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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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21 Dec, 2003

Will 2004 Be VHS' Swan Song?

For as long as DVD has been on its meteoric rise, industry executives from studios and retail have been cautioning colleagues not to prematurely abandon the VHS business. Of course consumer demand, brought on by a higher quality and better value product, and retailer buy rates, fueled by a more attractive ROI, spurred DVD to become the most successful and fastest growing consumer electronics technology ever. Still, until this year, VHS commanded the majority of rental revenue while DVD took over the sellthrough business.

Earlier this year DVD overtook VHS in the rental business as well, and its been gaining ground ever more quickly in that space, while now completely dominating the sellthrough business. And while I have been a strong proponent of encouraging both retailers and studios to continue to maximize the return on VHS, it's clear that this format is on its last legs and is losing support from both retail and supplier alike. That is made very evident when Disney, long the bastion of children's programming, a genre which was tardy coming to the DVD party for obvious reasons, sees its titles soar on DVD and trumpets that success.

Indeed, it's fair to say that 2004 may be VHS' swan song.

Our most recent reader poll on this web site shows the level to which VHS has fallen on the retail front. When asked what percentage of you product mix VHS would be next year more than 57 percent of the responding retailers said less than 10 percent. Only 10 percent of respondents said their mix would be 50 percent or more.

This week's edition of Video Store Magazine talks about the imminent demise of VHS. While major chains such as Best Buy and Circuit City eschew the format, smaller chains like Tom Warren's 10-store Video Hut in North Carolina are also watching VHS dwindle before their eyes. Warren, also the chairman of the board of directors at the VSDA, says he expects VHS to account for about 18 percent of his rental business and less than 5 percent of his sales next year.

A little more than a year ago VHS accounted for about 66 percent of the total rental business, according to Video Store Magazine. That share has dropped to about 36 percent. Next time this year we could be looking at a number that threatens to be in the single digits.

Needless to say, there is still money to be made renting VHS and likely there will be niche markets around the country that, for demographic reasons, still may do alright with the format for several years to come. Meanwhile, however, I'll be interested to see how the industry goes about disposing of this remaining VHS inventory in the coming months.

18 Dec, 2003

Studios Appeal to Collector Mentality With DVD Gift Sets

You've got to love the elaborate DVD gift sets the studios are coming out with this holiday season. Taking square aim at the collector mentality that's prompting people to buy movies in record numbers, the studios have assembled a formidable array of cool multidisc sets that include all sorts of extras — and we're not talking the electronic variety.

My three favorite add-ons shoppers can find this year with their DVDs:

1. Gollum. A collectable statue of the ugly little creature comes with the fancy The Lord of the Rings: The Two Towers gift set, from New Line Home Entertainment.

2. Tony Montana money clip. Packed inside the deluxe gift set of Scarface, from Universal Studios Home Video, this gold clip is engraved with the monogram of the doomed drug lord portrayed by Al Pacino in the classic Brian De Palma thriller.

3. The historical documentary Here's Looking at You, Warner Bros., a great video recap of one of the all-time great movie studios that's available only as a bonus DVD packaged with Warner Home Video's Warner Legends Collection, which contains three of the greatest movies ever made: The Adventures of Robin Hood, starring Errol Flynn; The Treasure of the Sierra Madre, with Humphrey Bogart; and Yankee Doodle Dandy, starring James Cagney.

That said, I am signing off for the rest of the year. Let me close by urging you to check out our year-end issue of Video Store Magazine, in which we recap the year with a chronological rundown of the top stories, month by month, and then put on our thinking caps — and ask key executives to do the same — for an exhaustive analysis of what it all meant.

Until next year!

17 Dec, 2003

Convalescing is Catch-Up Time for DVD Watching

I had a minor surgery Friday, which in itself was no fun at all. But it gave me a rare opportunity to veg in front of the TV catching up on some unwatched DVDs, guilt free.

After all, one of the reasons we collect DVDs at all is to watch the stuff we've missed while we were too busy interacting with humans to sit in front of the one-eyed monster. But that opportunity, at least for me, seldom presents itself. So I spent much of my weekend immersed in old favorites, guilty pleasures and new fare I just hadn't gotten around to yet.

I was surprised at how much I liked Pirates of the Caribbean: The Curse of the Black Pearl. I mean, how much mileage can you get out of a story built on a seven-minute theme park ride? Quite a bit, it turns out. I expected Johnny Depp and Orlando Bloom to be the only reasons to watch this flick, but it turns out the storyline was amusing and the references to the ride sprinkled throughout worked much better than I thought they could. I'm not sure how many more rides Disney can milk for movie plots — “It's a Small World” is maddening as a ride, so a movie would almost have to be saccharine-sweet.

In any case it was great relief from Pirates of the Middle East, aka the Saddam show. Call me cynical, but that capture was awfully coincidental with the revelation that Halliburton overcharged the government $61 million for fuel deliveries to Iraq. Time magazine managed to have a photo of Saddam on its cover on newsstands Monday, a feat that should win an Oscar for best choreography.

I switched off the news and retreated to Gigantic: A Tale of Two Johns. Plexifilm's rockumentary about the surreal band They Might Be Giants was a little too long, perhaps, but any fan of the band should see it. We've always known these guys were a half a bubble off plumb, but this movie makes us thankful for it.

I caught up on some episodes of Paramount's “CSI” series. I had started watching with the first season, but other priorities drew me off before I could finish the second. The show is great fun and great to keep your mind occupied while laying on the sofa convalescing with a warm dog in your lap.

I plan to watch more over the holidays — between parties and family gatherings. But it was nice to have some time to catch up before that.

16 Dec, 2003

We've Been Riding a Franchise Wave That's About to Crest and Subside

Besides the fantastic growth of DVD, the past few years have also afforded our business some great movie franchises and the marketing machines that go with them.

Warner's “Matrix” trilogy has made it way through theaters with the last of the series due soon on video. The Return of the King, the final installment in the “Lord of the Rings” trilogy, debuts in theaters tomorrow to great fanfare, wrapping up that lucrative series for New Line. The home entertainment division will likely unveil the final title in the series in theatrical cuts than follow with extended edition debuts -- a strategy similar to that for the first two installments in the film trio.

Warner's “Harry Potter” series, too, will undergo a change as the kids possibly grow out of their roles, the elaborate timing of the books and movies falters and the children who grew up on the books move on to more adult fare. Hopefully, the series will hold its fascination, but, like any, it's likely to fade at some point.

These franchises contributed to a “perfect storm” of the good kind in marketing DVDs. As the new theatrical hits came out, the DVDs of previous titles got a lift. The franchises also spawned games and, in the case of the “Matrix,” a collection of short subjects called The Animatrix.

It's going to be hard to match the success of these franchises, which has lifted the video business to new heights as DVD took off. Certainly, the format has developed a momentum of its own, buoyed by classics and other fare, but these driving franchises will be missed.

14 Dec, 2003

DVD's Unrelenting Pace Continues During the Holidays

The number of DVD releases is growing at an unrelenting pace as major studios with big vaults launch fusillades of catalog titles in between the theatrical hits. And secondary suppliers with a raft of lesser theatrical titles and a world of special interest programming continue to seek niche audiences in the growing DVD culture.

It's no different this holiday season as some 74 holiday-themed titles were released in time for shoppers' heyday (see cover story). It's a mind-boggling wealth of titles to choose from, and it points to the challenge that retailers of all shapes and sizes are going to continue to face in terms of product selection and merchandising as suppliers ratchet up their releases to maximize the continuing growth in DVD purchasing.

According to a recent DVD Release Report, the industry has delivered more than 30,000 DVD titles into the marketplace since the format's inception (not including adult). It took the industry only 58 weeks to reach the last 10,000 titles, according to the DVD Release Report, so you can see how much the pace has quickened as the format has reached critical mass.

Retailers continue to create more space for these releases (which right now comes at the expense of VHS) and, if they can, find new ways to make the burgeoning selection stand out so customers can find the titles.

I did a quick check of a couple of stores in my area (one independent and two chains) and was underwhelmed by the effort to merchandise what I thought might be a record year for holiday-themed titles. The indie had no display whatsoever dedicated to holiday-themed videos, and the two chains each offered fairly meager endcaps sporting about a dozen titles.

Now it may very well be that a majority of independents and chain store managers in other areas did more with the holiday product, but I have to wonder if retailers are becoming too maxed out with new releases to be able to find the space (and the time) to make much of anything stand out these days other than the blockbuster new releases. That means that the usual challenge for customers -- finding that neat, lesser-known but just as entertaining title -- is getting increasingly more difficult.

It's clear this onslaught of titles we're seeing will continue to squeeze shelf space.

Meanwhile, retailers need to continue to reassess their merchandising and find as many opportunities to build not just price-driven displays but better themed efforts and other creative approaches to bring out those titles for customers to find and buy or rent -- because there are still plenty of unreleased titles in studio vaults.

11 Dec, 2003

Buying Is an Impulse — and DVDs Are No Exception

I've gotten a lot of responses to my column of last week in which I urged video rentailers to start aggressively selling DVD or else risk extinction. Some agreed with me, including one retailer who wrote to tell me that he only carries DVD, everything's available for sale or rent, and his business is up 60 percent on the sales side and 50 percent on the rental side.

I also heard from retailers who in essence told me I am full of hooey, although they didn't use that word.

I stand by what I wrote, and I will even go a step further: I wonder if the big rental chains like Blockbuster and Hollywood could even become magnets for selling DVDs rather than rentals, if they wanted to.

You see, in the nearly two decades since video stores effectively ceded the sellthrough business to the mass merchants through their own inertia, consumers have been trained to buy a certain way, and that way ain't in the video store.

Especially now, when every movie is available for sale straight out of the gate, the impulse factor is more important than ever. Chains like Wal-Mart realize this and feed on it. They put bargain bins in high-traffic aisles, and fill them not with budget crap, but with high-quality catalog titles from major studios they picked up for a song. The guy who's buying diapers and a new toilet flush mechanism walks by, something catches his eye, and he begins scouring the bin for $5.88 treasures. As soon as he's done, he starts walking until just a few feet away there's a rack of Pirates of the Caribbean or Finding Nemo for $14.88. He's hooked again, and since this rack is right outside the dedicated DVD section, guess where he heads next.

That's how we buy videos — or, more specifically, DVDs — and short of trying to beat the discounters at their own game, there's little the video specialty goliaths can do about it.

Short of carrying toilet paper and Tide, Blockbuster and Hollywood may be out of luck.

9 Dec, 2003

What A Difference A Year Makes

Last year at the Western Show, the cable industry event for the West Coast, all the buzz was about Internet Protocol (IP) video-on-demand (VOD). Movielink had just been launched in stealth mode and Starz Encore announced an IP add-on subscription for the movie network's subscribers.

This year the cablers, like most in the packaged media industry, seemed to have moved on from the IP hype and, while the talk was still about VOD, it was less about content and more about competion.

The cablers see true VOD (as opposed to NVOD, SVOD and the rest of the alphabet soup) as an imperative. Not only because DVD is a breakout hit with consumers, but because the threat of Rupert Murdoch getting his hands on DirecTV looms even larger now than it did last year.

True VOD is a challenge for cable or satellite. Satellite, which must beam the same program to a lot of receivers at once, has gone whole-hog for TiVo and similar digital video recorders (DVRs). Over this year DirecTV and Dish Network have both rolled out DVR options and priced them very aggressively for the holidays. Cablers, who traditionally have been limited to 33 starts at the same time because of the headend equipment they need to feed programming, have rolled out a variety of options that let consumers get more movies and shows in more convenient ways.

At the show this year I have to admit I was surprised, not to see that the standing-room-only crowd at a panel discussion called “VOD: Who's Watching What?” but that every time the presenters put a chart or graph up on the screen, a dozen or so people whipped out digital cameras and took grab shots of whatever little tidbits of research they could get. I've been to a lot of trade shows, but I've never seen a feeding frenzy quite like that before. Well…. Maybe at AVN.

The one constant is consumers. Consumers still want the same things they've always wanted: commercial-free viewing when and where they want it. So far that has worked in DVDs favor.

The cablers know VOD is an imperative to stay competitive with satellite and DVRs, not to mention DVD. They know it reduces subscriber churn and makes for happier customers. They know it's the only way they can deliver a DVD-like experience and make no mistake, they aren't waiting around to do it.

The Western Show won't be around next year for a look back at how the cable companies have done in delivering on the promise of VOD, but I suspect the packaged media cash registers will tell the story. Let's hope it has a happy ending.

8 Dec, 2003

Entertainment Can't Expand Beyond 24 Hours a Day

Television broadcasters are wondering where all the young men have gone. A recent dropoff in Nielsen viewership by the 18-34 male age group has broadcasters worried. Nielsen reports men are watching DVD or video 9 percent more and playing video games 33 percent more, cutting into their TV viewing time.

While entertainment gurus often talk about the revenue pie getting bigger, there are only 24 hours in a day. I think Blockbuster and the other rental chains are coming up against a problem similar to their broadcast brethren. Consumers are buying more and more DVDs – for gifts and for themselves — and it looks as if they are renting less.

Hollywood last week warned of a slowdown in rentals for the fourth quarter, resulting in a stock fall. Blockbuster in October made a similar warning about a revenue shortfall, in part blamed on a drop in rentals.

Much is made of the fact that consumers may be buying titles instead of renting them, but I don't think that's the whole picture. There are many more viewing opportunities in the home – from DVDs consumers already own, to those they borrow from neighbors, to extras on those DVDs, to video games, which can eat of hours and hours of time, to surfing the net.

A rental isn't just competing for viewers' time with a single sellthrough title viewing, pay-per-view or video-on-demand. It competes with all the other entertainment pastimes viewers can pursue to fill up that 24-hour day, including added viewing of DVDs they or their neighbors already own. As the fourth quarter ratchets up, consumers who buy DVDs or get them as gifts will find less and less time to rent. Between holiday shopping and get togethers with friends and family, they'll likely pop in a DVD from their own shelf.

7 Dec, 2003

Responding to the Holiday Impact on Rentals

Our most recent poll on this Web site asked retailers how they compete with the big chains during the holidays, when competition is fierce and pricing is predatory.

Surprisingly, the majority of respondents to the survey (55.5 percent) said they make no seasonal adjustments to their business to try and counteract the threat of the heavy emphasis on sellthrough video and the loss-leader kind of pricing that's ubiquitous during the holidays and becoming prevalent throughout the year. More than 22 percent of respondents did say they put together some sort of holiday-based giveaway, contest or drawing.

In our report on the results of “Black Friday” in this week's issue of Video Store Magazine, it seems that low-ball pricing was even more extreme this year. Major new releases were being seen from a low of $11 at Wal-Mart to early-bird sales of $11.99 at Best Buy to $12.99 at Circuit City. And, of course, we have seen some dramatic price promotions on DVD players that have literally caused stampedes at some stores. Even catalog seemed to be selling well, according to John Hastings, president of Hastings Entertainment in Texas, who was reporting a stellar holiday season.

Not surprising, especially if you were one of the retailers who did not adjust your business in this challenging time for rentals, you likely saw your rental business drop. VSM market research shows that rental spending for the first two months of this fourth quarter dropped 5 percent, compared with the same period last year. And if rentals of new releases are being impacted by sellthrough, data shows it's hurting catalog business as well. Retailers report that catalog rentals, as a portion of their total weekly rentals, is less this year than it was last year.

Certainly, the holiday period tends to enhance the impact the sellthrough business is having on the rental business, and it should be pointed out that VSM market research notes that year-to-date rental spending is up more than 9 percent. I am not one to believe, as some do, that the rental business is going to quickly spiral downward in the next year or two. However, those retailers who do not ratchet up their own new and used sales efforts and rental specials during the holiday season to combat the drain on their business risk losing a slice of their customer base every season, until there are no more seasons left for video rental.

4 Dec, 2003

Rental Stores Need to Become the Place to Buy, Not Just Rent

With yet another chain reporting down rental revenue (in this case, Hollywood Entertainment), it is fast becoming clear — as if it weren’t clear already — that the big thundering rental chains are going to plod their way to extinction if they don’t establish themselves as the place to BUY movies, not just rent them.

And that’s going to be a challenge, given the lock on the market that the mass merchants and club stores have had since the baby-step days of video sellthrough.

No wonder the rumor mill is grinding with speculation that Sumner Redstone wants to dump Blockbuster. No wonder Blockbuster is doing everything it can to present itself as a movie-selling store. No wonder the indie stores that are still in business are focusing on used-movie sales or even hardware sales — anything, ANYTHING but rental.

Will it work? Can today’s rental giants successfully transition into movie-selling emporiums? Doubtful, although here are five drastic steps, directed at Blockbuster but critical for the entire spectrum of rental dealers to note and to act on:

1) If Wal-Mart is selling a hot new release for $14.88, you’d better do the same — and don’t charge a penny more. Likewise, if the day after Thanksgiving Wal-Mart is selling The Lion King DVD for $11, match or beat their price. And don’t bitch and moan about taking a bath — for Pete’s sake, send people into Wal-Mart early in the morning, before you open, to pick up an armload or two, and then sell them at cost.

2) Lose those stupid “guaranteed rental” ads. Believe me, no one cares anymore. I don’t know anyone who this week rushed out to rent Pirates of the Caribbean. But I know a heckuva lot of folks who ran out to buy it at Wal-Mart or Target, because the latest blitz of Blockbuster “guaranteed rental” ads reinforced the notion in their minds that the video store is where you rent movies, not buy them.

3) Bump up your selection and include budget product. Take a cue from the mass merchants and at least create the perception of low pricing. I’ve seen several people scan the $5.88 bins at Wal-Mart and then pick up Shrek, from the main DVD section, for $21, because they’ve been misled into thinking Wal-Mart has the best price on everything. There’s no reason rentailers can’t play that same game.

4) Power up your commitment to used DVDs — and stop calling them “previously viewed.” Encourage customers to come in and exchange their oldies for new titles, but be selective in what you take back. You don’t want a meager selection of recent hits, but you don’t want a ton of crap, either.

5) Change the name. Blockbuster is synonymous with movie rental. Blockbuster: The Movie Store or some such derivation could help change that perception.

John Antioco, if you are reading this: Send the check to Thomas K. Arnold, care of this magazine. I’ll be waiting.