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Insights from home entertainment industry experts. Home Media blogs give you the inside scoop on entertainment news, DVD and Blu-ray Disc releases, and the happenings at key studios and entertainment retailers. “TK's Take” analyzes and comments on home entertainment news and trends, “Agent DVD Insider” talks fanboy entertainment, “IndieFile” delivers independent film news, “Steph Sums It Up” offers pithy opinions on the state of the industry, and “Mike’s Picks” offers bite-sized recommendations of the latest DVD and Blu-ray releases.

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25 Apr, 2002

WORKING WEEKEND: Studio marketers seek synergy and synchronicity

Synergy's typically gotten a bad rap, especially where entertainment goliaths are concerned. Just ask anyone who works at either of the companies masquerading as the singular AOL Time Warner.

But drill down a little and you discover that at major studio's divisions such as home entertainment and consumer products either are working hand-in-glove to forge a unified front with major retailers, or in fact report to the same executive.

In Hollywood more and more these days, video (as always, in this space that includes VHS and DVD, and even video games) plays an integral role in the marketing of other goods and services. That's because home video itself has become a commodity consumer good that essentially is a licensed product, even if it is released by the same studio that produced and/or distributed its theatrical parent.

As the studios' home entertainment units have grown into multibillion-dollar revenue streams, they have been increasingly synchronized with the marketing strategies and operations of the entire company, from theatrical to consumer products.

At 20th Century Fox, Pat Wyatt ran the consumer products group – which encompasses studiowide licensing, promotion and interactive games -- before adding home entertainment to her portfolio several years ago. Conversely, there's a generation of homegrown video executives who have inherited sizable and strategically vital consumer products units at their studios.

These include Ben Feingold, president of Business and Operations of Columbia TriStar Motion Picture Group, MGM Home Entertainment Group COO and president David Bishop, and the latest addition to the club, Louis Feola. The former president of Universal Studios Home Video recently was named president of Universal Pictures Franchise Development. That's a new division that includes consumer products, two specialty production units and all Vivendi Universal franchise properties.

The effect at retail is that the studios today are working more closely than ever with the A-list merchants, including Wal-Mart, Toys ‘R' Us, Target and what the licensing and promotions people call QSRs – quick service restaurants – such as McDonald's and Pizza Hut, among many others. Wal-Mart can command its own proprietary packaging for titles such as Warner Home Video's Harry Potter DVD.

In the business of licensed movie merchandise and promotions, the lesson learned in recent years is that less is more. Licensors -- the studios – and the consumer goods marketers of apparel, books, plush toys and other items that are their licensees would rather focus on fewer categories of merchandise moving through fewer channels of distribution, and know that the SKUs are being heavily promoted, receiving prime shelf space and selling through with minimum returns. That's why you'll see less Star Wars merchandise for Episode 2: Attack of the Clonesthan for The Phantom Menace.

Customized and exclusive retail promotions on event titles have become the industry standard.

Universal Studios Consumer Products Group signed what it calls “an unprecedented and exclusive three-year worldwide merchandising program in more than 20 countries with Toys'R' Us, Inc., the world's largest specialty retailer, to develop a full range of exclusive E.T. product.”

At Sony Pictures, Consumer Products SVP Al Ovadia notes his group works closely with home entertainment in calling on chains like Wal-Mart. On an inevitable blockbuster release like Spider-Man, he explains, the sister studio divisions can be in the same meeting with the account and lay out the movie's marketing program “from pre-theatrical through to video. It's pretty convenient.”

At MGM Consumer Products, Lisa Westfield Avent, VP worldwide licensing and retail development, says her group works closely with home entertainment, in part to keep tabs on which genres of catalog product are popular.

Having tracked historical data showing that, for example, horror cult favorite Army of Darkness was a big seller, the consumer products group decided to target its fans by signing five licensees to market a line of tie-in merchandise. So if you know someone who collects bobblehead dolls, tell them there's an army of ‘em waiting to be conscripted.

25 Apr, 2002

THE MORNING BUZZ: Video Game Rental Opportunity Will Continue to Grow

With some 400 to 500 video game titles coming out a year across three competing game platforms, it would seem to me that the rental model opportunity (and previously viewed sales) is only going to get better. The issue is, are the game manufacturers interested in going along for the ride?

This week's quarterly financial reports from Blockbuster and Hollywood Entertainment both highlighted the video game business as being an integral part of their strategies for growth.

The 66 Hollywood stores with a 1000 square-foot Game Crazy store-within-a-store section average $400,000 more in revenues per year than Hollywood stores without a Game Crazy. It's no wonder the chain plans to add another 100 to 200 Game Crazy sections in the next year, according to CEO Mark Wattles.

“In my opinion, games could become an even bigger benefit to our industry than DVD has been,” he said. That's quite a statement.

Blockbuster this week also highlighted games as a major growth area, noting that it would be remerchandising its game products into platform clusters (PlayStation, Xbox, GameCube, et al) combining all sales, rental, hardware and accessories. It also said it was going to extend its rental subscription concept to video games as it is for video, whereby for $59.90 gamers can check out and play up to three video games for an extended period of time without paying late fees, a la the NetFlix model.

In talking to game industry analysts, it seems that suppliers have an ambivalent attitude to the concept of rental. They grudgingly recognize that trials do, ultimately, drive sales. There is no indication that rentals degrade sellthrough, at least on hit product, since every strong rental title has also been a strong seller. However, there does seem to be concern that on less than stellar titles, rental, in fact, may replace sellthrough, since obviously gamers would try a game and, having played it once, go on to something else. But price also has a factor to play here. With most every title, hit or not, coming out at $49.99, this may explain some of the concern on second-tier games. There is some movement toward a $39.99 price point this year. I can sense this palpable tension building between what seems to be a growing opportunity for video game rental (and previously played sellthrough) and the lack of interest by the video game manufacturers to want to recognize or support it. Seems like the early 80s in home video all over again, doesn't it?

On the specialty video retail side, the main challenge seems to be managing inventory. What games do you get and how deep do you go? If it's just a hits business for you now, then in Xbox, for instance, it's arguable you'd have Halo, Project Gotham Racing and maybe Rallisports Challenge and that would pretty much be it. That's not much of an Xbox section, so then you go deeper, but into less predictable waters. That means either a knowledgeable staffer to help you with the buying, or a good distributor. The home video and video game industries have not been kind to distribution in the past several years, so your options there are limited.

Specialty stores also have a real opportunity in the “previously-played” arena, with most new product retailing at $49.95. If rentailers can turn enough rentals on a product quickly enough before moving it into the used sales rack, seems to me gamers' threshold on buying second-tier product is lowered.

All in all, this a major category to continue to build and one that fits fairly neatly into the current home video rental business.

23 Apr, 2002

THE MORNING BUZZ: Why The Killer App May Be A Suicide Victim

VOD is the killer app. Everyone in cable and satellite knows it. The studios and their pirate nemeses know it. Video dealers know it, too, they just aren't scared of it for the same reasons I am coming to doubt whether it will happen, at least any time soon.

The technology is there and so is the demand. All the elements are already in play, as the illegal file traders prove at a rate some put in the hundreds of thousands of downloads per month.

The real obstacles to VOD are that 1) all the folks who have to get together to provide it can't play nice together, and 2) the ones in position to deliver the goods are smarting now because they put all their respective resources into capital upgrades and loss leader bids for subscribers.

Most just don't get it and the rest appear to have been playing fast and loose with the books. The biggest threat to VOD that I see on the immediate horizon is signs that the cable and satellite providers are on the brink of an implosion like the ones we've seen in the telecommunications industry.

I recently related my experience with DirecTV (recap/update: the $140 installation rebate I sent for Jan. 4 was supposed to go out March 18, but customer service – and I use the term loosely – says it has been rescheduled for May 10 payment). The company is in hot water in Los Angeles court for allegedly failing to pay $300 million in rebates and commissions to installers for the last year or more.

Those are just a couple of warning signs that a company may be counting money in column A that should probably be in column B.

DirecTV's admission Monday that for years it counted chickens that never hatched – potential subscribers who put down a pittance and never got the service or paid a bill – support that notion. An executive's assurance that “four out of five” of those people actually did subscribe is little comfort. What other business gets away with padding its figures by 20 percent? Oh yeah, Internet providers.

Now the Securities and Exchange Commission is rooting around Adelphia's books and shareholders have sued, claiming the cable company “understated” $2.3 billion in debt for last year. That's some understatement. Within the last week the company's stock hit its lowest level in a year.

“Potential accounting issues and off-balance sheet issues is what sparked the downside for these cable stocks,” Jeffries & Co. analyst Frederick Moran said. While he called the market overly cautious, that caution seems prudent in light of recent events.

AOL's stock price dropped below $20, its lowest level since the Time Warner merger, and investment bankers are backing out. AOL is hemorrhaging subscribers as its dial-up customers defect to high-speed services and – surprise surprise! – can't see the reason to pay AOL's $23.90 monthly fee on top of $40 a month for high-speed access.

Several others are wrestling with saturation points, flagging stock prices and “concerns over accounting issues” that have become ubiquitous in the wake of Enron's collapse. These companies have been debt financing their buildouts, creating more infrastructure than the public will ever pay to use.

So why is anyone surprised to see this happening? For the last few years most observers and investors have been following the Internet players. Cable and satellite companies fed the frenzy with their own infrastructure to support that rising star they thought would never dim.

Now anyone who wants and can afford home Internet service has it. Their kids and pets have their own mailboxes and Web pages.

The thing that constantly amazes me is not that cable and satellite companies keep following the suicidal telco business model like lemmings, but that bankers who should know better keep extending them credit to pursue it.

Any MBA candidate who put forth a business plan that looked like that would get laughed right out of B-school.

22 Apr, 2002

THE MORNING BUZZ: If You Can't Beat 'Em, Co-Opt 'Em

About a month ago in our March 24-20 issue of Video Store Magazine and here on the Hive, senior editor Holly Wagner wrote about DVD players in such diverse places as cars and blood donation chairs (incidentally, after the article came out, Samsung debuted a networked refrigerator that can play DVDs. Holly calls it the DigiFridge). Indeed, many trades appear to be latching onto one of the hottest entertainment products to hit the market in years.

In what is perhaps the most bizarre twist I've seen yet, an Internet streaming technology company, Media and Entertainment.com Inc., yesterday unveiled its new product, NetDVD, billing it as "the world's fastest and clearest real-time video and audio compression methodology." Now, several streaming movie companies have put their films on DVD, but this is the first I've heard of the competing technology actually appropriating the packaged media "DVD" moniker to sell a streaming media concept. DVD stands for digital video (or versatile) disc, after all. Its very name implies packaged media.

DVD has a lot of cache, even among the video-on-demand crew. It has become a standard for good picture and audio quality (something VHS never was; heck, it was often a standard for bad quality) and for good digital delivery of entertainment. "Most streaming companies deliver blurry, mediocre and less than desirable video quality," says Media and Entertainment.com's chief technology officer in a press release, adding "no other company can match the speed and clarity of our NetDVD system."

In the whipsaw turn of events after the bursting of the Internet bubble, DVD and packaged media seem to have come out on top. It's nice to be on the cutting edge, for a change, with our VOD brethren implicitly acknowledging the power of the packaged media product.

22 Apr, 2002

THE MORNING BUZZ: Use DVD To Make Collectors Out Of Renters

I had an interesting conversation the other day with our art director. He's worried about the future of video and told me that when true video-on-demand arrives, “I'm there, man. Think about it – any movie you want to see, when you want it, at the click of a button. Why would I ever want to go to a video store again?”

His comments underscore the importance of converting packaged media consumers into buyers rather than renters – a bold step, I know, but one I happen to believe is vital for the home video business to survive.

We're always hearing talk about VOD. It's right around the corner. It'll never happen. It's coming, slowly but surely. It's almost here – no, wait, the economy's gone south and investors are shying away from anything speculative, so video rental stores have at least five or 10 years left.

I've been hearing that “five or 10 years” line for the last 14 years, ever since I began writing about our industry for Video Store Magazine.

I have always believed that even true VOD wouldn't completely kill video rental, but the more I talk with people like our art director, the more I believe there is definitely a faction out there that doesn't care what form their movie at home takes – they just want to watch movies at home with a minimum of effort.

For these people, going out to a video store to rent a video is a hassle, not a social experience. They want instant gratification and renting a video takes time they'd rather not spend – and then there's the added hassle of bringing the movie back. Heck, our art director didn't even flinch when I told him watching a video “on demand” might set him back $3.95 or $4.95. “That's what my video store is already charging for a rental,” he said. “Yeah, it's for three nights, but I still only watch the movie once.”

People like this have no interest in collecting movies en masse. Oh, sure, they might buy a DVD every now and then of a film they just have to have, but by and large their home movie passion is a transient one – and it might as well be just another click of the remote.

That's why retailers have to start pushing DVDs as both affordable and convenient. Catalog prices are tumbling down, with Wal-Mart already boasting a huge selection of watchable films for $5.88 apiece. Meanwhile, new releases are routinely available for $15 or $16 at places like Best Buy, and if certain studio heads have their way new release prices are in for a downward slide as well.

Regardless – it is imperative that retailers (and by this I mean all retailers, even tiny mom-and-pops who still view sellthrough as a foreign concept) start pushing the heck out of DVDs as a way to get consumers into the habit of collecting movies. Bring in as many low-cost catalog titles as you can afford. Start selling (and buying) used DVDs. And don't give up on new releases. Buy them as cheaply as you can, even if it means going to Best Buy or Fry's, and carry whatever's new and hot if for no other reason than to show your customers that you can, that you are a full-service home movie store. Then target frequent renters and offer them incentives like lease-to-own to get them to start building their own libraries.

As I've stated previously, a home library of DVDs is the ultimate form of video-on-demand – and at $5 or even $10, the cost differential between a rental (particularly a pricier, multiday rental) and a sale starts to blur.

No wonder Wal-Mart is making an all-out effort to convert renters into buyers with slogans like “No late fee…You own it!”

They've seen the writing on the wall. Just because the sky hasn't fallen on video rental yet doesn't mean it's never going to fall.

18 Apr, 2002

THE MORNING BUZZ: Distributors Looking to Capitalize on DVD Growth

The travails and woes of the video distribution business have been well documented over the past several years and I don't intend to revisit them today. Suffice to say, the home video business has changed on so many different fronts and many of those changes have conspired to make life (yes, even existence) difficult if not impossible for distributors. This has resulted in fewer distributors in business going into this week's NAVD meeting in Los Angeles than there were a year ago.

But while the association's dwindling membership may cause some to wonder if the group will soon follow its former members into that great warehouse in the sky, in actuality, those hardy souls who remain in this business may be lean and mean enough to actually enjoy something of a renaissance, at least for the next few years.

The emergence of DVD in the last several years as the soon-to-be dominant home video platform has reinvigorated the home video retail industry. And while the margins on DVD have made it even tougher on the middleman, the fact is that DVD is enlarging the home video pie overall, especially in markets where distributors can grow their businesses; non-specialty stores.

As senior editor Joan Villa writes, the difficult times have caused those distributors still in business today to have become even more efficient in their operations and focused in their customer service, to both counteract the lower margins and to raise their value as key service providers to a growing cadre of non-specialty retailers who are anxious to build up their own home video businesses.

Music stores, supermarkets, e-commerce sites, book stores, drug stores, book stores and libraries are just some of the categories that are growing their video businesses, driven by DVD's primarily sellthrough nature. These businesses need the sort of value-added assistance and small-package shipping that only distributors can do. Mass merchants who deal directly with studios are also using distributors for incremental, quick replenishment business.

“With DVD exploding, distribution is needed more than ever,” said Steve Scavelli, president of New York-based Flash Distributors.

So while those gathering around the pool at NAVD conference cocktail receptions this coming week may feel quieter than ever, one might sense a buzz of optimism as distributors look forward to enjoying some payback for the tough years they have weathered, having emerged as highly efficient, customer-centric operations ready to help a growing retail industry capitalize on DVD.

16 Apr, 2002

THE MORNING BUZZ: Forget the Millennium, We Have To Deal With the <I>Interregnum</I>

Video rental dealers, by and large, don't perceive video-on-demand (VOD) as a threat – at least not any time soon.

But if anything became clear to me Tuesday at a VOD panel discussion the Digital Coast Roundtable sponsored, it was this: some of the people in the VOD business view video rental as an obstacle to be stamped out as soon as possible.

Intertainer CEO Jonathan Taplin – who did a truly impressive job of moderating the panel – called this period in entertainment evolution an interregnum – a period between the death of one king and the accession of his successor. That, with all of the chaos and struggle for leadership it implies, is the best description I've heard yet.

Panelist Andrew Wolfe, SVP and chief technology officer at personal video recorder (PVR) maker SonicBlue , even made it clear he wants the rental window. He said nothing of his pitch to studios, networks and other content providers, but based on this I'd expect PVR makers to position their boxes as big, fat cans o' Rental-B-Gone.

That's going to mean rentailers have to fight for their market position even harder. They'll have to convince Hollywood that rental is a value proposition, which won't be easy when studios have options to provide the same content without any manufacturing costs.

Right now the specter of piracy is keeping that at bay, but if the pipers can convince studios they can make more piping content into homes than they would lose on piracy, that's big trouble on the rental horizon.

The pipers – the middlemen who supply neither content nor hardware but the pipeline to connect the two – are raring to go. They do have the technology to make it happen now and they seem almost mystified that none of the big studios want to come to their party. Rather like the cat who's confused when you aren't as pleased as she is about the dead mouse she left on your pillow.

These folks are aware of Movielink.com and Movies.com (the studio VOD joint ventures in development). They are watching those ventures closely, knowing neither effort has yet yielded a stream or download. It's generally accepted that the studios announced their plans as a sort of placeholder, to tell the public they will bring VOD before anyone else gets a foothold.

Folks like Taplin and Cinemanow CEO Curt Marvis are the ones getting that foothold. They don't have the brand recognition of a Warner, Disney or Universal so while they are trying to make their own names, a studio VOD failure could give them a bad rap.

As usual with palace intrigue, it's amazing how much fear and greed are keeping the situation in check. Hollywood's reputation as an almost medieval court system is long and it's clear the studios want to play this game by themselves. They could have VOD up and running right now if they ever get over the fear of piracy and make peace with the techhies.

That is the real obstacle to widespread, big-title VOD any time soon. Even this field holds a few bright spots of opportunity for the packaged side:

1) DVD has deviled VOD (they even look like dueling abbreviations) to the precise measure it has benefited you. Accessibly priced, ownable video frustrates efforts to get people to pay subscription fees for content and the pipeline to get it.

2) The VODers acknowledge that slowing uptake of home broadband is a barrier to homes. That part of their system is largely out of their control so their best marketing weapon is to pursue content that's irresistible enough to make people pay for bandwidth they don't want for its own sake.

3) Pipers and content providers seem to be looking at event-based content like sports and high-profile reality shows as a great way to get VOD into homes. They say the demand for content is a bottomless pit. For as long as the studios stall, the VODers can move forward with less of an impact on the packaged market. People will still rent and buy movies.

4) The set-top set is getting ready to roll out DVD-enabled boxes. Whether that's an olive branch or a Trojan horse remains to be seen. They may just be eyeing DVD as the video equivalent of a gateway drug.

5) Wolfe said people don't collect video to like they collect music, to build libraries. Uh, wrong, but thanks for playing. Apparently he has never seen DVDs, or the people who hoard them. That statement might have been true at VHS' zenith, but it's a major miscalculation today.

The next few years – the interregnum-- will be wild and woolly for this industry. The entertainment kingdom is a fief system and the lords are feuding. Technology has put more weapons in the arsenal than anybody knows what to do with. Sorting it all out will be fraught with skirmishes, coup attempts and maybe even a few conquests.

12 Apr, 2002

WORKING WEEKEND: Tom Warren&#39;s no shrinking violet

Those of you born before 1960 may well remember Charley Weaver, the rustic raconteur who made a career of appearing on Jack Paar's "Tonight Show," Mike Douglas and other talkfests. He'd weave (get it?) homespun anecdotes and dispense bits of wit and wisdom from his bucolic perch on Mount Idy. In truth, Charley's name was Cliff Arquette – young ‘uns might relate to him as the pappy of nubile thespian siblings Rosanna and Patricia.

The video rental industry's own, inimitable Tom Warren reminds me of good ol' Charley. Like an ace fisherman, he reels you in with his keen instinct and disarming style. Speaking as a native New Yorker, it's no secret my landsmen's regional accent – epitomized by Brooklynese and Long Islandese (my origin) – comes off as decidedly less engaging than the genteel charm of a Carolinan drawl. But Tom's appeal is much more than speech-deep.

A prime example of why Tom – owner since 1983 of the 12-outlet Video Hut chain in North Carolina -- is in his second consecutive term as chair of the Video Software Dealers Association was his deft and incisive handling of a retail panel at a conference in New York about packaged media loss prevention. (Keep it up, Tom, and you'll handily put journalists who moderate panels – present company included – out of business.That means I'll have to take my good friend Steve Scavelli of Flash Distributors up on his longstanding offer to put me to work running a video rental store.)

The conference on loss prevention of DVDs, games and other entertainment media -- which chief moderator Scott Bartlett of Sony Disc Manufacturing assured, in a below-the-belt quip, was a different sort of shrinkage than that experienced by hapless George Costanza on "Seinfeld" – was sponsored by packaging suppliers Clear-Vu and AGI PolyMatrix.

"Shrinkage is an issue for rentailers as well," advised Tom, as he presided, in his inimitable fashion, over a panel encompassing Best Buy, Borders, Electronics Boutique, HMV, Toys "R" Us and Wal-Mart.

He noted that the novel "integral locking" package design promoted as "the next standard" at the industry gathering was for rental as well as sellthrough use.

"For every DVD stolen," Tom explained, "I have to sell 15 to 16 to pay for it with the margins I have.

"That will kill you in a week when something like Training Day comes out," Tom continued, clearly implying the rough-and-tumble movie about a rogue cop is a prime target for rogue customers.

Noting that product shrinkage is a very complex and costly occupational hazard for even vigilant retailers to arrest, Tom surmised "The only way I can think of stopping the professionals is to weigh a person coming into the store and on the way out.

"Our focus is the convenient (or casual) shoplifter. The high school kid or person with a drug or mental problem. The amateurs are easiest to catch."

The application of an EAS tag (electronic article surveillance) on the package and not the disc is not exactly daunting to shoplifters who want to get the content inside the package out the door, said Tom. "One surefire way to catch amateurs is to target the content itself.

Any shrinkage control measure that ends up costing more to implement than "the shrinkage cost per SKU," it isn't worth it, he offered.

Warren also addressed the issue of who pays for more robust loss prevention. "The supplier can't do it for free, and the retailer can't absorb it, so the person who pays the tab for shrinkage is the consumer. It's up to us to do what we can. It's matter of principle."

Warren suggested that also newsworthy about the conference was, "Something you didn't hear mentioned once all day – VHS."

11 Apr, 2002

THE MORNING BUZZ: Race Sponsorship Extends Lifespan of <I>Fast and Furious</I>

With each passing year a typical movie's theatrical lifespan is shrinking as studios load up their marketing blitzes for opening weekends and theater operators move the latest hits in and out at a dizzying pace after the marketing support slumps. The home video rental business window of opportunity has also shrunk from months to perhaps six weeks or so, thanks to day-and-date release of DVD at sellthrough prices. But the collectible nature of DVDs (and the multiple editions that appear over time) is extending the lifespan of home video titles, especially hit movies. If you can couple that with some unique related marketing efforts, you can create an almost year-round sellthrough effort on major titles, and even years-long sales efforts on sequel films.

Of course Harry Potter and Lord of the Rings are the obvious examples here, but mega brands can now be created on the back of DVDs from titles that, seemingly, didn't have the potential for that in pre-DVD days. This struck me as I read through a recent announcement heralding the multiyear sponsorship between Universal Studios Consumer Products Group and NOPI (Number One Parts, Inc.) to sponsor the NOPI The Fast and The Furious Racing Series, which begins May 11 and runs to Oct. 19. I mean, talk about your shelf life. There's a big dose of it right there for Universal. We're talking about a sponsorship that ends 10 months after the original home video streeted for sale, and they'll still be pushing the home video. (And, of course more importantly, The Fast and The Furious brand, but more on that in a moment). Of course Universal will take advantage of this with a May 25 release of a special edition VHS of the home video that includes some of the bonus materials included in the original "collectors edition" of the DVD released Jan. 2. On that same date Universal Studios Home Video will also re-release the original DVD, though no details of that were available at press time.

The length of the actual deal with Universal and NOPI could not be confirmed, but assuming it's at least two years, the obvious question I had was…will it be known as the NOPI The Fast and the Furious Racing Series next year as well? That could also not be confirmed by press time, but I would guess the answer to be yes. There is a sequel planned for the surprise $145 million box office hit, though production has yet to begin and there is no announced theatrical target date. And, of course, there is always the followup home video release after that. Think about this from the studios' standpoint. I can't say what they were anticipating for The Fast and the Furious when it made its theatrical debut, but what they may have expected to be a modest teen flick success they now have a two-year, year-round (or more, dare we expect) theatrical/home video franchise! And this drag race series sponsorship is a major commitment to that franchise.

But there's more! Microsoft's Xbox has signed on as the series' season-long sponsor. Hmmm. Racers will battle for the Xbox Cup, awarded at the end of the season to the top-points getter. According to the announcement, Microsoft will also market its Rallisports Challenge and Project Gotham Racing Xbox titles at each of the venues. However, there is word of a video game in development for The Fast and The Furious that will be announced this June.

9 Apr, 2002

THE MORNING BUZZ: NAB is Making Strange Bedfellows

Think of Las Vegas and – Quick! – what are the first three things that come to mind?

If you're like me, the answer is 1) gambling; 2) hasty marriages; and 3) glitzy display. So it's the pefect venue – and the perfect metaphor – for this year's National Association of Broadcasters (NAB) convention.

Indeed NAB, which has added a streaming media component to its annual trade show, is a lesson in convergence and strange bedfellows this year. Companies are taking gambles, forming alliances and showing off efforts at VOD like never before.

For the cable and satellite industry, VOD is the killer app. It's the one thing they must have to go to the next level and they're pushing hard to get it.

Whether or not they will ever make it is anyone's guess. Politics and greed factor heavily into the equation and there are new players on the field, namely the tech powerhouses that provide the programs and gear that make VOD technologically feasible. That means more people at the table carving up a pie that has grown little in recent years.

I've been speculating for months that the reason Microsoft made DVD an add-on to its Xbox game console and spurned the widely used media player programs is its intent, long range, to try to convert the world to a Windows Media Player (WMP) standard. Why build an MPEG compatible device if you think the world would rather (or can be persuaded to) make software compatible to your proprietary player? This might also explain why Microsoft made version 8 of WMP (the one bundled in the XP operating system) so it relays information to Microsoft about what DVDs and features users are watching. Call it stealth research.

More evidence emerged this week, as Microsoft showed up at the NAB show to court studios and broadcasters with its computerized delivery system. RealNetworks, which makes the competing RealPlayer software, is also a real player with its announcement of a content management suite the company claims will make it easy for content providers to go live on demand. A few have already signed up.

Convergence is the watchword and it's clear that cable and satellite companies view VOD as the bridge to ITV, the holy grail of targeted marketing. VOD is merely a means to an end, I think, a way to get consumers used to using the set-top to command responses. The real goal is to lure viewers to choose advertising, which is where those companies will rack up the big bucks.

Intel was on hand with a "Powering Digital Media" display that introduced a new peer-to-peer computing program touted to make some files inaccessible to the remote user. (In plain English that means users can file trade selectively, sharing family photos with Aunt Minnie while hiding illegal copies of movies in another part of the computer.)

Sony and Sun Microsystems announced partnering on a program to offer "integrated next generation AV/IT solutions, including video-on-demand and streaming media solutions for cable companies, telcos and broadcasters."

These companies are staples at Infoworld and CES, but this is really the first time the computer giants have made such a push at a broadcasting show. Clearly they have VOD in their crosshairs.

I've been warning, some say like Chicken Little, that if the VOD players ever get their stuff together, video retailers are in trouble. I predict there will be an industry shakeout before we reach that point, but retailers would be wise to consider that dates on that calendar are closer than they appear.

The convergence may seem a long way off, but the studios have all become part of media conglomerates which, in most cases, own substantial interests in cable, satellite and terrestrial-line video delivery systems. With the exception of Viacom and Blockbuster, the only link in the movie food chain they don't own and control already is video rental.

Is anyone else smelling what's on the menu at NAB?