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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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20 Dec, 2002

Don't Price Yourself Out of Your Market

There's a new reality in the home video business. It is this: retailers who don't drastically discount prices on new releases, at least for the first week or 10 days, might as well shut their doors and hang a “Gone Fishin’ sign on the front door.

Several studio executives with whom I've spoken in the last few weeks have marveled at the pervasive deep discounting of new video releases by such retailers as Wal-Mart, Target Stores and Best Buy. It's a practice in which they've engaged for some time, but never have prices been this low on so many titles. It's gotten so that virtually any new DVD release can be purchased for less than $15 — a most attractive price point for impulse buyers as well as multiple purchasers.

And therein lies the rub. The mass merchants have a history of lowballing prices on everything that's new, then they make up for whatever money they might have lost by selling additional units of older items that typically sell at or just below list price. In the short term, it might cost them some dough — in May, Wal-Mart was selling copies of Harry Potter and the Sorcerer's Stone for more than $2 less than what reliable sources say the chain paid for them — but in the long term, it helps perpetuate the perception that they've got the best prices in town, period, even if they don't.

Thus you find things like Wal-Mart's shelf price for the Monsters, Inc. DVD shot up from $14.77 to $18.77 overnight. Or copies of Shrek selling for $22.98, the equivalent of list — and a full six bucks less than the first-week price in November 2001. The mass merchants are serious about being a category leader in DVD and they're doing exactly what it takes. And I'd bet all three of my sons that at the end of the day, Wal-Mart comes out ahead of the game, with customers lured by cheapo prices on new releases walking out with a handful of other DVDs with decent margins. They don't call ‘em “loss leaders” for nothing, you know.

Best Buy has adopted this strategy as well, and just look at how robust their software sales are. The only thing dragging the company down is its Sam Goody mall music stores, which have traditionally charged higher prices on both CDs and video software than the big-box discounters.

This business has become increasingly price-sensitive. Retailers who are trying to carve a serious stake in sellthrough but aren't willing to compete on pricing are out of luck. This applies not just to video, but also to music. Tower Records and Video, for years one of the strongest audio-video combo chains in the country, is in serious financial trouble. I look at their ads and I instantly diagnose the problem: They're advertising the latest Britney Spears album for five bucks more than Wal-Mart or Target.

Consumers are bombarded with fliers, circulars, mailers and newspaper inserts, all of them hawking the same “flavor of the week” hit products. The prices on those hit products are the barometer by which consumers measure the entire operation. It does Tower no good to have twice the selection of CDs and DVDs as Wal-Mart, or better prices on catalog titles than Target.

You need to get the customer into the door, and the only way you're going to do that, in today's media-saturated environment, is by beating, or at least matching, the competition on price.

That's how you get them into your store — and once you've done that, you've won.


17 Dec, 2002

Viewers are Taken with original cable programming

Since I started writing about the home video industry, I've become accustomed to a sort of fortressing mentality among video rentailers, especially indies, that seems to regard every potential competing technology – pay-per-view, video-on-demand, cable and satellite – as poaching on its prerecorded territory.

But after a trip to Broadband Plus a couple of weeks ago, it's becoming more and more clear to me that is a fallacy.

It may have been true at one time, but the cablers especially have realized that original programming is their ticket into homes. Far from wanting to squash packaged media, the cablers are counting on packaged media to offset the production costs of their original series and movies.

HBO has been leader of the pack. It's not only the popularity of The Sopranos that led HBO to put the show (and many of its other original programs) on cassette and DVD. The average cost of original programming for cablers is $1.2 million per program, according to Matt Blank. That cost is way lower than most broadcast networks spend on shows and not even close to the cost of a studio blockbuster theatrical hit.But what happens when your cable show becomes the water cooler show of the season? Four things, at least: it increases demand for the show, increases demand for the network, creates a market for a less transient form of the show and, in all likelihood, ratchets up the stars' salary demands.

That means the programs hit a sort of equilibrium, in which just about the time a show is hot enough to trigger big salary disputes, it's also hot enough for previous seasons to sell on tapes and discs to make up the difference.

The cable networks are starting to bank on that. A great example is “Steven Speilberg Presents Taken, a ballyhooed miniseries that catapulted Sci-Fi Channel's ratings beyond its wildest expectations. As the network avers, the show gobbled up its bandwidth for two straight weeks, pushing many other shows off the schedule as the channel re-aired the entire series several times in different time blocks. It also made Sci-Fi the leading basic cable network in prime time for the first time – for two weeks in a row. And as I watched some of the catch-up marathon last Saturday, I saw the crawler line across the bottom of the screen: “Coming to DVD in 2003.”

I'm interested to know who rents boxed sets and how such rentals are structured. Or is the boxed set just a sellthrough and gift phenomenon? If you've tried renting boxed sets to your customers, Buzz me back.


16 Dec, 2002

Rapunzel, Rapunzel…where are your toys?

If you're shopping for gifts for little girls this holiday season, you'll notice one of the hottest selling toy franchises this year is the Barbie as Rapunzel series. I know I've been to numerous Web sites where the toys are no longer in stock (my daughter has requested many of the items in the series). In fact, respondents picked Mattel's Barbie as Rapunzel doll as the top toy for the season in marketing firm Playdate's survey of toy industry retailers.

What's striking about this is that the toy series is based on a direct-to-video title. That DTV production, distributed for Mattel by Artisan Home Entertainment's Family Home Entertainment label, is the second such program for the video marriage and it's shaping up to be a great franchise for both.

These sort of synergies don't always work. Many a store found itself with too many Star Wars toys to unload after overestimating their appeal during the release of Episode I. Even when these partnerships do work, it's usually a television series or feature film driving the toy franchise -- such as the Harry Potter phenomenon – not a direct-to-video series. So the success of the Barbie franchise is a great testament to the marketing acumen of the Mattel/Artisan marriage, as well as the quality of the product.

I wonder, however, if all video retailers have capitalized on this tie-in by offering the dolls and various accessories. I know it's hard for rentailers to compete with mass merchants in the licensing arena, but getting in on the hottest toy of the season should add excitement, if negligible profit, to a rental store. I know I'd buy the stuff wherever I could find it this holiday season. I'd be interested to hear from rentailers who've made a successful go of it selling licensed items.


15 Dec, 2002

Ratcheting Up the DVD Buy

It's a mixed up, crazy dual format world in the home video business going into 2003 and it will remain a struggle for both studios and retailers to juggle their DVD and VHS businesses even as they participate in the creation of the DVD era.

Figure that of the 96 million U.S. homes with VHS players, say 38 million also have a DVD player going into 2003 (I am averaging a couple of estimates here from several sources). Also figure that, according to at least one estimate from Warner Home Video, 10 million households have two DVD players. Now think of the rental or retail combinations any one buyer can represent when they walk into a store. I won't even try to factor into the mix DVD-enabled video game consoles.

Despite the stupendous and exciting growth in DVD, consumers are still very much fractured in their use of home video platforms, even as they continue to embrace the concept of collectibility of movies (predominantly on DVD) while still visiting the rental counter (where VHS still has the edge.)

It's clear from the current poll on this Buzz page that retailers are committing themselves to building DVD in rental (and, of course previously viewed sellthrough), since more than 56 percent of the poll respondents say they intend to expand their DVD inventory by more than 21 percent going forward. But they are also fully aware that VHS still drives the majority of rental transactions (56 percent for the month of November, according to Video Store Magazine market research). The VHS rental business continues to decline, however, and as one studio head told me last week, retailers know they won't go wrong heavying up on their DVD buys.

On the retail/sellthrough side, a number studio execs express surprise and confidence that there is still a very strong VHS market, even as they continue to see 65 percent DVD sales on most major new releases, on average. The fact is they have to do a lot of title-by-title consumer surveys polling intent to buy by platform to try and get a handle on how to plan for DVD/VHS splits on new releases. The multiplatform household of today means any number of combinations is possible for any one title in terms of positioning the DVD and VHS product, especially VHS pricing and marketing. And that's going to continue for the next 12 months or more.

Despite the legitimate hype over DVD, this will still be a dual-personality business in 2003.


12 Dec, 2002

Christmas Stocking

We're seeing an interesting phenomenon this fourth quarter: While most of the high-profile video releases are generating wads of money, we're not seeing records being broken almost every week, the way we did in the fourth quarter of 2001.

Indeed, except for Monsters, Inc. and Spider-Man, there's been no real mega-hit of the caliber of last year's Shrek, with the top-grossing theatrical blockbusters generating proportionately less on video — even with the DVD feeding frenzy that's going on at retail — than some of the smaller titles.

What's going on here? Is the bubble bursting?

Don't count on it. If last year was when DVD really took off, this is the year it's circling in orbit. DVD has made home video a true commodity business, and the peaks of the launch years have simply leveled off, as consumers buy DVDs the way they used to buy CDs.

People aren't rushing out to buy one hit title, all at once. They're going into Best Buy, or Wal-Mart, or Target, or even Blockbuster, and they're grabbing a handful of titles they want for their burgeoning movie libraries.

They're buying more DVDs, overall, with the narrow focus on the hit-of-the-week widening into a gaping “Man, can you believe all the cool stuff that's out there?”

Men In Black II isn't going to pull Joe Consumer into the store the way it would have last year. Instead, Joe's buying stuff for all the relatives who didn't have DVD players last Christmas, but do now. He may still get Men In Black II for himself, but he's in no hurry. It's not like there's going to be shortage, given the huge quantities Columbia TriStar shipped into the market in what industry observers are calling the “dump and run” strategy, perfected just last May by Warner Home Video with Harry Potter and the Sorcerer's Stone.

The hits are still selling huge quantities, especially on DVD, but their proportionate numbers may be down as consumers realize there's a heck of a lot of stuff out there. And if you check out stores that really emphasize gift editions, you'd be hard-pressed to spend $20 on Mr. Deeds.Here are some of the goodies I'd like to find under my Christmas tree:

  • Rhino Home Video's incredible four-disc set of musical highlights from the “Ed Sullivan Show,” including Elvis shaking his booty and the Beatles bringing down the house.
  • Universal's Back to the Future trio of films, which has aged remarkably well.
  • Paramount's gorgeously restored Sunset Boulevard, in which the packaging is so nice I want two just so I can put one away somewhere.
  • Disney's Walt Disney Treasures tins, especially the collection of vintage black-and-white Mickey Mouse cartoons dating all the way back to “Steamboat Willie.”
  • New Line's top-of-the-line Lord of the Rings set, the one with five discs and some really cool bookends.
  • MGM's latest James Bond set—all special editions. Wow.
  • And then there are all the catalog titles bowing on DVD for the first time—too many to name, and getting more numerous as we approach the magic 40 percent penetration mark.

    No wonder there are no standouts. Who needs a spotlight-hogging high-wire act when the whole ceiling's been raised?


  • 10 Dec, 2002

    Break Out the Ruby Slippers...

    While reports and speculation about retail performance are staples of every holiday season, this year's reports have been more of a mixed bag than in previous years. In fact, they look a bit too much like the Scarecrow in The Wizard of Oz giving directions by pointing in opposite directions at the same time.

    Every week brings a new report about how consumer confidence is up, no it's down but we're expecting improvements in the job market; but whoops! employers trimmed their payrolls again and the “recovery” is even more jobless this week than last.

    In the midst of all that retail has been this year's barometer. It's become almost a mantra that home refinancings have put money into consumers' hands and spending the profits has kept the economy afloat, a cycle economists have warned can only hold up for so long.

    In last week's installment, analysts were crowing over big Black Friday sales, but warned that people were further into their annual shopping at the Black Friday starting gate than in years past.

    This week's update from UBS Warburg and Bank of Tokyo-Mitsubishi notes chain store sales were down 2.3 percent in the week ended Dec. 7, which seems to bear out last week's conclusions. The report offered this bitter assessment: “It's beginning to look a lot like Christmas, as the saying goes, but unfortunately, right now it is looking a lot like Christmas 2000 – which was a dismal retail season.” The analysts predict the best of this holiday season is already fading in retail's rearview mirror.

    While cheap DVD players are chumming the software feeding frenzy this year – and video retailers are right to get it while they can – they are also foolish to think that can go on forever. Consider writer Igor Greenwald's commentary for Smartmoney.com:

    “A year ago, 25 percent of U.S. households owned a DVD player, according to one survey. That figure could well double by January as the DVD tries to almost single-handedly save Christmas. But what about next year? God forbid some bank should order up a million cheap freebies to lure credit card borrowers: Some DVD players are already as cheap as toasters.”

    By itself, that may seem like a warning that would benefit software retailers at the expense of hardware vendors, but it's only part of the picture.

    Software retailers can count themselves lucky this year, but even with a big, happy bump in DVD-enabled households, combined DVD and VHS rental spending for November was down 22.2 percent from the same month last year (and more than 11 percent year-to-date). The rental bug is hurtling toward an end that's starting to look a whole lot like sellthrough's windshield.

    Increasing DVD penetration is a boon for our industry, but like all good things and like the dot-com bubble of the 90s, this too shall pass. Anyone who thinks their business can survive on rental alone might as well click his heels together three times and chant, “There's no place like rental…”


    10 Dec, 2002

    Break Out the Ruby Slippers...

    While reports and speculation about retail performance are staples of every holiday season, this year's reports have been more of a mixed bag than in previous years. In fact, they look a bit too much like the Scarecrow in The Wizard of Oz giving directions by pointing in opposite directions at the same time.

    Every week brings a new report about how consumer confidence is up, no it's down but we're expecting improvements in the job market; but whoops! employers trimmed their payrolls again and the “recovery” is even more jobless this week than last.

    In the midst of all that retail has been this year's barometer. It's become almost a mantra that home refinancings have put money into consumers' hands and spending the profits has kept the economy afloat, a cycle economists have warned can only hold up for so long.

    In last week's installment, analysts were crowing over big Black Friday sales, but warned that people were further into their annual shopping at the Black Friday starting gate than in years past.

    This week's update from UBS Warburg and Bank of Tokyo-Mitsubishi notes chain store sales were down 2.3 percent in the week ended Dec. 7, which seems to bear out last week's conclusions. The report offered this bitter assessment: “It's beginning to look a lot like Christmas, as the saying goes, but unfortunately, right now it is looking a lot like Christmas 2000 – which was a dismal retail season.” The analysts predict the best of this holiday season is already fading in retail's rearview mirror.

    While cheap DVD players are chumming the software feeding frenzy this year – and video retailers are right to get it while they can – they are also foolish to think that can go on forever. Consider writer Igor Greenwald's commentary for Smartmoney.com:

    “A year ago, 25 percent of U.S. households owned a DVD player, according to one survey. That figure could well double by January as the DVD tries to almost single-handedly save Christmas. But what about next year? God forbid some bank should order up a million cheap freebies to lure credit card borrowers: Some DVD players are already as cheap as toasters.”

    By itself, that may seem like a warning that would benefit software retailers at the expense of hardware vendors, but it's only part of the picture.

    Software retailers can count themselves lucky this year, but even with a big, happy bump in DVD-enabled households, combined DVD and VHS rental spending for November was down 22.2 percent from the same month last year (and more than 11 percent year-to-date). The rental bug is hurtling toward an end that's starting to look a whole lot like sellthrough's windshield.

    Increasing DVD penetration is a boon for our industry, but like all good things and like the dot-com bubble of the 90s, this too shall pass. Anyone who thinks their business can survive on rental alone might as well click his heels together three times and chant, “There's no place like rental…”


    9 Dec, 2002

    Every Big Catalog DVD Release Is Now a ‘Five Star' Title

    20th Century Fox Home Entertainment's has cancelled its “Five Star” line of beefed up DVDs, but the move actually is evidence of the popularity and ubiquity of extras-packed discs, rather than an indictment of them.

    Special editions are not quite so special any more. Studios have done a great job of offering numerous extras to consumers at a reasonable price, pulling out all the stops to produce a truly fine product on catalog titles. In fact, the product is so desirable that catalog titles can often be treated like new releases, with the event marketing to back them up. Studios don't need a special line to call attention to great DVDs. The titles speak for themselves.

    “We can move on to producing catalog [special editions] as event releases in their own right rather than as part of a collection,” said Fox SVP of marketing Peter Staddon during a n online chat with the Home Theater Forum.

    Many marketing execs have noted that catalog titles on DVD have all the punch of new releases. Witness the special bashes thrown by Paramount for “The Godfather Trilogy” and Grease, and by Artisan Home Entertainment for Reservoir Dogs. In the old VHS sellthrough days, a spccial line and flashy silver packaging seemed to add value to the cassette. DVDs simply don't need it; they stand on their own.


    8 Dec, 2002

    The Holiday Movie Ritual

    With our time to enjoy the holidays increasingly crimped by workload and commute times, we are even more, I think, looking to movies to help us get a quick fix, a jump start to generating that good old holiday cheer. And nothing beats home video for delivering the films we grew up on and have become part of our holiday ritual.

    Last week I performed one of my own holiday rituals that never fails to get me into the mood. I sat down and watched White Christmas on video. Most years I have watched it by myself, since I am the only person in the household who can't get enough of Bing, Danny and those Hanes sisters. This year, however, I found that a neighbor buddy of mine was also somewhat fanatical; about the film (he even has a tree ornament of the White Christmas quartet), so while our wives were watching something typically grim on the Lifetime Channel, we two he-men settled into the couch for a rousing time of singing and dancing (OK, really, we just like to watch the very lithe Vera Ellen strut her stuff) and mountain lodge horse play leading to that ultimate moment when the fellows' Army unit comes back for one more salute to “the old man.” It just isn't Christmas for me if I haven't seen it at least once a year during the holidays.

    Alright, I'll admit it's a little weird, this compulsion to watch White Christmas, but hey, it could be worse! I could be daft over Ernest Saves Christmas which, according to a recent poll by the sellthrough chain Suncoast, was overwhelmingly voted as the worst holiday movie ever made. The chain surveyed some 2,400 people across the land and they found that men and women tend to differ on the absolute favorite holiday film. (My wife, for instance, can take or leave White Christmas, to my utter astonishment. Her favorite, and it's a good one, too, is The Santa Clause.)

    Maybe typically, the movie most men voted as their favorite holiday fare was National Lampoon's Christmas Vacation. Hmm…, that does indeed express the pain and agony of the holidays. For women the answer was the classic It's a Wonderful Life. No surprise there. The best animated movies ever both men and women agreed, was How the Grinch Stole Christmas.

    The fact is that everyone has an opinion about a holiday film and likely will go out of their way during the holidays to see it. It's always a happy holiday for the video business.


    5 Dec, 2002

    Scenes I'd Like To See...

    I'm getting calls left and right from the national media, which all of a sudden seems to be “discovering” DVD — and concluding that it's not a fad, after all.

    The New York Daily News did a story, using our research, on how DVD is leading to bigger and bigger video sales. The Buffalo, New York, newspaper followed, with the reporter asking me to quantify how big DVD has become.

    Other metropolitan papers around the country have also been calling about DVD and I recently finished a radio interview with a news-talk station in the Big Apple on the DVD phenomenon.

    Now, I hear the New York Times is working on a story with a futuristic slant, focusing on DVDs, like Unfaithful, that contain alternate endings.

    Quite frankly, that's my favorite special feature of them all. I like having director commentaries and music videos, but I don't generally watch them, unless I'm really into the movie.

    But I do make it a point to run through all the outtakes and deleted scenes, and on the rare instances when I come across a DVD with alternate endings, I'm in heaven. Deleted scenes can really change the way you view a movie; alternate endings can actually change the movie.

    But as much as I enjoy them, I am also realistic, and believe that alternate endings will never be the Next Big Thing in the special features department.

    Adding a different ending or two would change the story from what they released to theaters. After the pre-theatrical release focus groups settle on an ending, Hollywood types hate to change them. Heaven forbid fans prefer one of the alternate endings to the one from the theatrical version! What would that do to a fragile Hollywood ego?

    If there is a trend in the development of special features, I think you have to go back to what Disney's Bob Chapek said over the summer at our DVD at 5 conference — that instead of more special features, you're going to see better special features.

    DreamWorks takes the cake on this one, with the delightful “make a movie” feature on Spirit. This is one of the most entertaining and innovative extras I've seen, and definitely shows they put some thought and creativity in assembling this DVD.

    With that in mind, here's a list of some special features I'd like to see on upcoming DVD releases.

    The Ring — This one's a no-brainer, as far as I'm concerned. Slap the deadly videotaped film on as a standalone featurette, then issue a special/deluxe/collector's/whatever edition that includes the original Japanese version, and then maybe even a four-disc set with all three Japanese films (the original, along with the prequel and the sequel). Four discs might sound like a lot, but hey, if it worked for Pearl Harbor…

    8 Mile — An Eminem concert video.

    Harry Potter and the Chamber of Secrets — More set-top games, a tribute to Richard Harris and a virtual reality flying car.

    My Big Fat Greek Wedding — An interactive recipe guide to some of the fabulous food served at the wedding, and a minidocumentary on Ouzo and maybe a Web link (sponsored, of course!) to order some online.

    Die Another Day — An interactive Aston-Martin dashboard that lets you put yourself in the action and control the car through some of the scenes, and a documentary on the Bond girls through the years.

    That's it. If any studio wants to offer me a marketing job, you know where to find me.