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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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2 Feb, 2003

VHS Pricing Will Have to Change

The pressure continues to build on VHS and its continued viability in the market, at least as it's handled for new major theatrical releases. I expect we'll see studios trying different approaches to this challenge in 2003.

Fox's new One Price Lease program is a response to this pressure and we'll have to see how that program works out. My own opinion is that most retailers will shy away from any complicated or goals-based programs and by the end of 2003, if not sooner, you'll see VHS priced equally with DVD on all new theatrical releases.

It's all about cash flow.

While no one at Blockbuster is saying it, I think there was a bit of a message in Big Blue's recent .decision not to carry VHS versions of New Line's Simone and Buena Vista's Tadpole. And it has more to do with available dollars than the intricacies of audience preference for one format over the other. The fact is that with a focus on volume buying of DVDs for rental and sales (new and previously viewed), regardless of title VHS is just going to be the victim when a decision is made to use cash for other purposes.

The two titles Blockbuster shunned on VHS were both small players during their theatrical run (Simone $9.7 million, Tadpole $2.8 million), though Al Pacino's starring role in Simone gave it an extra boost. The VHS versions were priced for rental. Blockbuster didn't offer much deep reasoning behind the move other than to say its purchase decisions are based on “what our customers want and the economics of the product.”

Economics, indeed. Consider that last week, Paramount's Serving Sara ($16.9 million box office), not a big hit by any means, debuted on Blockbuster shelves in both DVD and VHS formats (the VHS priced for rental). The Banger Sisters, from Fox, arguably a more mainstream hit with star power ($30.3 million), yet not a world beater, also appears on Blockbuster shelves in both DVD and VHS (priced for rental).

Blockbuster spokesperson Liz Greene told VSM not to read into this any trend, from the retailer's standpoint, of no longer carrying rental-priced VHS. Certainly the fact that Big Blue picked up rental VHS on the above-mentioned titles bears this out. But I won't be surprised if we see Blockbuster make these choices again soon, and with more frequency.

Cash is always king and operating expenses for retailers big and small are going up, most notably in the area of insurance. Retailers are reporting 30 percent to 50 percent hikes in their employee health and business insurance policies. Meanwhile retailers are trying to react to the burgeoning DVD audience by adding more depth in their DVD purchases of new releases and making an investment in converting VHS catalog to DVD as they can. Something has got to give.

While the sheer force of DVD adoption hammers VHS business, studios' two-tier pricing practices on many new releases will only add fuel to the mounting funeral pyre for the videocassette.


30 Jan, 2003

Too Little, Too Late?

The woes of the record industry are rearing their ugly heads at retail. Long after the record companies began yammering about how downloading is cutting into their trade, retailers are feeling the brunt of the slowdown in CD sales.

And while a year ago many were struggling to keep afloat, now some of the key music dealers are sinking — fast — as evidenced by Wherehouse Music's Chapter 11 filing and Best Buy's closure of a formidable chunk of its mall-based Sam Goody music store fleet.

DVD, ballyhooed as the savior of music stores at last year's National Association of Recording Merchandisers (NARM) convention, isn't going very far in plugging the leaks.

Smaller record dealers still have problems in getting product, while the big chains are victims of the mass merchants aggressive push into this sexy new business — a push accompanied by their trademark deep-discounting and in-your-face merchandising.

Why should a consumer spend $20 for a DVD at Wherehouse when the same disc is $15 at Wal-Mart — along with Doritos, contact lens solution, shaving cream and diapers (there — I've just shared a portion of my own weekly shopping list)?

Unfortunately, I see no way out for the dilemma the music stores are in. Back when DVD first happened, many made a strong commitment to the category, although CDs were never relegated to the background.

Perhaps they should have been. If the music stores had jumped on DVD and made that their primary focus, then maybe the mass merchants never would have taken over the business because consumers early on would have been trained to get their DVDs at the record store.

But far be it from me to do any Monday (or Friday, as the case may be) morning quarterbacking. There are a lot of “what ifs” out there that could have changed the course of the home entertainment business and it's a fair bet that, had some come to fruition, we'd be even worse off than we are.

Then again, I don't see how things could be any worse for the record stores. Wherehouse is counting on DVD to help it weather its latest bankruptcy filing, but it's a little late, isn't it?

About the best the Wherehouse could hope to do would be to go tit for tat with Wal-Mart and the other mass merchants — but even then, the chain is at a marked disadvantage.

DVDs have become a commodity item, and Wherehouse is simply not in the commodity business.


28 Jan, 2003

Fading to Gray

A lot of people are bracing for a tough year at rental and, while video software held up relatively well last year compared to some industries, 2003 may hold a few new challenges.

Just the other day I saw a press release from the Food Institute claiming that variety stores and discounters are cannibalizing supermarkets right along with other businesses. So while grocers are poaching on video turf, commercial forces are eroding their core business, too.

Ultimately this will lead to the grayscale world in which all shopping channels are pretty much alike. Cavernous stores offering every imaginable product under one roof so large it has its own zip code.

By most accounts the 2002 holiday season was a disappointment. Even carnivorous Wal-Mart had sales below expectations. But if you look at the numbers, a few businesses fared well. High-end specialty retailers Coach and Sharper Image had banner years.

In Monday morning quarterbacking the season, retail analysts point to those retailers offering unique products with a strong brand behind them as the source of their success: You can't get Coach products anywhere but at Coach.

Which illustrates what I think will be the biggest challenge for home video this year. The suppliers will have a great time, but retailers will be competing for ever-smaller slivers of the business as more and more vendors jump on the DVD bandwagon.

Anyone who doesn't believe me has only to walk store to store at the nearest shopping center. At one outdoor mall near my home, I found home video (especially DVD, of course) at six stores in a row. Drugstore, supermarket, Blockbuster, Wherehouse, another drug store, another supermarket. Other stores on the same lots also offer DVD. This is less than a quarter mile stretch of boulevard we're talking about and we haven't even crossed the street yet.

That makes video specialty a tough market for the coming year because unlike designer label products and boutiques, video dealers have essentially the same thing to offer their customers as literally every other store on the block.

This year's imperative will be to distinguish your business from every other one on your block or mall that offers the same products you do. It means you will have to compete on price, service and, perhaps, catering to niches.

So there's your challenge for the year: find your own color, or risk blending in to the oblivion of a grayscale world.


27 Jan, 2003

Can a Retail/Online Entertainment Distribution Marriage Work?

Back in 1999, when video-on-demand seemed more imminent, Mark Vrieling, who was then chairman of the VSDA board, told the Associated Press he didn't think Internet movies would happen anytime soon. But he said he could foresee a time when video stores could coexist peacefully with digital delivery, even embracing it. “Nothing stops us from having a bunch of DVDs in the back room and sending them to people's houses on a phone line,” he told the AP.

Almost four years later, with the new buyout of Echo Networks by six major music retailers, we may see if digital delivery and packaged entertainment can indeed form a happy marriage. Best Buy, Tower Records, Trans World Entertainment, Wherehouse Entertainment, Virgin Entertainment Group and Hastings Entertainment have acquired a controlling stake in the company to try legitimate digital distribution of music. Whether the planned service can compete with file-sharing systems that offer music for free remains to be seen. However, the retailer consortium has some advantages.

Echo's chief executive Dan Hart told The Los Angeles Times retailers may have a leg up on their pure-play competitors in gaining favorable license terms from the record labels because they — like the record labels — don't want to undermine packaged media sales; they have an interest in protecting the old-line business. In other words, the record labels may prefer to go with the devil they know.

If the music retailer online venture succeeds, it could provide a blueprint for the video retail future. So often the guinea pig in the packaged media business, the embattled music retailer may show its video brethren the Web way.


26 Jan, 2003

Fighting Back Against Violent Crime in Video Stores

It's a sad fact that there are people in this world for whom the value of a life is worth less than the few hundred dollars (or less) in the till the poor clerk with a gun to his face is being asked to open.

It's also a sad fact that the video store is a natural target for this type of crime, and that this type of crime sometimes leads to violence, serious injury or even death.

This came all too horribly into focus last May, when a gunman, in the course of robbing a Blockbuster store in Anniston, Ala., shot and killed four men, including two employees.

This was far from the first time someone was shot and killed in a video store, and was just one of several homicides in video stores in 2002 alone. But it ranks as one of the most horrific crimes to take place in one, and even back then it got us to thinking here at Video Store Magazine about the issues surrounding store security and violent crime prevention. This week we begin a multipart series on the subject by senior/online editor Holly J. Wagner that will cover not just violent crime and ways to possibly prevent it, but also delve into nonviolent crime.

Video stores handle a lot of small cash transactions that attract robbers. At many independents there typically is only one employee (larger chains may have two, but, more often than not, only one is behind the register.) Stores' windows are often partially covered with posters and promotional banners that can block views into the store from outside. And, unlike similar type businesses like a convenience or liquor store, one can hang out in a video store for quite a long time looking at titles without bringing any attention to oneself.

A recent Insta-Poll of video retailers conducted by VSM market research showed 15 percent of the respondents had been robbed in the past, and that more than 80 percent of the incidents, money was taken.

This is not a burglary, or even a grab-and-run type crime; we're talking in your face with a weapon to back up the threat (58 percent of robberies did involve a weapon, the poll showed).

Now, I know for most retailers the news that their stores are potential magnets for crime is not a revelation. The VSDA offers a variety of information about store security and a majority of poll respondents said they do conduct some employee training. But there is much you can do to improve security for your employees and customers. We'll explore these options in the coming series.

For instance, how many of you have asked your local law enforcement for a store security review? (The poll answer to that is just 28 percent.)

I look forward to hearing from you about this important issue in the coming weeks.


Have you experienced crime at your video business? Discuss your experiences and share prevention tips below or here.


23 Jan, 2003

Pricing is In Limbo But the Question Is, How Low Can You Go?

If you've happened to walk into your friendly neighborhood Wal-Mart recently, one of the first thing s you see, in the high-traffic aisles, are huge dump bins of DVDs selling for $5.88.

This isn't budget fare, either—virtually every title I picked up was from a major studio, albeit deep catalog.

Wal-Mart isn't talking, but sources within the industry say this signals the start of a major initiative for the giant discounter — selling DVDs for rock-bottom prices. One studio executive, speaking strictly off the record, even said he was urged to lower list prices so Wal-Mart could offer more catalog product for less than $6 a pop.

Talk about price erosion. Indeed, falling prices, particularly on the catalog end, are apparently causing some studios to think twice about opening the floodgates on their vaults, as they had planned on doing in the first quarter of this year.

“I'm not going to put stuff out there and have it sell for $5,” said one irate executive. “There's no money in it for us, and it's a complete waste of time.”

Rather, he said, he's going to focus on selectively releasing catalog product in pricier “special edition” versions.

I'm quite certain that DVD pricing is going to emerge as the hot-button issue of 2003. I don't think we're going to hear much about two-tiering or rental models, particularly now that Tom Lesinski is over at Paramount, the last of the old-school studios. This business clearly belongs to sales, and any retailer who questions that need only look at Blockbuster to see how wrong some of our industry's brightest minds were about the future of our business.

But I do think we're going to see a lot of tinkering with price points, as studios try to achieve a balance between maintaining margins and giving retailers what they want.

In the fourth quarter, we saw new release prices plummet to unheard-of depths, with the big chains selling virtually everything that came in for less than $15, at least for the first week.

We also saw catalog prices steadily decreasing — and this trend appears to be picking up.

Sooner or later, prices are going to have to bottom out. The question is, how low will we get?


21 Jan, 2003

Whose Reality Is It Anyway?

I don't know about the rest of you, but I've had just about enough of "reality programming" cluttering up the airwaves.

I suppose "Candid Camera" was the first reality programming. Then one of the networks figured out outtakes -- marketed as "Bloopers" -- would get viewers. Then that wasn't enough and they had to expand the concept to "Bloopers and Practical Jokes," which used outtakes and set-up jokes on TV cast members.

Even "The Osbournes," which I do not watch regularly, had some tabloid appeal. Tabloids make their millions by airing the sordid or just plain mundane details of celebrities' lives. What I suspect amuses most fans about "The Osbournes" is seeing some utterly nontraditional people dealing with the same unglamorous tasks we all face, like feeding pets and taking out the trash.

But like any good thing, the concept fast becomes too much when the media conglomerates seize on it. That's why every diva hopeful on talent search programs sounds like Mariah Carey or Celine Dion. That's why we have Brittney Spears and Christina Aguilera. Too many executives with cookie cutters and 90-day profit reports.

This year we have a raft of "reality" shows, although I can't see much reality in any of those I've peeked in on. The ones in the pipeline seem even further from most people's reality.

So far the only thing I've seen in these shows that approaches reality is the caption IDs on the first episode of "Joe Millionaire" (which I have not watched since). For about half the contestants, it was the same line: Name, 24, Loan Officer. Cha-ching! Who'd have guessed!

I won't even try to remember the names of some of the new ones, but a sample of plotlines: eight wacky American families compete to see which is the funniest, to win their own sitcom; a young man's parents grill a potential love interest and her former boyfriends and give the thumbs up or down on the new relationship; a network plucks up a poor family and puts them up in a Beverly Hills mansion, a la "Beverly Hillbillies."

About the only good thing about these programs is that they only compete with other viewing on a one-to-one basis. Even the network programming executives dismiss the possibilities of releasing "Survivor" or "Who Wants to Marry A Millionaire" on home video. The only reason anyone watches is to see how it will turn out. Kinda like how once you know the chick in The Crying Game is really a guy, the mystery is over and most people won't watch it again.

Then again, maybe all this broadcast detritus is good for the home video industry. Broadcast programming is going down the same, self-destructive road as the music industry, chasing the flash in the pan and, for the most part, not bothering cultivate real talent with some future potential.

One look at the TV guide most nights is enough to send any thinking person scurrying for the nearest video shelf, whether it's in the home or down the street. Maybe we need to start a new industry marketing campaign to remind viewers there are alternatives to this dismal programming. Our slogan could be, "Get Unreal! Rent A Movie."


20 Jan, 2003

Sellthrough Cannibalization Isn't Just About BuyingVersus Renting

An industry pundit once told me it isn't just the fact that people buy, rather than rent, a sellthrough title that hurts rentals, it is the fact the once consumers own a title, they can watch it over and over again. When a consumer watches a title in his or her library — say, The Lord of the Rings: The Fellowship of the Rings as I did this weekend — that consumer isn't renting a new title to view.

There is only so much entertainment time available to consumers, and sellthrough titles compete for that time not just on a one-to-one basis with a rental, but almost indefinitely. One a consumer buys a title, that title can compete with any rental going forward. If there's nothing particularly compelling at the video rental store, the consumer can always pull a title from an ever-growing library and watch that instead. Or, the ease with which a consumer can pull something from his or her own movie library could prove a tempting prospect when considering whether or not to get into the car and take the time to choose a movie rental.

Certainly, many consumers buy titles that they never watch more than once. Many buy titles just to have them in their library, without ever watching them at all. But as consumers' libraries grow, the chance that they will compete with the rental market grows as well.

In the end, it's not only Wal-Mart and other video discounters competing with the local rentailer, it's consumers' own libraries.


19 Jan, 2003

A Visit To Gadget Heaven

I am still reeling a bit from some of the wondrous visions I beheld at the recent Consumer Electronics Show In Las Vegas: A man playing bad chess against a very good robot who kept up a steady stream of patronizing banter at his befuddled opponent such as “Well, now, that's a move I hadn't considered!” A stupendous black Ferrari bejeweled inside with an array of video and audio equipment that would have me living in that vehicle if I could figure out a way to squeeze in a porta-potty. And, of course, the already famous Microsoft Dick Tracy-like wrist watch.

But back to more mundane things like home video, it was clear that home entertainment is making quantum leaps, not so much in new forms of electronic entertainment, but in streamlining and consolidating what we already have strewn about our living rooms, home offices and bedrooms. It's a simple a concept as the home theater in a box was a few years ago, but now it's reaching the far ends of the CE spectrum.

In virtually all of the major hardware brand booth spaces I wandered through I saw variations of this theme. The combination of TV/DVD/DVD Recorder/PVR/CD technology and control interfaces to let users enjoy multiple applications simultaneously.

Oh, yes, I also saw an off-site demonstration of the an Internet-enabled DVD console running software from Phoenix Technologies, designed under DVD Forum's preliminary iDVD standards (still in the final stages of approval), to bring CD-ROM applications to the TV set, among other interactive and Internet-based applications, through such things as DVD consoles, set-top boxes, etc. So you can add some Internet functionality to this scenario in the near future as well, and that brings in music and video downloading into the picture.

And of course Microsoft's own media player initiatives, combined with wireless connectivity in the home (and those nifty new PC tablets I saw at the show as well), makes the concept of an integrated home entertainment, multimedia center far closer to reality in the next several years than I would have thought prior to attending CES.

But outside of the few new DVD/VCR combination decks I saw at the show, it's also clear we are entering another phase of the digital revolution where, because our entertainment is becoming all digital, we can use digital means to control and blend this content.

I think we have many, many years to enjoy the fruits of DVD as a storage medium for collectible entertainment. But with HDTV moving fast down the pike, and our cable/Internet-connected home entertainment systems encapsulating every known application of digital playback (and some with storage) known to man, the short-term consumption of nonpackaged entertainment (e.g. VOD) will have a snug little home in which it may reside. The technology is here. It's now a matter of how fast it is adopted into American homes.


16 Jan, 2003

For somebody somewhere, the third time is a charm

People within and outside the industry of it are trying to read things into the recent departures of three of the six major studio home video presidents, one after the other.

I just got an email from the entertainment editor of a big newspaper asking me what it all meant.

I'll tell you what I told her: Nothing. There is no connection between the departures of Pat Wyatt from Fox, Warren Lieberfarb from Warner and Eric Doctorow from Paramount. One left to start her own business, one got fired because he angered the wrong people and the third simply did not have his contract renewed.

It's not a mass repudiation of DVD policies, nor a power grab among theatrical honchos who feel that with DVD the home video units are becoming too big for their britches. It's coincidence, that's all — nothing more sinister than an affirmation of the adage that things seem to happen in threes.

That said, I will say that one change is afoot: The so-called “Lieberfarb strategy” of low DVD prices and mass distribution appears to be gaining acceptance at more studios, most notably Paramount, where I can just imagine studio chief Jonathan Dolgen waking up in the middle of the night shortly before the New Year wit h the startling revelation: DVD just might be here to stay and the VHS cassette may, in fact, be on its way out.

The Lieberfarb strategy certainly appears to be working, as studios that have embraced it — Warner Home Video, of course, along with Columbia TriStar Home Entertainment — are enjoying banner years in the sales department. Other studios pushing the proverbial envelope on DVD, like Fox, are also reaping the rewards. Maybe Dolgen just felt it was high time Paramount joined the party.

But at the same time the Lieberfarb strategy appears to be well on its way to becoming the Magna Carta of home entertainment, there's a warning in some circles that perhaps it is time we apply the brakes.

One studio chief who asked his name not be used is thinking twice about releasing loads of catalog product in the coming year. Prices have come down way too far, and way too fast, he says, for a speedy migration of all things catalog to DVD. Better to sit back and play the high-priced special edition game than dump everything into the market all at once and end up being priced right out of the profit picture by studios that have already gone to the vaults once and now are selling almost everything they've got for $10 or less.

Hmmm. Focus on quality special editions that retail for around $20 or more and hold back on the catalog until prices stabilize a bit? That sounds an awful lot like what Paramount was doing all along.