorations. When it was my turn I asked for my discount.

First the clerk told me the discount didn't apply. When I pointed out three signs on the yardage table specifying that my goods did, indeed, qualify, she said she would give the discount “this time” – then proceeded to calculate it incorrectly, which gave me more of a discount than I was entitled to receive. I tried to call that to her attention but she was too frustrated and the line was getting too long, so she just sent me on my way.

On the way home I stopped for a burger. In the drive through I announced my combo coupon into the speaker. The food technician got the amount wrong and when I tried to correct her (up $1) she said “fine” and charged the lower amount, then didn't even ask for my coupon.

About now you're wondering what all this has to do with video.

It's not so much about video as the general state of retailing. It happens all over, especially at chains like Wal-mart, Kmart and Circuit City, where corporate management decides the best way to save money is to eliminate minimum skills at the lowest rungs and hire anyone who can fill out the application, often to sell quite specialized items or handle complex transactions.

Most of the time it seems like chains have all the marketplace advantages. But this street-level view proved to me that independents can do a better job of some things, like hiring and training people with at least marginal knowledge of the store's products and policies.

Independent retailers may struggle to pay decent wages, but at least they are involved enough to see what's going on at the customer interaction level. As chains divert ever greater portions of their revenue to senior executives and shareholders, they forget the costs of leaving their businesses in the hands of ill-trained, apathetic minimum wage slaves.

You can bet I won't be buying stock in either of the businesses mentioned here. If they run all their outlets like this, they'll go broke soon.


28 Apr, 2003

Rev-Share Deals Probably Don't Mean A Return to Bad Old Days

A recent post on the Video Software Dealers Association discussion board noted the new DVD revenue-sharing deals with the big chains and asked, “Are we about to be screwed again?”

The post referred to the controversial revenue-sharing deals of the late 1990s between the big rental chains and the studios, which forced many independent retailers to shutter, spawned a bitter antitrust legal dispute and changed the whole character of the business.

Despite the bad blood of recent memory, the simple answer to the question of whether indies will return to the bad old days is probably no.

The studios don't appear to be abandoning the sellthrough strategy on hit DVDs (Why would they want to upset Wal-Mart?), which levels the playing field on the most desirable titles between the big rental chains and the indies, thanks in part to the First Sale Doctrine.

The new revenue-sharing deals seem to be aimed at getting retailers to bring in the secondary titles, not more of the hits. They essentially allow retailers to share the risk of buying the lesser-known titles with the studios and maintain a nice selection in the process. That's a far cry from offering must-have titles to the big rental chains at what indie retailers complained was a highly preferential price with which they could not compete.

Retailer Tom Hannah doesn't seem too worried. In answer to the post, he wrote, “As for getting screwed by revenue-sharing, I think that will only happen to IVRs [independent video retailers] that enter into bad deals.”

He noted the big retailers may be using revenue-sharing as risk abatement in a mercurial business and that it's harder for the big chains to judge the number of copies needed for each individual store.

That's something independent retailers who are savvy enough to have weathered recent years probably won't have to worry about. If they've survived, they most likely have the expertise necessary to gauge their customers' demands. And, as Hannah notes in our article, the secondary titles are not must-have commodities. He's survived in the past by buying them later at a reduced price.

Still, suspicions in this business run high -- especially since the recent bad old days of indies exiting the business in large numbers looms large. I wouldn't discount the studios' interest in earning top dollar for product, but I don't think the market forces today dictate indies' demise.

Sellthrough DVD has been an unintentional peacemaker in the rental business. If the big chains think revenue-sharing on DVD fits into the company's business plan, it doesn't necessarily mean the indies need to follow suit.


27 Apr, 2003

Is It Time to Give Video Vending a Look?

Is it time to add video vending machines to the list of options retailers have to growing their business? Well, perhaps it's too early to tell, but there has been a recent flurry of activity in the space, as chronicled in this week's issue of Video Store Magazine. DVD has spurred interest in video vending by specialty and non-specialty retailers alike.

“It's a continuation of the channel blur,” Jeff Lenard, spokesman for the National Association of Convenience Stores told senior editor Holly Wagner.

The variety of systems and services being developed for sale, lease and franchise in the video vending category and the number of locations where something like this might work could be both an interesting opportunity for established rentailers as well as a competitive threat from other retail sectors.

There is no analysis yet available as to whether or not the video vending model is generally successful, but Blockbuster, as one example, has been active with video vending in Europe for a number of years in locations such as gas stations and grocery markets, and in Israel with machines placed outside some of their stores to extend their hours of business.

Indeed, the idea of using vending machines to extend one's business is an attractive possible alternative to, say, opening another store to reach into another market. By seeking out locations that combine foot traffic and the convenience factor, specialty retailers can also compete with their retail brethren in supermarkets, for instance, who have those attributes built into their business who are in the rental business now.

I also like the idea of the machine extending one's business hours, particularly in the morning. Many video stores open their doors at 10 am or later, and perhaps by having a vending machine outside their store, people on their way to work may take a moment to grab a video for that evening, instead of having to take the trouble to stop after work to rent a video when they'd rather be heading right home.

Video vending has been around for a while, but perhaps with DVD's size (and selthrough pricing) making it possible for these machines to have a larger inventory, the financial model for vending has improved. It's worth considering. We'll have to see how this concept progresses.


22 Apr, 2003

A Tradeoff Doesn't Have to Be A Bad Thing

Our Editor-in-Chief, Kurt Indvik, made some interesting points about used disc trade this week, but I think he only told half of the story.

This is another case of retail lines blurring, like Wal-mart getting into the disc rental business and supermarkets edging back into selling video. It's a retail free-for-all out there and any product as successful as DVD is going to be a prime target in a market where Wal-mart steals grocery market share from grocers and convenience store margins on gas and cigarettes are drying up, sending those chains in search of new revenue streams.

It seems to me that most video specialty dealers have been slow to catch on to the used disc trade, viewing it only as a way to sell off retired rental copies, not a thriving model of its own.

It's been the music retailers – on the ropes since music downloads burst onto the scene (coincidentally at about the same time as DVD got to market) – who have pioneered the used exchange model.

Chains like Wherehouse and Django's, which have bankruptcy in common, had no choice but to push into this model, one they perfected years ago with used CDs and defended in court when artists like Garth Brooks and Metallica made a stink about it.

Maybe the greatest lesson from music retailers is not the used trade model itself, but how long it took for them to embrace it.


21 Apr, 2003

Here&#39;s Hoping the Next Extended <I>Lord of the Rings</I> Gets Its Due

Retailers were caught a bit off guard by the two-release strategy for The Lord of the Rings: The Fellowship of the Ring. Many didn't order enough of the extended version – wrongly thinking it was merely a director's cut of the movie and wouldn't have much appeal. But the extended version actually turned out to be what I would consider the definitive cut of the film – the version that would have flown in theaters if people could keep their butts in the seats for four hours.

On DVD, a four-hour cut proves less of a problem. Viewers are more apt to watch the longer version in the living room, with the ability to pause for breaks. In fact, when I view or show others Fellowship, I always recommend the extended cut on DVD. It's a more complete vision of the story, I think.

Unfortunately, retailers were slow to warm to this new strategy. On a year-end visit to Wal-Mart, I talked to a clerk who said she had run out of the extended version and had to reorder. I wonder how many sales were lost during the interim.

Here's hoping retailers catch on to New Line's strategy this time around. If the quality of the first Lord of the Rings extended edition is any indication, we're in for a great product in November.


20 Apr, 2003

The Growing Impact of Previously Viewed Sales

The burgeoning business of selling used DVDs, VHS cassettes and video games continues to have an ever-growing impact on many parts of the industry.

It's impacting the way retailers buy and merchandise their products. For specialty rentailers, it's their way of battling for the sellthrough dollar against the mass merchants. The timing of when to bring rental product down from the rack to sell is being fine-tuned, not only to how mass merchants adjust their pricing and when, but whether or not local rentailer competitors have revenue-sharing selloff stipulations for their product and when those expire.

Previously viewed sales are impacting the way studios are structuring their DVD revenue-sharing deals and the previously viewed business is also a major factor in why units shipped into the rental marketplace have tripled over the past five years.

And, of course, previously viewed sales are having a significant effect on retailers' revenue over all. Consider that in 2002, Blockbuster scored some $365 million in previously viewed product sales in the United States, about 8 percent of its domestic gross dollar volume, according to Video Store Magazine market research estimates. Hollywood Video took in more than $100 million (7.6 percent of its gross) and Movie Gallery about $46 million (9.5 percent of its gross). A million here and a million there and we're talking real money.

For many smaller rentailers, sales from used product make up anywhere between 15 percent and 20 percent of their dollar volume and that number is growing.The fact is, as one retailer told senior editor Joan Villa, customers are learning that video specialty stores are no longer just rentailers, but retailers. Everything they see in the store is, or will be, for sale.

Not surprsingly, DVD can be seen as the cause for this fast-growing business segment. While VHS still outsells DVD at the previously viewed tables, DVD is growing by double and triple digits in unit and dollar sales at retailers around the country, while VHS continues to decline, according to a variety of market research.

DVD has transformed so many aspects of the home video industry. This is the latest evidence of the format's elevated perceived value in the mind of the consumer. Certainly its value as a “used” product is much higher than the lowly cassette and the reason that retailers are seeing exponential growth in sales.


17 Apr, 2003

Bringing Down the DVD House

I was cleaning out my office the other day when I came across an ad-filled supplement to Billboard magazine from the middle 1970s, honoring the many advances and surefire success of 8-track tape.

It's one of many notable failures to dot our checkered technological past, along with Quad sound, the Dynaflex LP, the Beta videocassette and, most recently, Divx.

If the next-generation DVD camps don't get their you-know-what together and either work out a compromise or agree to back one of the three competing formats, membership in this elite club — already preparing a seat for Super CD or DVD-Audio or perhaps both — could swell even more.

Here we are, several years after the concept of a next-generation, high-definition-ready DVD was first floated, and we've still got three banner-wavers vying to be the standard.

Two of them use a blue laser, while a third uses the tried-and-proven red laser, just like the current generation of DVD players.

Mucking things up is that unlike in the days leading up to the launch of first-generation DVD, there is no outspoken leader who can hammer away at all sides until someone caves and we have one format that all clearly champion.

To paraphrase the old Chicago song, “Harry Truman”: America needs you, Warren Lieberfarb — or at least a man like you with vision and a big, powerful clenched fist to drive that vision home to those who can't, or won't, see.

Hopefully that vacuum of leadership will soon be filled. Word has it that Ben Feingold, who was a half-step behind Lieberfarb in advocacy of DVD, is getting ready to step out as the poster boy for the Blu-ray camp, backed by mighty Sony, parent company of his studio, Columbia TriStar.

If he does, the Blu-ray folks will have a decided advantage in the hype arena, where format battles are typically fought. Feingold is intelligent, articulate and savvy, and if he does assume the role of Blu-ray champion the smart money would likely follow him.

Just picture it: Warren Lieberfarb as the architect of DVD, and Ben Feingold as the guy behind its remodel.

I like it already.