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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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16 Sep, 2004

MGM Acquisition a Good Move by Sony

No sooner had the ink dried on Sony's “agreement in principle” to buy MGM for nearly $5 billion than the industry was abuzz over the motive.

Generally, analysts concur Sony is both gambling on DVD's staying power and betting against it.

On the one hand, as the august Wall Street Journal puts it, Sony “is betting that Hollywood's DVD cash cow will continue gushing money.” Consumer spending on DVD has risen steadily each year, with last year's spending total estimated at $11.8 billion. That's more than consumers ever spent on movies in the VHS era, and a record that's likely to be shattered this year, when spending on DVDs for the first half is already at $6.6 billion, according to Video Store Magazine Market Research.

Indeed, DVD has proven so lucrative that studio executives have become a lot less nervous when movie production budgets balloon, so confident are they that the risk will be mitigated through boffo DVD sales on the back end.

MGM has a huge library, one of the biggest in the business, and while many of these have already been released on DVD, the number of new DVD households keeps growing. We're still nowhere near the 70 percent mark, which is a key indicator of a mature market. New collectors are being born every minute, and at the same time Sony's home video division, perhaps more than any other studio, knows how to double-dip (score twice by releasing a superior DVD weeks or months after a regular one).

Thus, the fact that MGM has already released most of its sellable titles on DVD is hardly a deterrent; the folks at Sony are ready and willing to do it again, convinced there's more money to be squeezed out of classic library titles from John Wayne's The Alamo to the “James Bond” collection.

That said, Sony is also betting against DVD with its proposed acquisition of MGM. Sony heads one of two competing next-generation optical disc formats, Blu-ray, which is vying to become tomorrow's high-definition standard. The opposing camp, HD-DVD, has the backing of Toshiba.

There's a lot at stake. Sony has been left in the dust once before — in the early 1980s, when its Beta cassette lost out to Matsushita's VHS. Sony was at the vanguard of developing DVD as well, but walked away with only a partial victory when the MMCD format it had developed with Philips was integrated with Toshiba-Warner's SD after computer companies demanded a single, standard format.

Both competing next-gen camps are currently in a race to the market. All the studios except Columbia TriStar Home Entertainment, owned by Sony, are still on the fence. If Sony is having a hard time convincing a second studio to line up behind it, what better tack than to buy one — particularly one with as formidable a library as MGM?

With MGM, Sony will command a library of some 8,000 movies titles — ready and ripe for the next-gen pluckin', and a snub in the face of HD-DVD, which as of yet has no major studio behind it.

There are plenty of skeptics who question Sony's wisdom in buying MGM for so much money. Even the Wall Street Journal is raising eyebrows, touting the fact that some analysts believe DVD growth will slow and that eventually the entire packaged media category will fade “as more viewers turn to movie-on-demand services and run out of old favorite video flicks to replace.”

But I disagree. I see DVD sales maintaining their robust clip well into the future, fueled by such out-of-nowhere niche markets as TV DVD and music DVD, and also by the continued shift of consumers toward buying and collecting movies the way they buy and collect CDs and books.

And if and when DVD sales fade, there will be a new packaged media format to pick up where DVD left off.

Whoever's got the content will win, and with MGM under its belt, my money's on Sony to secure many, many happy returns.


15 Sep, 2004

Extras That Could Stand on Their Own

Tom Adams, president of Adams Media Research, said something that intrigued me at the recent Entertainment Media Expo in Hollywood.

“When is extra content going to become content?” he queried during a panel discussion.

The topic came up in relation to TV DVD programming, specifically reality programming, which tends to struggle at retail, especially closed-ended series like “Survivor” and other competitive reality shows.

Henry McGee, president of HBO Home Video, applauded Universal Studios Home Video's package of extras on The Apprentice Season One as one way to combat the reality-TV sales apathy and pique renewed consumer interest in the program on DVD.

Certainly, at some point, given the content is good enough, DVD added content could stand on its own as, well, DVD content. “The Lord of The Rings” extended edition documentaries come to mind — they are among the finest in the genre, regardless of how they are released.

The documentary on the Hedwig and the Angry Inch DVD is one of my favorite all-time extras. The featurettes on the Cast Away DVD fall into that category, too; the documentary following the film's screenwriter basically living out the lonely survivalist events of the Tom Hanks' character in the movie is definitely its own tale.

And, having been among the lucky few to get an extra-early peek at Kevin Burns' two-and-a-half-hour documentary “Empire of Dreams,” included on the “Star Wars” trilogy set, I recently added another to the list.

LucasFilm/Fox released an abbreviated version of this documentary to air on the A&E Network last weekend. Since then, I've talked to no less than four people who saw it and were incredibly excited about it, thinking it was a separate release they could buy somewhere. When I told them they'd see an even more in-depth version on the four-disc set coming out Sept. 21, they were even more excited.

A day may come when these types of extras are a meaty part of the DVD market. Perhaps one day, after next-generation technology takes hold, studios could repurpose some of the better added content for separate release on DVD and market it to a whole different level of consumer.


14 Sep, 2004

The More Things Change …

Blockbuster Video is in a whirlwind of changes to reposition going into the fourth quarter and, at least in Southern California, it looks pretty good so far.

It's tough to tell how any new venture will perform, even when it is part of an old venture. But today's announcement about 77 new Game Rush store-in-stores here and 400 nationwide by the end of the year looks like a step in the right direction. Gaming is a big deal in my neck of the woods, and I expect those Game Rushes to do brisk business.

The movie-trading model, which turned up at Blockbusters in my area right before Labor Day in a spate of flash resets, is a little dicier, mainly because the terms are not as parallel as those in the game space.

In other areas it may be different, but around here consumers have a lot of choices of where to take old DVDs to trade or sell them. Some of those places pay cash, not just store credit. But Blockbuster may be able to make up for that with better marketing — several of the places that pay cash for DVDs and games aren't very good about advertising it. Not that they are less enthusiastic about doing it, but you don't see or hear a lot of TV or radio promotion. That kind of exposure, if Big Blue starts doing it, could build a valuable identity that other chains are not really pursuing. At least not yet.

Mass merchants have forced entertainment specialists into a paradox of increasing both specialization and product diversity. Game and music stores are becoming movie stores, movie stores are becoming one-stop entertainment stores. They're all trying so hard to differentiate themselves that, for the most part, it seems to be backfiring as everyone grabs for a share of whatever is working for someone else.

Nobody can blame a business for moving into areas that are generating money. That's why they call it a business. But I can't help wondering when the market will reach a sort of gray saturation in which all those efforts to offer something new and look different end up making everyone look the same.


13 Sep, 2004

Why Won't Indies Swallow Subs?

Now that Hollywood has followed Blockbuster, officially jumping on the subscription bandwagon by quietly launching its Movie Value Pass, and Movie Gallery is talking about its 70-store test of the same model, you'd think independent retailers would be poised to join their bigger counterparts.

But a recent Video Store Magazine online poll found most (72 percent) of respondents had decided not to install a subscription model in their stores. Frankly, I find that astounding.

Many say the economics of the subscription model are not as profitable as the traditional a la carte model, but if the big guys are doing it, how can other video stores fail to follow suit?

Independents have been riding the wave of lower-then-ever-priced cost of goods with DVD as well as the previously viewed disc juggernaut (one retailer I know said it was like printing money). Can the good times last? Or will indies find they are behind the times by not looking to subscriptions to satisfy their customers? Few businesses can survive by resting on their laurels.

I'd be interested to see what readers, especially indies, think about the growing subscription model. Drop me a line at my e-mail address above.


12 Sep, 2004

The Latest on ‘Double Dipping'

It comes as no surprise to you, I am sure, that a growing percentage of home video titles are coming out in multiple versions. According to the DVD Release Report, to date some 23 percent of releases this year have been offered in multiple versions.

You'd have to agree that home video, as a form of packaged entertainment, is unique in this regard.

Outside of reference books, I'm not sure book retailers have to prepare themselves for a new, “extended edition” (with more chapters and an expanded biography of the author) of the latest hot novel or nonfiction best seller coming down the pike in six months. Most readers would say, “What, you forgot something the first time around?”

Not counting compilations and other “best of” efforts, or “live” albums, I don't think music retailers have to set aside room for artists who come out with “special editions” of their most recent albums. Buyers would be wondering which work the artist truly wants you to hear.

When it comes to movies on DVD, no doubt there are those who argue that a director ought to stand behind the film as it appeared in the theaters and are suspect of “extended versions” or “unrated” editions (the originals edited to avoid ratings issues, usually). And, of course, there has always been the ongoing argument over widescreen vs. full-screen versions.

But, by and large, these naysayers are few and far between, and the American public has been eagerly buying up all manner of new editions of movies as they appear on DVD, many of which keep the movie intact, but do add numerous bonus features that were not available on the first edition.

In this week's issue of Video Store Magazine Judith McCourt, market research director, and Thomas K. Arnold, group editor, team up to tackle the issues and questions surrounding the topic of “double dipping.” The fact is, studios are going to the well more than ever before with multiple versions and consumers are buying into the idea.

And while studios are busily cranking out these special editions, a space crunch is beginning to be felt at the retail level as shelves sag under the weight of a continuing deluge of new home video product. It's getting to be a challenge for retailers to make buying decisions in the face of this onslaught, even as they attempt to find more space for all these new (and new edition) DVDs.

It just so happens we have an article looking at this challenge in this week's issue as well. And we managed to find space for both on the cover. We may consider extended versions of these articles at a later date.


10 Sep, 2004

DVD's Many Sub-Businesses Keep Growing

DVD is becoming not so much one big business as a confederation of smaller businesses, many of which did not exist in the VHS era. TV DVD and music DVD are two examples, but they are hardly the only ones.

In the VHS era, for example, used-tape sales never amounted to much, even in the days when revenue-sharing picked up and there were lots of surplus cassettes floating around. Only with DVD did the market really begin to thrive, and now some rental dealers are reporting that what's euphemistically known as “previously viewed” sales have replaced late fees as their second-biggest source of revenue behind rental. At Movie Gallery, for example, the used trade brings in 10 percent of all consumer dollars.

There's also money to be made in niche markets such as documentaries and art films. Both categories are becoming bigger, thanks in large part to the emergence of online vendors — both rental (Netflix) and sales (Amazon) — whose cyberstorefronts are open to everyone the world over. Again, DVD gets at least some of the credit, because the inclusion of special features makes these titles more collectable and discs cost a lot less to ship than those clunky cassettes.

DVD also helped grow the home theater business, not so much because of the format's superior picture as its superior sound. With VHS, home theater would have been a waste of money; with DVD, it's become virtually essential.

Another of DVD's many sub-businesses is the market for mobile DVD players. Again, the trend toward putting video in minivans and SUVs began some years back, but as anyone who's driven cross-country with a bag of cassettes can tell you, it wasn't really practical until DVD. I remember road trips with cassettes flying all over the place; these days I can pack two dozen movies into a little album no bigger, or thicker, than a paperback.

This is why I feel certain DVD will go down in the history books as a lot more than just another successful consumer product launch. It's a pop-culture phenomenon, with a legacy that's likely to grow richer with time.


8 Sep, 2004

Subscription Redux

Blockbuster, Hollywood Video and Movie Gallery have all unveiled variations of in-store and Web–based subscription rental programs aimed at undermining the success of online pioneer Netflix.

These initiatives are not limited to the national chains.

DVD Trading Co., in Chandler, Ariz., has operated an in-store subscription service for three years, according to owner Don Desmarchais. He welcomed the competition from Hollywood since it isn't offering new releases as part of the promotion.

“It was kind of interesting that they had the option to match Blockbuster's deal and they chose not to,” said Desmarchais.

What about the other 1,200 video rentailers large and small?

Write to me at the e-mail address at the top of the screen and let me know what your store is doing regarding subscription programs.


7 Sep, 2004

Used-Disc Trade Blurs Traditional Retail, Pricing Lines

It's become apparent that DVD trading is the model of choice for a lot of consumers. It offers a very attractive entry point for people who want to start or build collections.

Blockbuster is making good on its promise to bring trades into its stores. In advance of the Labor Day weekend, several stores in my neighborhood were getting flash makeovers that include more shelf space devoted to used discs and huge banners advertising that the chain offers a minimum of $5 in store credit for any DVD it buys from a consumer and a maximum of $35 for games.

Trans World hasn't made nearly as much noise about it, but that chain, with nearly 900 stores under a half-dozen brands, has been doing consumer trades for a long time. And it has the added allure of letting the consumer choose to sell for cash or slightly more in store credit. Both chains promote the used trade with lists indicating which titles have the highest bounty.

Game chains EB Games and GameSpot have been trading games with consumers for quite a while and both recently got into DVD trading, especially in areas that have a lot of appeal for their customers — anime and sci-fi, notably.

It's a smart way for chains to bulk up on catalog and other product. Although Trans World has exited the rental arena, Blockbuster is expanding online. The used-disc trade in stores offers several benefits. For one, the chain is likely to bring in titles that might be hard to find and almost certainly would cost more to stock from studios or distributors. After all, aren't all discs used after the first time you play them?

The Movie Gallery e-newsletter that arrived in my e-mail box today is already promoting the availability of pre-viewed The Passion of the Christ Sept. 13.

It has become pretty standard that PVT are available within a week or two of the same titles' street dates. Chains can use their amassed data to gauge when a title will fall out of rental favor or just how soon they can afford to start selling off titles as PVT.

The used-disc trade has so far been a boon to retailers large and small. But as it takes hold, it may have a couple of downsides that have not yet been factored into the equation. Chains that have enjoyed near icon status among consumers will have to compete not only among themselves, but against savvy consumers.

Used discs have opened up a layer of trade that is completely outside of traditional retail. Consumers are figuring out that they can get more for their used titles by selling them on eBay (alongside some studios and Movie Gallery) for more than a video or music store will pay, especially for TV DVD.

Then there are the new upstarts like peerflix.com, barterbee.com and filmtrader.com, that seem to be springing up faster than weeds in an herb garden to let consumers trade among themselves. One-for-one trades are about as close as you get to full value.

Finally, consumers are training themselves that anything more than $10 is too much to pay for most movies. Even when a high-def format makes it to market, it will not be easy to convince consumers to pay $10, $20 or $30 more for it.


5 Sep, 2004

Shelf-Space Squeeze An Opportunity for Specialty Retailers

The volume of home video releases into the market is staggering, and suppliers appear to be capable of keeping the pace up for the foreseeable future. The question on the minds and lips of both suppliers and retailers is how to cram all of this into that finite realm we know as shelf space.

Obviously, the answer is that they can't, at least when it concerns major retail shelf space. There will be “winners” and “losers” this holiday season as suppliers of all sorts do everything they can to get their hit movie, their catalog release, their special-edition collection or special-interest title on as many retailers' shelves as possible.

Major nonspeciality retailers, especially big-box retailers, for the most part now appear to be holding firm on their total allocation of space for home video, though certainly they have adjusted product mix to accommodate the huge success of DVD (goodbye VHS) and certain hot genres (hello TV DVD), and extended their sections with end caps and dump bins in other parts of the stores, among other efforts.

Virgin Megastores, for example, is beginning to move certain DVD genres, such as music and fitness, out of traditional DVD sections and into themed areas where these products can be cross-merchandised with related CDs, books, etc. In this week's issue of Video Store Magazine, senior reporter Jessica Wolf writes about this issue as it came up in several panels during last week's Entertainment Media Expo in Hollywood. Part of the issue is of the mass merchants' own making: That is, they have created the first-week loss-leader phenomenon for new-release hits that have made the margins for at least that portion of their video business (and it's their most significant portion, at least in units) unattractive to such an extent that home video doesn't warrant greater allocation of space.

Meanwhile, as DVD households continue to grow — albeit at a quieter pace — consumers seem as ready and willing to buy now as when the format was in its formative stages.This is where the specialty retailers and rental chains, including online models such as Netflix, have the opportunity to capture a growing share of the sellthrough market. Because not only does the volume of new product present an opportunity, the ever-increasing fickle nature of mass merchants' buying models will pass up an increasing number of mid-tier (less than $25 million box office) theatrical titles and any amount of other great product that just doesn't fit their ROI scheme.

Major rentail chains continue to reconfigure their stores, continue to jettison VHS and move aggressively toward sellthrough in all variations, from new and previously-viewed to trade-ins, not just in the hits, but in the wide range of terrific mid-tier theatrical and non-theatrical product mass merchants just aren't going to carry.

The opportunity for specialty stores in sellthrough will continue over the next several years.


3 Sep, 2004

DVD's Going Down the Tube

The size and escalating popularity of the TV DVD category is mind-boggling. Here at Video Store Magazine, we're in the midst of producing the first-ever TV DVD Awards and have received more than 150 entries from suppliers, in 12 categories. A lot of the stuff that's come in I've never even heard of, and yet judging from the elaborate boxes and special features custom-made for the DVD release, there's a ready and willing audience out there for even the most obscure TV shows.

As we head into the fourth quarter, one of the biggest issues is the crunch for shelf space. Several of my colleagues have already addressed this issue, so I won't go there (at least not until my next “big picture” story in VSM).

But I will clue you in on one new development: Retailers are jumping all over TV DVD, to the point of allocating more space in their stores for television product. Best Buy, Target, Wal-Mart and virtually all the other big sellthrough drivers are committing more space to TV DVD this fourth quarter — a fact that was communicated early in the year to the folks at Universal Studios Home Video, who responded by finally jumping into TV DVD in a big way this summer after two years of sitting on their TV library.

TV DVD isn't just turning heads at sellthrough. At a recent panel discussion I led at the EMX conference in Hollywood earlier this week, Ted Sarandos, chief content officer of Netflix, revealed that TV DVD accounts for 12 percent of the subscription rental service's overall revenue and is the fastest-growing segment of the company's business. Movie Gallery's Ted Innes added that his rental chain has added a dedicated TV DVD section to its new-release wall.

Will this bubble burst? Our market research department predicts consumers will spend more than $2 billion on TV DVD product this year, up from less than $1.5 billion in 2003.

Based on my own collection at home — and the gobs of shows and series submitted for our awards — we've only scratched the surface. I'm not just collecting the stuff, I'm watching it at the expense of hot new movies.

I'm currently on episode three of “American Dreams,” a show I had never even heard of — I'm not an avid broadcast TV watcher — until it came to be on DVD.