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.
Two studios this week demonstrated some resistance to the declining price of DVDs both as a way to find the highest possible margins on DVD, and as a way to buttress against the too-rapid pace of conversion away from the VHS cassette. As I have said in this space several times this year already, 2002 will see a lot of exploration in pricing schemes as studios look for the right combination of rental versus sellthrough pricing, VHS versus DVD pricing.
Buena Vista Home Entertainment announced a slate of five high-profile titles, all at a suggested retail price of $29.99, most definitely on the high end of the DVD sellthrough spectrum. What makes this price point all the more interesting is that it is attached to some of the more critically acclaimed films from the studio this year, indicating that Disney may be exploring the finer areas of price elasticity when it comes to high-profile, (if not high-grossing) films.
The films are: The Shipping News streeting June 18, ($11.4 million box office); The Royal Tenenbaums, streeting July 9 ($51.6 million B.O.); Amelie, streeting July 16 ($31.1 million B.O.); In the Bedroom, streeting Aug. 13 ($35.1 million B.O.); and Iris, streeting Aug. 20 ($4.5 million B.O.).
Video Store Magazine has reported in the recent past on indications that Disney's DVD pricing has, by and large, not followed the downward trend, perhaps to maintain a pricing level that befits consumers' value perception of the product at this point. It will be interesting to see how other studios react to Disney's move in the coming months.
Later in the week MGM Home Entertainment announced it was testing a new pricing scheme designed to extend VHS's lifespan in this period of transition. MGM set a $22.50 dealer price on both its DVD and VHS versions of rental-destined A Rumor of Angels, allowing retailers to be flexible with their purchase balance of the two formats depending on their local markets, and to take the VHS to DVD conversion at a more manageable pace.
"Retailers will purchase at least as many or an equal number of VHS to DVD, where before you had a segment of retailers pushing to do away with VHS simply because there was such a big difference in cost," said Ted Engen, president of the Video Buyers Group.
Here we have one very interesting attempt by a studio to explore the upper reaches of studio return for sellthrough DVD titles in that fine realm of critically successful films with a narrower appeal. While the MGM program also keeps its DVD pricing high on a similarly narrow-appealing film, but also tests the lower reaches of VHS pricing to see if, "all things being equal," VHS can put the brakes to its precipitous drop in the face of DVD and avoid an untimely death. The idea here being that VHS's dramatic decline, at least in the rental business, may be manufactured to an extent by a price differential between the two formats pushing retailer adoption of DVD software for reasons of retail economics more so than by consumer demand. Keep in mind that the penetration of DVD has a long way to go before it reaches the number of U.S. households still actively using VHS.
It will be interesting to see how these various pricing tests do, and to what extent DVD pricing continues to go lower this year as DVD player penetration rises.
Even as the studios ready their video-on-demand (VOD) ventures for online launch, I'm starting to move into the camp that says VOD is probably a fat pipe dream, at least for the cable and satellite providers. Digital subscriber line (DSL) progress isn't faring much better.
Like telecommunications companies, the cable and satellite systems (some even have sister telcos, or are trying to acquire one) all seem to suffer the same, decidedly low-tech problem: lousy customer service. Also like the telcos, they overpromise, underdeliver and labor under the arrogant delusion that America could no more live without cable or satellite TV than without baseball or apple pie.
A few months back I gave Time Warner cable the heave-ho in favor of satellite, mainly because of the high cost and incompetent service Time Warner is delivering in my market – the same things that made the rest of my neighborhood switch. After four months I can honestly say satellite is a better deal for me, but it has more to do with the way programming packages are structured than with DirecTV – which is no better at service than Time Warner was.
The telco tales offer a little 20/20 hindsight. A few years ago they rushed onto a fiberoptic field of dreams chanting "If you build it, they will come" mentality.
The frenzy fed itself as they kept promising wirelines, wireless and all from the same company, which in theory would give consumers streamlined service at lower rates. Now that the country, even the world, is picking through the rubble of Global Crossing, it's easy to see the flaws in this approach.
Telcos promised those new fiberoptic networks (like Global Crossing's) would bring DSL to your doorstep and, darnit, they promised investors, you and I would not be able to survive in a speedy world without it.
What they forgot to mention to most customers is that it could be months between a consumer's order for DSL and the time the company could deliver it. Much of that owed to an issue broadly called "the last mile" – the fiberoptics were laid from the network backbones to switching stations, but getting the technology the last mile from those stations to homes is a bit trickier. It's also very expensive, so telcos had to be guaranteed an economy of scale before sinking the money into closing the last mile gap.
It works similar to preselling a video release, with one key difference: When a retailer presells a video, (s)he has a reasonable expectation (s)he will have the video to deliver on the promised date. When telcos promise service, they really, really hope they will be able to deliver it, but often there's a big "whoops" factor in play ("Whoops! Not enough people in your area signed up yet, you'll have to wait").
The pattern has been similar for market-by-market digital cable and satellite rollouts and it's going the same way, even slower, for digital television, with the added hurdle of protecting digital signals from copyright enfringement.
Those who don't learn from history are destined to repeat it as the telcos, cable and satellite providers and even the studios are doing now.
Taking a page from the telco manual, DirecTV got me to switch by offering me a free dish, set-top box and free installation to get me started (this tactic accounts for a substantial percentage of the 8 million new subscribers DirecTV recently told its shareholders it signed up last year).
Well, they couldn't very well get me to subscribe to their services without the dish and set-top box, so those showed up on time. But five months later, I'm still waiting for my $140 installation rebate and I'm learning I'm far from the only one.
When I called DirecTV last week to find out about it, the rep said she would have to turn my request over to a supervisor, who would handle it as an "overdue rebate." She couldn't tell me what to expect after that or when I might see my check (are you hearing the telco theme in the background yet?). She escalated my call to a customer service supervisor who wasn't there. I left a message on his voice mail and have yet to hear a peep from him.
Meanwhile, dealers are already taking DirecTV to Los Angeles Superior Court. Plaintiffs in Garcia et al v. DirecTV, filed last October, allege DirecTV, for whom the dealers acquired subscribers, failed to pay dealers promised commissions on the new subscriber installations and residual monthly income based on the subscribers' monthly payments. The plaintiffs want more than $300 million in damages. DirecTV is defending against the charges, but it's starting to sound like the satellite provider shifted its gamble from installers to consumers.
I'm not holding my breath for VOD on satellite or cable. The providers can't seem to get their existing services together so there is no reason to believe they will do better with the increased personalization that VOD demands.
Now, what about Internet VOD? The studios are working on it, all the while contending weak copy protection and inadequate broadband penetration hinder its progress. The broadband providers say their adoption has plateaued because there is no compelling (read: studio) content available to incent people to subscribe to broadband.
The truth is, it's all smoke and mirrors. It's going to be a lot more difficult and expensive to deliver VOD than anyone predicted. Will it ever be a reality? Not at this rate. The companies that could make it happen are all too busy giving away the store for market share and pointing fingers at each other for messing it up.
I gotta go now. I have to go choose between the $40 check AT&T just sent me to get me to switch phone companies or the three months of free DSL that Sprint and Verizon are offering.
Studios may consider DVD supplemental material a neat, if not essential, valued-added item on the disc format, but consumers may be coming to expect the special edition treatment.
To satisfy consumers, Columbia TriStar Home Entertainment last month announced the addition of a disc of extras to some of its Superbit titles. Originally, these releases were designed to offer boosted picture and sound quality instead of extras. The idea was to use the discs' entire capacity on the feature itself, rather than on things like "making-of" featurettes and deleted scenes. Now the studio has decided to make select Superbit titles even more "super" by adding a disc of extras to the mix and calling the double-disc series "Superbit Deluxe." Superlatives aside, it looks like extras are increasingly becoming essential on DVD.
In July 2001, Video Store Magazine did a survey of independent retailers asking about the value of DVD extras. At the time, 60 percent of the retailers surveyed reported extras were important to their customers – and that was nearly a year ago. Now that retailers carry more DVDs and consumers are more familiar with discs, that percentage may have grown. Among the top extras in the July 2001 survey were outtakes and deleted scenes, with 48 percent and 46 percent of surveyed retailers, respectively, reporting that customers look for these features. Close behind was "making-of" information at 45 percent.
My own experience bears out the importance of extras to the consumer. As I commented last week, many parents in my informal 4-year-old birthday party survey mentioned extra features like deleted scenes as reasons they like DVD. In my own household, my husband and I will often look at the supplemental material before we watch the movie – especially if we've seen the film in the theater. With A.I. Artificial Intelligence, for instance, we watched the extras first one evening because we didn't have time to view the whole film and we'd already seen it. In that case, the extras, which detailed the special effects, were almost as much of an attraction as the movie itself.
While it remains to be seen if studios will continue to toe the line on (i.e. pay for) supplemental material – and if consumers will squawk much if it disappears – evidence suggests it is appreciated in the marketplace. Unlike its older cousin VHS, DVD with its extras is not just a small copy of the film, but a unique and interactive home viewing experience.
The Aug. 6 launch of New Line Home Entertainment's first home video release of The Lord of the Rings: Fellowship of the Ring is a full two-disc package including the original ‘PG-13' theatrical version and two hours of special features, priced at $29.95. This was somewhat of a surprise to me, albeit a pleasant one. When we first reported on the possibility of a two-stage release for The Lord of the Rings, I expected more of a "vanilla" version of the movie, followed later by the "real" DVD package of features and other extras.
What we learned this week, of course, is that New Line and director Peter Jackson have developed a huge amount of additional material from the movie for DVD use, much of it shot and edited expressly for home video. Their commitment means that the initial Aug. 6 release is far from vanilla and includes 15 featurettes with interviews with cast members and information on Middle-earth, three in-depth "making of" programs revealing "secrets behind the production," the Enya "May it Be" music video, a 10-minute preview of The Two Towers coming to the big screen this Dec. 18, a preview of the Electronic Arts' video game The Two Towers, original trailers and TV spots and other content. The home video will be released in both widescreen and full screen formats.
What is very exciting to me is the groundbreaking effort to use the DVD platform as the genesis for the creation of a special "extended edition" (among an array of other features on four discs) slated to street Nov. 12. It's not just that there will be more than 30 minutes of previously unseen footage in this version (a glorified director's cut), but that it is truly a new film with 30 minutes of new scenes and music edited into the narrative to create a fuller, richer movie for the serious fan. Many of the scenes were shot with the DVD in mind and, in fact, Jackson is back in New Zealand shooting additional footage and recording new music for the extended edition. (The possible ‘R' rating that may be attached to the "extended edition" would be the result of a graphic, climactic battle scene near the end of the movie.)
DVD, with its capacity for greater storage, programmability and interactivity, is clearly on the cusp of developing into an art form all its own. DVD programming has become more than just an extension of the home video movie marketing business, it is evolving into a legitimate creative force in entertainment. The Lord of the Rings may be the most dramatic example of this yet, but other properties in the future, especially mega-sequal properties like Harry Potter, may draw from New Line's example -- which not only creates a five-month marketing event leading up to the next movie, but keeps the DVD perceived value high in consumers' minds and thus helps to keep it from becoming just another commodity product platform delivering movies. It's delivering a truly new entertainment experience and that can only be a great thing for the home video business.
Much was revealed at last night's video coming out party for The Lord of the Rings: The Fellowship of the Ring. Much, but not everything.
It started when a Warner shuttle dropped our crew off across the street from a round door that obviously belonged to a hobbit hole. By all accounts such fetes have become a rarity even in Hollywood in recent months -- lavish elfin goodies served in a Middle-earth environment that got everyone in the spirit of the event, if anyone wasn't yet by the time we got that far.
Getting that far was really what it was all about. Like the books that inspired the movie franchise, it's all about the journey.
This quest wandered from J.R.R. Tolkien's fantasy to director/writer/producer Peter Jackson's cinematic vision to New Line's faith and eventually to box office victory. Reaching for the Ring has been a long road for those who traveled it and, like the movie, it's just the first volume. The Rings have brought the industry a couple of firsts and the video trek seems natural against that backdrop.
"We're positioning The Fellowship of the Ring release as a five-month event," gushed Stephen Einhorn, president and CEO of New Line Home Entertainment.
The retail journey starts Aug. 6 with the release of the theatrical version with a 10-minute teaser of The Two Towers, plus an extra disc of special features.
Then comes a carefully crafted, four-disc Special Extended Edition Nov. 12. This one will include 30 minutes of scenes that were cut for theatrical audiences -- not as displaced deleted scenes, but recut into their proper places in the story to add detail about the relationships. I expect it's another first to have the orchestra (in this case the London Philharmonic) recording the cues that were dropped in the cuts to make the soundtrack as seamless as the extended movie, which is expected to get an 'R' rating.
Finally it's the holiday grail of a set that will include the extended edition, collectable game cards, bookends designed by the film's artists, documentaries and the National Geographic 'Beyond the Movie' DVD, all boxed in the artwork of Alan Lee, who illustrated J.R.R. Tolkien's books.
It's a brilliant marketing strategy. The video releases are structured to hit the widest possible audience first, then hold the attention of more mature audiences and die-hard fans of the trilogy.
Never before could a studio plan a video release so tightly around the release of theatrical sequels, mainly because nobody has ever had a three-flick series in the can before the first movie screened in theaters. That reality lets New Line map a strategy using the video releases as signposts to the theater just in time for The Two Towers (Dec. 18) with absolutely no fear that bad weather, temperamental stars or funding issues might delay the next step.
Add to that the music, toys and other merchandise, the Rings will be top of mind for the next two years at least.
Going in, some people speculated that other wizard might work the biggest video magic this year. Coming out, they weren't so sure.
If recordbreaking sales of Shrek (7.9 million DVDs) and numerous presales of Harry Potter and the Sorcerer's Stone hadn't convinced me of the discs' incursion into the family market, my daughter's birthday party sealed it.
At a party for 4-year-olds, pretty much the only thing to do to pass the time before cake and presents (if you aren't interested in party games like face painting and balloon animals) is to chat with the other parents. Being immersed in the video industry, I naturally took the opportunity to question them about DVD.
First question: Had they even heard of it? The last time I asked about DVD (about a year ago) all I got were blank stares. This time I not only encountered recognition, but parents gushed over the extras, mentioning deleted scenes and the like. They also mentioned how easy it was to store DVDs, as they are much smaller than cassettes. Only one of the dozen or so parents had only a VCR. All the rest had DVD players, and one even watched DVDs through a game console (naturally, she has teenagers).
Next, I asked what sort of DVDs they had accumulated for the little darlings. Many had purchased such recent releases as Walt Disney Home Video's Cinderella II: Dreams Come True and the special edition of Peter Pan. I would bet those same purchases would have been VHS cassettes last year. One parent even asked if E.T. — just re-released in theaters — was available yet on DVD, recalling fond memories of taking her older children to the original theatrical release of the Steven Spielberg hit.
While certainly not scientific, anecdotal evidence seems to suggest that DVD is alive and well in the suburbs and quickly taking the place of VHS in the family library. Parents may be holding onto cassettes they've already purchased, but new additions to the library are all DVD.
No doubt these same 4-year-olds will one day look at VHS cassettes the way today's teenagers view vinyl record albums – quaint, clumsy and decidedly old-fashioned.
This is a hot week in home video. The Academy Awards were held last night and indications are that the winners are going to enjoy a surge in demand on home video—the ones that are out, of course.
My question is this: are retailers capitalizing on this opportunity? To a lot of the smaller dealers I've spoken with in recent weeks, the Oscars are almost old hat. These retailers collect a few dozen past winners, display them in a corner of the store with a tired "Oscar winners" sign, and then toss in a few copies of this year's crop.
People, people! If I was a retailer, I'd pump the hell out of Oscar, and the funny thing is, the big video sellers — not the specialists — are the ones who are doing exactly that.
Take Wal-Mart, for example. The mass merchant's in-store plans are top secret, as always — Wal-Mart doesn't think much of tipping the hat to the competition in advance, although TV ads for the last couple of weeks have focused on DVD.
But online, it's another story. Last week, the home page for Wal-Mart.com defaulted to a huge banner ad that read, "Choose From Over 10,000 Movies!" DVDs of three nominated films — Moulin Rouge ($18.88), Training Day ($19.95) and the not-yet-released Harry Potter and the Sorcerer's Stone ($19.95) — were prominently featured with "click and buy" buttons.
That Harry Potter and the Sorcerer's Stone is included might come as a surprise to veteran Wal-Mart watchers who associate the chain with impulse buyers, as evidenced by its huge selection of budget-priced cassettes and discs.
But a spokeswoman tells me that at the online unit, where DVDs typically outsell cassettes, advance sales are very much part of the picture — so much that Harry Potter has been the top seller since it was announced in early February, just as it's been at Amazon.com.
The one thing that remains the same at both Wal-Mart incarnations, brick-and-mortar and virtual, is low price. Online, Harry's selling for seven bucks off the suggested list price, and that includes shipping.
Amazon.com is also selling Harry Potter for $19.95—but shipping is $2.98 extra.
But I digress. The fact is Wal-Mart, where video is only a small part of the mix, is making a big to-do about the Oscars, even to the point of preselling a title that's not even out on video yet — not to mention a huge banner ad on the home page of the entire online store.
Many video specialists are doing a lot less — and then they wonder how the mass merchants "steal" their business.
Price may be a factor, but clearly, there's a lot more to it than that.
By: Thomas K. Arnold
Video Store Magazine and Hive4Media.com have announced the winners of the first annual Oscar Readers' Picks Awards. For the past five weeks we have solicited the home entertainment industry for its choices for winners in 24 Oscar categories, with voting taking place via HTML e-mail ballots and this Web site. A few Internet-challenged folks even wrote in for ballots. In the end more than 1,300 votes were tallied from the full spectrum of our readership base including studio/home video unit executives, video specialty retailers, mass merchants and a broad variety of other retailers, and distributors. You can get the full story here.
While the point of this poll was to have fun, I think the results should be taken with some seriousness. After all, while the voters in this poll (that's you) may not be movie business "peers" as are official Academy members, you are, just as importantly, business partners. Important business partners, as we all know, from the amount of revenue home video contributes to the major studios and independents who create these films.
And of course, you watch a lot of movies! Your livelihood depends on correctly positioning and marketing the quality of these verifiable critical and popular successes nominated for Academy Awards. This is, as we have always heard, a hits driven business. Choosing the "best" in popular media is, obviously, a subjective choice that must lie somewhere between the achievement of certain cinematic artistic and esoteric qualities, and the ability to have these qualities delivered in a way that enriches the widest possible audience. That, in a nutshell, makes for an overall success. Who better to make that choice than the people who must try and market these products from here on out to 90 percent of the U.S. households with some form of video playback machine?
That being said, the home video industry seems to be concurring with the vast consensus of awards already given and polls already taken, at least on the Big 4. When it comes to Best Picture you picked A Beautiful Mind (hands down); Best Director, Ron Howard (hands down); Best Actor, Russell Crowe (hands down); Best Actress, Nicole Kidman (close, very close; it's a three-way race here with Kidman, Halle Berry and Sissy Spacek).
Hopefully, we'll draw some attention with this Readers' Picks poll and look forward to an even bigger voter turnout next year. See you at the Oscars.
I was going to leave the whole copy protection and file sharing (a la Grokster, Music City and Morpheus) debate for a while, but the last round got so many responses I just had to make a couple more points (and make sure both of my fans have the chance to chime in).
First of all NO, I don't approve of copyright infringement. As a matter of fact, I'm continually astonished at the number of people who come out hard against it, but look the other way when their kids and spouses burn discs for them. I have no such files on my computer or storage media, but clearly a lot of parents are not instilling their children with the notion that file swapping copyrighted material is a crime; they let their kids see the benefits without risks or penalties.
Even so, it's still hard for me to stomach movie executives pleading to a Senate committee to protect them from that dreaded scourge, the consumer. When the government wants to regulate a business for the public good, business wants to be left alone. When the business wants to be rescued from the public, it runs to the government for a regulation.
Studios are complaining their movies get pirated before they get into theaters. Hmmm ... let's see. I send my product to Southeast Asia (aka the knockoff capitol of the known universe) to be copied, then complain to the committee that American jobs are threatened because – Holy (Cash) Cow! – someone made copies.
If drug companies were as cavalier about their heavily invested secret formulae, we would all have died of anthrax in the water supply 20 years ago, when there was still a cold war. Why should the movie industry, whose products have nowhere near the potential to unleash a public threat, get greater protection?
Maybe copyright laws should only extend protection to products made in the good old U.S. of A. Studios could send their replication jobs overseas at their own peril and stop expecting Americans (a lot of whom are still jobless) to pay for security breaches elsewhere.
There are other, free-market approaches to protecting business interests. Like:
1) Crime is a risk-benefit proposition. A criminal weighs the risk against the reward (thankfully for us law-abiding citizens they aren't all good at it). Check out the discussion boards on tech sites. Most of the traders say if they could buy the DVD for $5 or $10, it would no longer be worth their time to file-swap. Ladies and gentlemen, I give you the Invisible Hand and the Law of Diminishing Returns. Maybe that's not a practical price for new releases, but it demonstrates there may be middle ground between file sharing and today's prices.
2) Make it more profitable for the programmers to work for studios than to rip them off. See Thomas K. Arnold's story on Sen. Orrin Hatch's comments at NARM for more on that approach.
3) Get insurance companies to open a new line of business for digital piracy. They already insure studios against production events that might cause the loss of an investment.
4) Scary as it is, I can buy software for $99 that will track keystrokes on my company's computers. The courts are upholding companies' right to fire people for spending too much work time getting Internet lap dances. I'm sure they would let the Mouse House chase out its rats in the same way, either for the piracy itself or for misuse of company equipment.
Take me to task or make your own suggestions about piracy prevention and copyright enforcement here. Bring it on!
Analysts, who were hailing broadband, dot-com and Internet stocks not so long ago, are now taking a liking to good old video chains. The Robertson Stephens brokerage recently bestowed Hollywood Entertainment Corp. and Blockbuster with a "buy", and this week SWS Securities initiated coverage of Movie Gallery with a "strong buy."
How quickly the tables have turned.
But history has proven it's not prudent for this industry to assume it has won the analyst relations battle with video-on-demand (VOD). Yahoo this weekend queried customers about paying $2.95 for VOD movies. Battered by the technology and advertising busts, the Web industry is desperately looking for its killer app – and our business is among the top candidates.
Ah, you say, VOD has reared its ugly head many times and we've always survived. Indeed, in my first week at Video Store Magazine eight years ago the business was rocked by news of a TeleCommunications Inc.–Bell Atlantic merger designed to deliver VOD. At the time, Bell Atlantic chairman and CEO Raymond Smith declared video stores "no longer viable." Video stores came back with a vengeance after that, only to fall out of favor once again when the Internet dazzled Wall Street.
The difference in the threat this time, it seems to me, is the desperation of our rivals. Battered telecommunications companies have spent a lot of money building out broadband, PC makers are on the ropes and numerous dot-coms like Yahoo – if they have survived – are desperately looking for a way to make money. Pardon me if I'm a little paranoid.
NBC anchor Tom Brokaw moderated a discussion of technology issues, "Silicon Summit III," broadcast this weekend on MSNBC. Among the panelists were representatives from Amazon, PC-maker Gateway and AOL Time Warner. One of the issues discussed was entertainment piracy – a practice Disney chief Michael Eisner recently told a Senate committee was the tech industry's "killer app." After that showdown, panelists seemed to strike a conciliatory tone during the broadcast, admitting the industry needs to get together with content providers to find a piracy solution that doesn't involve Congress. If they're serious, this could spell trouble.
The ultimate arbiter of how movies are delivered to the home will be the consumer. If the video industry can continue to satisfy consumers better than VOD purveyors, we'll have nothing to worry about. But if our rivals ever get their act together – and the current desperate climate may speed that process – then we'll have a real fight on our hands.