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.
I've been talking to a lot of music DVD suppliers lately, and it's been making me think about the nature of the music consumer and what role these folks are going to play in the future of home entertainment.
For example, I think I'm a fairly good example of a music consumer with a healthier than average buying appetite.
Listening to CDs is a natural element of my daily routine, like reading, getting coffee in the morning or brushing my teeth.
I love it when you pop in a CD and you travel back in time to the first time you heard it or to a particular moment in your life.
I was blasting a compilation CD of songs from bands in my college town in my car yesterday. Many of the musicians on it are old friends or acquaintances of the time, and as I sing along, I like to picture them performing in any number of dank Tempe, Ariz., dive bars. Makes whatever particular patch of gnarled L.A. traffic I'm sitting in at the time feel a little bit like home.
I will never part with this particular album, not for a loan of any length of time. I don't know where or if I could ever get a replacement should someone inadvertently swipe it.But as I listened yesterday I thought of how one song on this album would be the perfect opener for a mix CD I making for a friend's birthday.
Now the fact that I even began thinking of making her a mix marks a significant step in my evolution as a music consumer. I don't make mix CDs willy-nilly, I never have. It's just more hassle than I care to endure, I'm a selfish, lazy music lover.
But not anymore, I discovered shortly after I signed up for iTunes, and it was like a bell doinging in my brain: “I can just go to iTunes, download any songs I want, upload any others I may not be able to find online and burn them all to a CD.” Brilliant. Cheap. Fast. You don't even have to wait for the length of a song for it to download. And for around $20, you have a neat little personalized disc. It's perfect.I have to admit. I've never been so excited about making a mixtape (oops, CD).
The music consumer has been getting a bad rap lately, but mediums like iTunes and handheld hardware like the iPod, well, they're getting us excited again. Excited to spend money on music.
And quite frankly, I think the movie industry needs to keep an eye on that excitement. It's inevitable that digital downloading and handheld technology is going to play a major role in the future of home entertainment. And I think what's happening with legal music downloading right now is going to be the training ground for that future market.
Music DVD suppliers are already planning for it, I know, thinking of all the ways they can deliver music videos or concert footage through VOD or downloads in the future.I think it's the music consumer of today who gets excited about purchasing music online or at a kiosk in a coffee shop or record store who will be the most comfortable taking that leap to purchasing downloads of visual content, even feature films, when that market evolves.
By: Jessica Wolf
Is video headed for an air war?
Maybe. I ask this question because of all the new entertainment options becoming available on airlines. The downtime up in the air is a great place to catch a movie on a laptop or portable player and could also be a great place to advertise the possibilities.
Last week, Delta Airlines announced it had outfitted all 36 planes in its discount Song fleet with a variety of entertainment options, including Dish Network TV channels. By the end of the year, the airline plans to offer video-on-demand and pay-per-view movies as well as video games.
Movielink CEO Jim Ramo has said that the largest percentage of that service's users are business travelers who download movies before they go and watch them literally on the fly.
Vending machine boosters covet airport locations — difficult to get because most jurisdictions don't want a lot of vending machines in their airports, so floor space is unlikely to be available anyplace except where they can convince existing gift shop merchants to give it up.
In that environment it would be more practical to offer EZ-D disposable discs, although the title selection is still quite limited. But air travelers are a captive audience with an immediate need, so the disposable disc could be a good option.
Netflix is also a good choice, because travelers can take the movie from home, watch it on the way to the destination and drop it into the mail wherever they land in the United States. Netflix also has more selection than any of the other options.
All of this would make it seem that in-flight magazines and onboard audio and videocasts are the perfect place to advertise these new approaches. Of course, it would not be feasible for small operations, but Flexplay and Buena Vista, for example, could run spots promoting the disposable discs on routes to and from cities that have them. Ditto for Netflix and Movielink, which have greater selection and cover all U.S. markets.
With the vacation season nearly upon us, it's worth thinking about where your customers, and your business, are going this summer.
By: Holly J. Wagner
Now that Blockbuster is launching into the movie-trading business with abandon, it occurred to me that consumers engage in movie trading amongst themselves all the time — and at no charge.
Just last week, the kids in my neighborhood were asking neighbors if they had a copy of The Haunted Mansion and if they might borrow it. Granted, I live in a particularly clubby and social neighborhood, but this sort of trading no doubt happens between friends, family and neighbors everywhere.
Now, I'm not going to suggest that the studios go after my neighbors, as they are making plenty of money on the sale of DVDs and there's no law against this kind of casual sharing. Certainly, neighbors do and have done the same thing with titles they rent.
But it does make me take notice of its effect on windows. Most rental dealers will tell you that titles die in a matter of weeks, mirroring the theatrical business. Indeed, this phenomenon started with Blockbuster's drive to have consumers “Go home happy” with the hit title they wanted through extreme copy depth. Now, instead of going to Blockbuster, consumers can “rent” from neighbors and friends.
The sellthrough business has shortened legs even more than did the copy-depth drive of the late 1990s. Most studio execs, like their theatrical brethren, say the first-week DVD sales are key. That's when studios realize the majority of a title's income. I see no hope or, indeed, interest in reversing this trend. It is merely a reality of the video business.
Independent retailers will have to adjust, as no doubt many scrappy competitors already have, by turning over inventory more quickly, by merchandising niche product that mass merchants don't, and by engaging in movie trading, heavy sales of previously viewed titles or other new business models.
It's not only the sellthrough business shortening windows. The video-on-demand bogeyman may finally be gaining steam. A recent study found that movies on demand (MOD) orders have surpassed pay-per-view (PPV) movie orders on In Demand Network. According to iND research, December 2003 was the first month in which there were more movie orders via MOD than PPV. Titles with 30-day windows averaged almost double the buy rates of titles with longer release dates.
All indications are that the savvy retailer of the future will have to pay heed to shortened windows and move product more quickly than ever. By next weekend, everyone in my neighborhood will have seen The Haunted Mansion, and they'll be looking for what's next.
By: Stephanie Prange
I got a call last week from a single-store retailer who was incredulous about the disparity in pricing between what he pays his distributors for a new release and what he can buy it for at Wal-Mart. “Isn’t this illegal?” he asked. "How can the studios and distributors get away with this?"
Indeed, the VSDA discussion board has been lit up lately with the same sort of discussion, some calling it the studios’ domestic version of the two-tiered pricing they have implemented in the United Kingdom. Retailers, for the most part, don’t seem to be buying the claim by studios and distributors that mass merchants are selling the high-profile hits at a loss to drive traffic into their stores as “loss leaders.” (Although it is interesting to note that the pricing of these titles at mass merchants does tend to rise after the first week or so.)
Over the past several years, it has been the practice of a large percentage of independent retailers to buy copies of new releases from big-box retailers. At first it started out as a way to fill-in copy depth on a title, but it seems that the practice has become a regular part of many retailers’ weekly buying habit. They buy what copies they need of one or two or more new-release titles from mass merchants as opposed to their regular distributor, since they can get those copies for anywhere from $1 to $5 cheaper.
As a matter of fact, Video Store Magazine is looking to find out just how often you buy inventory for your store from a mass merchant. Take a moment while you’re here to participate in our poll. We’re very interested in getting an idea of just how broad (and how deep) this practice has become.
One question that arises is, what is this doing to what is remaining of the industry’s distribution system as retailers question the value of their distributors? Besides getting terms and delivery, distributors have a much broader selection of titles to choose from than the mass merchants. That selection is an important element to every rental dealers’ business. Some retailers argue they have no sympathy for distributors and aren’t interested in buying from them for charity’s sake. But can they truly afford to see further erosion of their industry’s distribution system?
Many retailers have stated they certainly intend to stay with their distributors while continuing to buy from mass merchants either to fill in copy depth or maybe save some money by buying one or two titles at big-box stores as a hedge against what they feel they are losing in price difference for everything else they are buying.
A number of retailers are calling for some action to be taken by the iGroup or some other organization to try to rectify what they see as an injustice. Whatever form that action could take remains unclear. But what is clear is that independent retailers are taking the matter into their own hands to a certain degree, and that may lead to further challenges for the distributors left in this business.
By: Kurt Indvik
While some of the sharpest minds in Hollywood are debating the pros, cons and “what ifs” of the high-definition, next-generation optical disc, good old DVD continues to forge ahead, setting new sales records and changing the way consumers regard movies, from a simple transitory pleasure to something to buy, keep and cherish.
Not only does the DVD market continue to be on an upward sales trajectory, but the format's mass appeal is branching outward in some surprisingly ways.
We've all been monitoring the rise of mobile DVD — specifically, DVD players in SUVs and minivans to keep the kids occupied on road trips. Barney in the backseat, as it's referred to at those mobile electronics shops that advertise complete car setups for as little as $600 installed.
But Barney's getting some company. Tony Perez of Ground-Zero Entertainment told me last year that a good chunk of his urban and Latino films were being purchased by teens and young adults who considered front-dash DVD monitors a must-have bling-bling.
And now comes Time magazine with a report on yet another mobile DVD mutation, and one that gives “Barney in the backseat” a whole new (and salacious) meaning.
“Dirty Driving in the DVD Age” is the headline. The article talks about a legislative crackdown on “drive-by-porn — that is, folks playing blue movies in their cars.”
According to the article, parents whose children “have been exposed to the stuff by seeing the images as they pass a car are urging lawmakers to curb the road shows.” Already, the Tennessee state legislature has passed a bill prohibiting drivers from screening “obscene or patently offensive” videos in their cars if said videos can be seen by passing motorists. The measure is expected to become law July 1, according to Time.
The article notes that civil-rights advocates oppose this latest incarnation of the age-old attempt to legislate morality because it is too vague and may violate free-speech and privacy rights.
“Would a cop levy a fine for airing, say, an NC-17 flick like Showgirls or only for more explicit fare like Debbie Does Dallas?” Time asks. “Republican Mark Norris, a sponsor of the Tennessee bill, has an idea but can't quite put it into words. Scooby-Doo, he says, is fine, but ‘if it's another Scooby, that's another matter.’
Something to ponder, eh?
By: Thomas K. Arnold
In discussions with various home video distributors at the recent National Association of Video Distributors (NAVD) powwow in Santa Monica, Calif., Kirk Kirkpatrick, president of Waxworks, remarked that a strong rental industry discourages piracy.
He cited ever-shrinking rental rates and consumer-friendly return terms as psychological deterrents as potent as software firewalls against illegal copying of DVD movies.
“When a movie is $3.50 [to rent], the perceived [economic] value of watching a movie is lessoned,' Kirkpatrick said. “So why go out and make a copy?”
He said the movie industry has to look no further than its brethren, the music industry, to see how a stubborn devotion to the CD at the expense of the single (download) has resulted in soft sales and booming piracy.
“We owe a lot to having an older ‘brother' like that,” Kirkpatrick deadpanned.
Makes sense to me.
By: Erik Gruenwedel
A couple of recent articles in The New York Times and the Wall Street Journal told how studios are selling the same titles we buy here in other countries, notably Mexico and Russia, for about one-fourth of the price. The idea is that people will buy the authorized copies if they are affordable — a standard that is vastly different in other countries from what it is here.
The implication is that piracy here could drive the prices down here, too, if more people buy bootlegs or the folks on Capitol Hill get less sympathetic to the content industries.
You can't blame downloading for everything, though it's at the heart of a bigger truth: A lot of music retailers went down and record labels suffered losses because the industry wouldn't keep up with the times.
The music content providers hamstrung the retailers with format and prices. They tethered techie consumers to CDs and then overcharged for them (I know, because I recently got my $13.86 check from the class-action settlement the industry made for overcharging consumers for CDs for years).
In the movie industry, disc prices are not the same issue. Consumers abandoned CDs partly because they could get a movie and hours of bonus features for the same price. The value proposition is clear.
What else is clear is that pricing pressure will come from a different quarter in the United States — consumer trading. Whether it's sharing titles with friends, trading them to acquaintances or selling them to retailers, consumers have figured out that there are more economical ways to watch movies.
Most retailers are still focused on just selling off their rental copies that are no longer doing brisk trade. It's hard to predict what effect Blockbuster moving a third of its domestic store base into consumer trading will have on the marketplace, especially on independent dealers.
But I think this will end up being hard on the studios and on Netflix. I'll be quite surprised if Blockbuster doesn't reduce its buy rates on a lot of new releases as the trading model takes hold.
Sure, some customers still want to see the new release at street date. That's why Netflix plans to spend millions to beef up its new-release copy depth. It's why mass merchants use new releases as loss leaders every week.
For most of the rest of us, there still isn't any such thing as a video emergency. We can wait a week or two until the price comes down and still have something with trading value after we're done watching. That may not be good news for the suppliers.
By: Holly J. Wagner
I recently perused Target's DVD section and came to the conclusion that it has a very serviceable section for new releases. But I also thought there's an opportunity being missed on the sellthrough side in targeting catalog.
Certain titles, such as The Breakfast Club and Police Academy, were tossed on endcaps as if they were new releases, with nary an indication as to why a customer should buy these catalog entrants.
What about creativity? I have no doubt an indie retailer could come up with something to put the big box to shame. Teen and tween titles are all the rage in theaters. Let customers know that Molly Ringwald of The Breakfast Club was the Hilary Duff or Lindsay Lohan of her day. The film should still resonate with today's teens.
With the comedy Police Academy, a retailer might quote one of the famously funny lines or scenes.
As for the new releases, Kill Bill Vol. 1 could have been marketed with other Quentin Tarantino titles, such as Reservoir Dogs.
The big-box guys may offer low prices, but they make customers work too hard. I'd love to hear some innovative merchandising techniques from others.
By: Stephanie Prange
We have spent a good deal of column inches in Video Store Magazine on the subject of the burgeoning previously viewed and used trade-in economy in home video over the past year, and with good reason. It continues to have a major and beneficial impact on the video specialty business.
In this week's issue, we have several related items, not the least of which is our annual Top 100 report, which includes data on the top retail leaders in the sales of previously viewed DVD and VHS.
Of course, one of the big news stories of last week was Blockbuster's announcement that it would offer a DVD trade-in program, offering store credit for DVDs brought in, in about 2,000 stores by the end of the year. CEO John Antioco believes the business could turn out to be one of the chain's most profitable business lines, and, of course, is a great way to drive traffic into the store.
Blockbuster, meanwhile, generated some $222 million in the sale of previously viewed DVDs and VHS in 2003 to lead the pack, followed by Hollywood Video with $139 million and Movie Gallery with $57 million, according to Video Store Magazine Market Research. Check out this section of the Top 100 for the other seven retailers in this category.
It was also interesting to note that the previously viewed business has become significant enough that most specialty retailers are balking at DVD revenue-sharing deals because it would put limitations on their ability for quick turnaround of rental copies headed for the previously viewed bin, according to distributors meeting last week at the NAVD conference in Santa Monica, Calif. Coverage of that meeting is also in this week's issue of Video Store Magazine.
Earlier this year, the Video Buying Group released data that showed that its members were enjoying higher returns on their rental inventory investment when they put rental copies out for sale at about $9.99 - $12.00 after the copy's sixth to eighth rental turn.
Previously viewed sales are expected to top $1 billion in 2004. This year's Top 10 in this category saw previously viewed account for anywhere from 5 percent (Blockbuster) up to 16 percent (Easy Video) of their total annual revenue. How the business will fare in the future is anyone's guess, but it appears that the concept of trade-ins will fuel more product for sale, which ought to potentially change the dynamic of this side of the business. How will used (previously owned) prices compare with previously viewed (rented) prices, and what impact will that have on overall ROI for Blockbuster and other chains that try the concept?
I'd welcome an e-mail with your thoughts on this.
By: Kurt Indvik
The drive to come to market with a high-definition optical disc is accelerating as the deadline for HDTV draws nearer. At this point, it's looking like a two-horse race, with one camp pushing for a technological revolution and the other, more of an evolution.
Blu-ray uses a whole new technology that employs a blue laser rather than a red. HD-DVD, on the other hand, favors maxing out existing DVD technology in the belief that letting manufacturers keep the same plant and equipment to replicate the new high-def discs will keep costs down — and at the same time minimize consumer confusion by retaining the “DVD” tag, which Blu-ray won't.
The big challenge, at this point, is for both sides to come to the table and work out a compromise, much like the competing DVD camps did in 1996, a year before DVD's launch. This is a must — if two competing next-gen formats come to market, consumers will thumb their noses at both, and the launch will be a disaster, a train wreck every bit as devastating as the music industry's ill-fated push for a next-generation CD with two incompatible formats: DVD-Audio and SACD.
I'm assuming this won't happen on the video side — after all, look how neatly a compromise was brokered for DVD, and how successful the resultant hybrid has been.But even if all goes well and the first high-definition product hits stores in time for the 2005 holidays, I wonder how this rollout will compare to DVD.
Of course, both DVD and its high-def successor will coexist for some time, much like DVD and VHS. In each case, the new format required a new player, but in the DVD-vs.-VHS case, the differences in picture quality, sound quality and capacity were so great that despite a somewhat rocky launch DVD's success really was never in question.
But to notice the difference between DVD and a high-definition optical disc, consumers won't just need a new player, but also a new TV — a high-definition TV.And this, really, is where the next-generation product's fate lies.
There are two schools of thought here. One is that because ordinary DVD is still relatively young, you won't see the maddening rush to convert that you did with VHS. Keep in mind that when DVD arrived on the scene, the home video industry was in trouble — VHS penetration was north of 90 percent, and the novelty had long ago worn off.
DVD still excites people — and with the extra hardware purchase required to experience the benefits of high-def, the transition curve to Blu-ray or HD-DVD or whatever they call the compromise that will surely be hammered out (BVD? Sorry!) might be a lot less pronounced.
And yet there are those who believe the high-def disc will catch fire with the public even more rapidly than DVD. They note that HDTV isn't even going to be an option two or three years down the pike — broadcasts will be in high-def, and that's going to make consumers want everything in high-def. Furthermore, the rise of DVD saw a similar ascension of elaborate home theater systems, many already equipped with high-definition TVs.
“We'll have a waiting audience,” said a top executive with one of the rival camps. “They won't think twice about buying a player, so what I think you'll see is a faster adoption rate than DVD.”
Interesting point. We'll just have to wait and see.
But first, let's get a standard. Otherwise, I can tell you right now how fast the new format will catch on.
By: Thomas K. Arnold