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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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25 Mar, 2003

Coming Soon: Nostalgia

After a weekend of drenching rain two weeks ago that left the southern third of California housebound, I was itching to get back out in the sun last weekend.

Sure, the rest of the country sees the Rose Parade on TV on New Year's Day and thinks we are all a bunch of wimps. But nobody really beams back the satellite shots of the flash-flooding later in the year, when the area gets its entire annual rainfall total in one weekend. Such was our Ides of March this year.

Anyway around here, it wasn't just the war broadcasts keeping folks out of stores last weekend. Some of us fled, blinking, into the sunlight to ride bikes, walk pets or pursue other activities. Flea markets and garage sales are a pastime for me, so my excursion was cruising yard sales.

It has been a few months since we had really good yard sale weather so there were several neighborhood or tract joint efforts, 20 or more families in an area dragging their castoffs to the curb.

Being voluntarily childless, I almost always pass on sales where you can tell from your car that most of the stuff is outgrown baby clothes and toys. But with a neighborhood sale you get out of your car and walk, so I got a closer look at what was getting sold.

It was immediately apparent that in the few months since the last round of neighborhood sales, VHS has been migrating from the family room to the garage and, finally, to the curb. Virtually every sale, regardless of neighborhood economy or breadth of merchandise, had at least a few tapes out for sale, cheap. At the more affluent homes there were entire bins of tapes, often factory issues offered at $1 or even 50 cents each.

We all know that the number of DVD players in American homes nearly doubled from January 2002 to January 2003. The sheer volume of used cassettes for sale is only further proof that VHS is on the fast track to 8-track tape status: a clumsy curiosity that nobody misses and that will soon be recalled with the same nostalgia as tube TVs, manual typewriters and treadle sewing machines.

24 Mar, 2003

Netflix Infiltrates Suburbia

Last month, when Netflix made a splash by announcing it had reached the million-subscriber milestone, Wall Street swooned. But it was a recent conversation with my neighbor that solidified my opinion that the online rental pioneer has something.

We were talking DVD during a suburban get together. (I often do a little informal market research at the neighborhood block parties.) One neighbor mentioned that she and her husband were anxiously watching their Netflix rental queue for a certain hit title, and were hoping they would get it soon. Like a kid anticipating Christmas, this neighbor described how she would visit her list and watch her favorite films' progress to her door. It reminded me of the early days of video, when folks would visit the local video store and pick up a second- or third-choice title when the hit they were looking for wasn't in stock. To my neighbor, these online visits were like browsing without the hassle of getting into the car.

Mind you, we don't live in the sticks. If my neighbor were to get in her car, a five-minute drive in almost any direction would bring her to a video store where she could go home happy with her desired title. But she seemed content to watch its progress in the Netflix rental queue, seemingly more interested in browsing patiently, taking second and third choices and waiting for her most-desired DVD to arrive than in instant gratification.

In a country where people shop for fun, Netflix has found a strong niche. Like the video store of yore, the service has made picking out a video an enjoyable experience. Through Netflix, folks are once again going to the video store to see what looks interesting, they're just doing it in a virtual store, and it only take a few seconds to arrive.

23 Mar, 2003

Selloff Period Key to Revenue-Sharing

A reader poll in this space last week asked retailers how long they wait before beginning to put out previously-viewed titles from the rental rack for sale.

The choices were two weeks, three weeks, four weeks or more than four weeks and the results showed that each received about a quarter of the total votes cast. In short, about half of the respondents said they put out videos for sale after two to three weeks on the rental shelf, while another quarter said they put out videos in week four and the remainder wait more than four weeks.

This serves to drive home the fact that the previously viewed business is, indeed, a key element of a retailer's business and increasingly so. It also, I think, indicates that the selloff period restriction may be the most important element in any DVD revenue-sharing deal studios craft with rentailers.

There is no doubt that DVD revenue-sharing is well on its way. Studios are faced with mass merchants' growing reluctance to buy significant quantities of second-tier titles, thus the rental component for these titles becomes ever more important. However, even at sellthrough pricing for DVDs, many rentailers are only going to pick up so many of some of these secondary titles and thus studios, looking to maximize their take on the rental business, must do all they can to sell as deeply as they can into the rental pipeline.

Revenue-sharing, that is reducing the upfront out-of-pocket investment, will be the only way studios can get rentailers big and small to expand their depth, especially in second-tier titles.

Yet, retailers report that, for the most part, current revenue-share deals have significantly long selloff period restrictions. MGM, always rated one of the most favorable in this category, reportedly has a 30-day restriction before selloff can begin. Other studios average 45 to 60 days! That, it would appear, is nowhere near the reality of previously viewed sales practice of the majority of rentailers.

Now some of this might be mitigated by what a studio requires for a buyout, but from what retailers are saying, current buyout rates do not come close to making a 45- to 60-day restriction attractive on DVD.

As shelf space for non “A” title product gets squeezed at the mass merchant level, and as studios return to a rental priced/revenue-sharing model for the second tier of their product line, it will be interesting to see if they can craft revenue-sharing deals that are attractive to rentailers, especially smaller chains. I don't see anything more than 30 days as a selloff restriction working.

20 Mar, 2003

If You Can't Play Nice Together, Consumers Will Separate You

I wholeheartedly believe that if you don't learn from history you are bound to repeat it.

At this moment, I'd like nothing more than to rent an airplane and write this in big bold letters in the sky over the homes of some of our industry's leaders.

The brutal format wars between Beta and VHS almost killed the home video industry before it could fly.

DVD, in contrast, took flight and soared largely because disagreements over specs had been ironed out in compromise before the format was even introduced.

But those two examples are apparently lost on our industry's key decisionmakers, who are now rallying support for two competing next-generation audio formats (the Super CD and DVD-Audio) and three (three!) competing next-generation DVD formats.

Sorry, guys, but unless you agree on a single standard ahead of time, none of these noble experiments will succeed.

Look at the mess that next-gen audio is in. DVD-Audio has something like 300 titles, while Super CD has maybe 700. At this point, it seems unlikely either format will take off and replace the CD, simply because the force required to advance consumers to the next technological level is divided, split, ripped right down the middle.

The situation in the high-definition DVD camp is even worse. At first there were two noncompatible formats; now, there are three. Two of them use a blue laser: Blu Ray Disk, now known by the catchy nickname “BD,” and the Advanced Optical Disk. The third player is a high-definition red-laser DVD, backed by Warner Bros.

Each camp is churning out as much press as it can muster, in the hope that it will triumph.

But despite the public's love affair with all things DVD, I don't see any victory, at least not anytime soon, for any of these competing technologies. With apologies to President Bush, you don't win a war by defiance — in the world of technology, experience has shown that those who stand alone inevitably stumble and fall, and those who succeed only do so by mastering the genteel art of compromise.

That's how DVD got off to its rocket start, and that's really the only way any next-generation variant can take us to the next level.

18 Mar, 2003

A Day (or Week or Month) In the Life of A DVD

A few years back there was a film called Twenty Bucks that followed the path of a $20 bill from the time a cash machine spit it out to the time it was returned, torn and tattered, to the bank.

I think it's time for a movie following the coin of our realm. We could call it $20 Disc and follow the path of a DVD, from its first sale for $14.95 at Wal-mart on release Tuesday to the day it falls apart from disc rot or a toddler teething on it.

With VHS the story would have been boring. The tape gets bought, maybe rented a bunch of times and then sold at the end of its rental life cycle.

But DVD has added so many new destinations to that cycle. Discs travel several paths from the suppliers. The first fork in the road is whether it goes to rental or sellthrough. After that, the possibilities begin to look like a New York subway map.

A disc can get sold to a rentailer, rented several times (four times, according to the Video Buying Group's recent test), sold to a consumer. Then if it's in good enough condition, the consumer can sell or trade it off to an online used disc dealer (like skinnyguy.com) or put it on eBay for sale to another consumer.

Or maybe a consumer buys the disc at a mass merchant, watches it a few times. Probably has a friend over to watch it. Loans it to a neighbor or two – of course, in a swap arrangement in which each person gets to watch the other's new disc. After the owner tires of the disc, he trades it off at a local music retailer, where another consumer buys it.

That cycle can repeat as long as the disc is in good condition. Ditto if the consumer owner sells a disc to an online dealer who uses the disc to beef up a by-mail rental business.

I can think of plenty of other variations on this and I'm sure there are more than a few I haven't even heard or thought of yet. But what they all have in common is that, unlike VHS, DVD has several life stages. That means more profit-yielding stops and more profit-blocking stops – the times a disc in the hand pre-empts other programming choices, including a rental, cable or satellite or buying another disc.

Perhaps the only thing that is clear is that DVD has created so many new revenue possibilities that the industry will have to find new strategies to make money. You can rest assured that as long as the format facilitates it, consumers will come up with new ways to get the most entertainment for the least money they can.

17 Mar, 2003

With DVD, Theatrical and Home Video Play Well Together

I've been in the business long enough to remember a time when video releases were carefully kept secrets, when Web sites didn't freely speculate about home video release dates and covert distributor leaks were the only way to get a jump on a particular film's closely held home video release date, which often occurred six months after the film's release. Indeed, many times home video departments were wary of upsetting the theatrical apple cart with a premature announcement about the video release. What a difference today.

It seems I hear about a video release date just a few weeks after a theatrical bow. Theatrical-to-video windows are shrinking, as noted in last week's article, with certain video releases coming out only a little more than three months after the film's bow. The shorter windows allow video releases to piggyback on awareness generated by a particular film's theatrical campaign. Heck, certain DVDs even include tickets to theatrical films and DVD advertisements appear before features.

Why has video transformed from a redheaded stepchild to a bona fide member of the film family? It's all about the disc.

Unlike VHS, those who run studios as well as the talent that make them consider DVD a sexy product, not just a poor copy of a film. Whereas cassettes were mere ancillary consumer items, like stuffed animals and numerous other types of licensed merchandise, DVD is truly considered another release of the film – indeed, for many filmmakers, it is the definitive statement on the film.< BR>
Another plus for DVD. It's marketed directly to the consumer for purchase. Studios can get a bigger cut of the pie when a consumer buys the DVD outright, and studios don't have to give up any revenue to rental dealers, who can take all of the profit after the First Sale.

It's nice to finally be more fully recognized at the movie revenue table. Maybe DVD doesn't sit at the head of the table, but it certainly contributes to the film revenue feast.

16 Mar, 2003

Readying for War

We may be about to get more than we really want to see of “reality TV.”

I am, of course, referring to what seems to be the inexorable march toward war with Iraq. This week may see a climax to the weeks and weeks of U.N. debate and drama over the U.S. demand for a second resolution from the international body approving the use of force to get Iraq to disarm. Whatever the end result of that wrangling is, the likelihood is we will have war, and sooner rather than later. The troop buildup on the scale we have seen has only rarely not resulted in military action being taken.

In this week's issue of Video Store Magazine we talk with some retailers and analysts about the impact a war might have on the home video business. I am sure most of us share the same feelings to the effect that, there are other more important things to be concerned about in the event of war than how the home video business fares. And while that may be true, still, it is what we do and how we make our living, and we must prepare as best we can.

Home video, it is agreed, will in fact play a role helping those of us at home manage our intake of what will doubtless be constant (for the first few weeks) non-stop war reportage that includes disturbing images of death and destruction…real reality TV. At first we will all feel compelled to watch, out of concern for family and friends that may be in the conflict, or out of sheer compulsion to witness one of man's most powerful and gruesome attributes; the ability to wage organized violence against our own species for whatever reasons we deem appropriate.

We can expect a lull, then, in people coming to the video store looking for something to watch on TV. And then, as the war wears on, we can anticipate a strong desire for people to “watch something else” as a relief from the war, and to that end the ability to use home video to counter-program their TVs will be very attractive, and business may be brisk. That seems to have been the upshot of our last major war in 1991 with the very same fellow we're rattling our sabers at now.

I would encourage anyone managing a home video rental or retail business to keep this role in mind. People (customers, your employee, yourself) will be unsettled, weary, looking for something to momentarily relieve the tension they cannot really be avoided for long, until the conflict is over. They're walking into your store literally for relief. So make sure you do what you can to deliver that. Be mindful of what new releases you may be screening on your in-store monitors…I would guess we would probably like to see anything other than some actioner with a lot of shooting and things blowing up. Maybe create a special display of new or previously viewed video that's features a selection of comedies and family product that people can watch together.

Above all, you and your employees can have a positive impact in the way you serve customers, distracted as we all may seem. A friendly face and conversation about anything other than the war will make their experience in your store a better one and keep them coming back during what will be difficult times for all.

13 Mar, 2003

A Case For Collecting

Remember the good old clear plastic jewel case? Back in the early days of DVD, the square box was a leading contender to house DVDs as well as CDs. Two major studios, Columbia TriStar Home Entertainment and Universal Studios Home Video, released their initial batches of DVDs in jewel cases, as did a host of independent suppliers. Their reasoning was that consumers were already accustomed to buying music on five-inch discs and this familiarity would extend to the packaging.

But before long, the little jewel case fell from grace, in large part because the Video Software Dealers Association successfully argued for a bigger box to give DVDs their own identity. And thus we are where we are today, with those ubiquitous rectangles, all pretty much the same dimensions.

But there's writing on the wall, still faint and barely visible to all but the most knowing eyes, that seems to indicate smaller may, in fact, be better. Consumers still have a voracious appetite for buying DVDs, but some retailers are privately wondering whether there is a saturation point — the “full shelf” phenomenon, they call it — when consumers simply don't have room for any more DVDs and all of a sudden become significantly more selective in what they buy.

I know for a fact that at least one studio is conducting high-level talks about ways to extend the lifespan of the active DVD buyer. One option being considered is shrinking the box. Already, some screeners are arriving in flat cardboard wrappers and you can store about five of them in the same amount of space one regular Keepcase'd or Snapper'd DVD takes.

The problem — and the reason I don't think we're ever going to see studios take that route for consumer product — is that the flat wrappers are literally spineless. There's no room for any writing on the side, so you have to pull it out to see what it is like old vinyl records — hardly good merchandising.

But there are two other options. One is a flatter plastic case, maybe half as thick as a Keepcase or Snapper, so there's still room for writing on the side. Already, there's one such model available.

The other is to bring back the little jewel case — which may actually be the best option, when all the smoke clears. It's not only thinner, it's also shorter — which means you can put many more pieces in the drawer, or in the bookcase, even if it means adjusting the shelves a little.

And given the sad state of the music business, I'm sure there are plenty of jewel case makers out there who would be more than happy to cut the studios a deal.

11 Mar, 2003

Why Technology Isn't the Problem

There's a lot of brouhaha surrounding personal video recorders (PVRs) like TiVo and Replay TV. They are probably the closest thing to true video-on-demand (VOD) because they store your favorite shows automatically and let you play them whenever you want, with all the control features of a DVD like fast forward, pause and rewind. Plus you can skip commercials. It's no accident that TiVo users are very loyal.

This terrifies broadcast television executives, who are watching their revenue base erode before their eyes as people figure out how to skip past ads. The TV minds are doing their best to thwart this, with tactics ranging from lawsuits to a technology that digitally changes brand labels on items in existing shows to a pending variety show that hearkens back to the age of sponsored shows like Texaco Star Theater.

Advertainment is nothing new, although we are seeing some of its earliest manifestations return to the market. Strawberry Shortcake was a creation of American Greetings, conceived in the Reagan era of deregulated broadcasting to sell a line of greeting cards, figurines and manufacturered collectibles. In fact, Saturday mornings in the 1980s were a time slot given over almost entirely to advertainment. The airwaves were populated with cartoons promoting everything from Rainbow Brite and the Care Bears to their antithesis, G.I. Joe.

Movies are next, with a unit of Peter Guber's Mandalay Pictures called Mandalay Branded Entertainment actively shopping industrialists to finance advertiser-supported features for TV and theatrical release. From a branding standpoint, I guess that kind of melds ball park/event sponsorship with filmmaking. But it's going to have to be seamless, or most people will tune out.

And even with all this technology, people will find ways -- sometimes decidedly low-tech -- to filter out what they don't want.

A while back at Broadband Plus I remember chuckling when one of the cable executive panelists talked about the lengths to which people will go to get rid of crawlers and icons on their TV screens. She described people who put sticky notes on their TV screens to cover the translucent digital channel ID icons or duct tape across the bottom to eliminate crawlers.

While that seems a bit goofy, it illustrates a point that major studios and TV networks have yet to grasp: no matter how cool you think your advertising technology is, people who don't want to see it will always find ways not to watch.

10 Mar, 2003

With DVD In the Fast Lane, Consumers Are Passing on VHS

In talking to DVD-only retailers for a recent article, it became clear to me that previously viewed DVD sales are an important part of the new format's market.

As this week's online poll (over there, on the right) shows, retailers are garnering a good part of revenue from sales of previously viewed discs. My bet is that previously viewed DVDs are fueling a rise in revenue for rentailers, even as rentals may be taking a hit from sales. Consumers perceive pre-viewed DVDs to be more valuable than their VHS counterparts; indeed, many consider pre-viewed discs more valuable than a brand new cassette.

Consider this exchange, which I observed during a visit to Blockbuster over the holidays.

A woman asked the clerk if the store had National Lampoon's Christmas Vacation on DVD. She'd seen it on TV and wanted to add it to her collection. The clerk said they had some brand new copies.

“Do you have it previously viewed?” she asked, evidently looking for a better price.

“No,” he said. “It's too old.” (It wasn't a new release that had migrated to the pre-viewed bin.)

The clerk then showed her the new VHS copy, which cost about $2 less than the new DVD – a seemingly good option for a cost-conscious consumer.

Though she admitted her household had only one DVD player to its three VCRs, the customer did not buy the cassette. She opted for a new DVD. But her first choice obviously was a previously viewed disc.

I'm sure this scenario plays itself out continually in the rentail store. Customers look at a used disc as if it were a high-end car with only a couple thousand miles on it – in short, they see it as a really great deal. Whereas pre-viewed VHS is the old Pinto of video, DVD is the nearly new BMW. With DVD, rentailers have a really hot sellthrough product that puts them on a more level playing field with Wal-Mart.