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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 Aug, 2004

Proving I'm Right About the Home-Theater Experience

A few weeks back, I wrote a column about how the home-theater experience approached the big screen in overall enjoyment. Now, Philips Electronics (admittedly a not-disinterested party) has commissioned a study backing that view.

In the global study conducted by Harris Interactive, the most popular reason to watch movies at home is the comfort of the couch (30 percent of all respondents), followed closely by saving money (27 percent). Americans (29 percent) were among the most likely group to consider the cost.

This weekend, two friends and I spent a total of $21 to see The Village in a theater without THX sound (we missed the showing at the better theater). Evidently, we weren't the only ones who were interested in the movie over the weekend, as it made more than $50 million despite mixed reviews, beating industry projections. No offense to the filmmaker, but after seeing the film, I feel certain I would have enjoyed it just as much at home.

No doubt, the Sci-Fi Channel's faux documentary on M. Night Shyamalan and other teases increased our interest in the film. Regal Cinemas even charged an admission for a live interview with the director in the weeks preceding the film. I can't help but expect that interview or something like it to appear on the DVD.

Theater owners' attempts to beef up the experience with events such as the Shyamalan interview only strengthen my view of the home experience.


30 Jul, 2004

DVD Producer: Tough Job, But They're Happy to Have It

The ever-shrinking window between theatrical release and home video release may be a boon to retail, but it's murder on DVD producers. It's getting harder and harder to get DVD bonus materials ready in time for what is increasingly becoming a four-month (or less) window for home video as compared to the old six-month window of not too long ago.

That compressed time frame, and the now major importance of video revenue for studios, means that producers now have a whole lot more pressure on them and more people having a hand in the DVD production process than ever before. It's a trade off for what has become a pretty high-profile job in Hollywood.

A story in the Aug. 1 issue of Video Store Magazine covering a DVD producers panel at Comic-Con points to a number of challenges DVD producers are facing these days and why bonus features may be more predictable and slickly produced these days but, perhaps, not quite so edgy or risky. DVD is just too valuable to take chances with anymore, as directors, talent and studio executives are all getting involved in the act of producing DVDs.

Indeed, renowned DVD documentarian Charles de Lauzirika (Gladiator, Black Hawk Down – Special Edition, The Alien Quadrilogy) pines a bit for the old days, when DVD “was a more underground product, like laserdisc, and you could really do anything you wanted with it.”

One of the issues brought up at the panel was the perception by some consumers that studios are “double dipping” by coming out earlier with basic DVD editions and then offering the special editions later on. The well-worn response that these editions just take more time might be more acceptable these days as windows continue to grow smaller, but does point to the possibility that there may be some fan fatigue with this approach. Certainly studios wouldn't do it if there weren't reasonable enough consumer demand that made these editions financially viable, but one wonders if this approach — which seems to be applied to almost every fairly high-profile release, warranted or not — will start to fall out of favor with consumers. As always, they will vote with their dollars.

All in all, despite the job being tougher, the panelists at Comic-Con agreed … they have one of the best jobs in the world right now, producing what is essentially a new art form in DVD.


30 Jul, 2004

T.K. Returns Next Week

Thomas K. Arnold's weekend Morning Buzz will resume next week.


28 Jul, 2004

TiVo: Victim of Its Own Success?

Digital recording service TiVo is hoping the Federal Communications Commission allows its fourth-quarter product TiVoGuard into the market without restrictions.

That's a bit like believing nonrenewal of the Brady Act, which stipulates a waiting period and criminal background check before the purchase of a handgun, would not affect the rate of violent acts committed with a firearm.

At face value, TiVoGuard, which would give TiVo subscribers the ability to transfer programming from their TiVo hard drives to separate media devices, including PC and laptop computers, appears to represent the logical next step in the dissemination of digital entertainment.

However, the ability to mobilize your entertainment media to remote locations opens a Pandora's box of illegal options not limited to peer-to-peer networks and piracy.

Just as gun advocates ignorantly decry any attempt to reign in provisions of the Second Amendment, allowing consumers unfettered access to digital media is a bad idea.


27 Jul, 2004

Waiting for the Plunge

If the video rental marketplace is your ocean, you'd better take a deep breath and hold your nose. Because enemy subs are prowling your waters, and your only hope may be to hide in the icy, low-price fjords.

Low pricing has been a double-edged sword from the outset. It leveled the playing field for a lot of indies who otherwise might have been driven out of business. Many of them have kept afloat on PVT selloff. But they also found they had to sell off titles a lot sooner to compete against players like Wal-Mart that were little threat in a rental-dominated marketplace.

If the map for your business has been a la carte rentals, the big players are changing the coordinates. Navigating the pricing waters over the next year is sure to be a treacherous venture that not all will survive.

Our online poll this week indicates that just a little more than 12 percent of respondents either have subscription programs or plan to offer them in the next year. By my estimation, the 79.85 percent who say they have already dismissed the notion of in-store subscriptions are going to get a rude shock by this time next year at the latest.

Netflix was a curiosity when it first made the scene. It was an upstart that most observers gave little chance. But it turned out to be a bigger change agent than anyone suspected. Now, with 2.1 million subscribers in a universe that Blockbuster CEO John Antioco last week defined as 4 million possible subscribers, the industry is taking the company and its model as seriously as Wall Street analysts have.

Blockbuster has no choice but to offer online rentals, and soon smaller players won't have any choice, either. Because not only is Big Blue doing that, but Antioco said the company has been testing pricing and terms models.

That means not only are subs prowling your waters, but they are packing a big torpedo: lower a la carte pricing. And it doesn't end there. Would Blockbuster be tinkering with its pricing if it wasn't feeling the heat? I doubt it.

There's another engine in the price war: vending machines. Sure, a lot of you think I've lost my mind. You're saying vending machines will never make a dent. But with McDonald's testing $1-a-night rentals and some supermarkets testing machines with prices as low as 69 cents for a one-night rental, it won't be long before others are forced to bring their prices down, too.

I'm guessing that a lot of indies who have done OK on a la carte rentals for a long while will have to rethink their battle strategies or risk one of the bigger guns sinking them.


26 Jul, 2004

How Low Can They Go?

I've been in this business long enough to remember a VSDA convention at which then-Disney-exec Jeffrey Katzenberg railed against the devaluing effect of McDonald's offering a $5.99 video with the purchase of a sandwich. At the time, he said $5.99 was a “suicidal price to charge if your goal is to have a healthy video business.”

In recent years, DVDs dipped past that price point to $5.88 at Wal-Mart and, in recent months, the price has dipped to $5.50 at Wal-Mart and Target. 99 Cent stores and others have gone even lower, albeit on budget product. At this year's convention, one distributor talked of 75-cent fare.

Certainly, the majors' move into distributing titles from secondary suppliers is an attempt to stave off the devaluing effect on ‘A' titles by feeding lesser-known titles to the $5.50 bins.

So far, this race to the bottom hasn't seemed to dampen consumers' perceived value or appetite for DVDs. But one can't help but wonder if — as Katzenberg warned nearly a decade ago — it someday will.


25 Jul, 2004

Shifting Rental Models

During an analyst call last week, Blockbuster CEO John Antioco said he figured the online rental market to have the potential to be about 10 percent of the overall video rental business and figured there might be about 4 million potential customers out there for online rental subscriptions, or about double Netflix's current subscriber base.

At the recent the VSDA show, Jerilyn Kessel, analyst for the research firm Centris, said a recent consumer survey showed that about 9 percent of active DVD renters said they are currently members of a subscription program, either online or in-store. Blockbuster hopes to have about 10 percent of its customers on a subscription by the end of next year.

OK, so both online rental and subscription models are small chunks of the overall home video business at present, but because of the current struggle by many rentailers (including Big Blue) to show growth in rental, Blockbuster's focus on online rentals and subscriptions is causing quite a stir. Antioco hinted at the possibility of other rental pricing structures being changed (are rental rate decreases far behind?) as the big retailer struggles with the right combination of offerings that will maximize revenue from its current customer base and attract new customers. And early next year, the plan will be to marry these online and in-store subscription initiatives.

Because of its investment in these areas, Blockbuster is expecting some loss in profits, and its stock was hammered last week. And partially because of Blockbuster's investment in these areas, Netflix stock was also hit hard, although there was hangover from its announcement the prior week that its profits would also be hurt due to higher-than-expected customer acquisition costs. You gotta love Wall Street. It hits you when you have to spend money to grow your business, and it hits your competitor because you're spending money to grow your business.

Of course it's not that simple, but the fact is that right now no one really knows if subscriptions in a brick-and-mortar traditional rental business can truly be successful. And while Netflix has been a darling of Wall Street up until the past couple of months, the question arises that with the arrival of Blockbuster on the scene and the potential to marry its online and brick-and-mortar store businesses, perhaps Netflix has seen the zenith of its growth potential, at least in this space. (Netflix CEO Reed Hastings has promised the company will move into the digital download space, which would seem to be a natural extension of its business.)

In 2004, home video rentals will be a $10 billion business — healthy indeed, but not showing any signs of growth. The struggle over subscriptions and online rentals is, as we have seen, a struggle over 10 percent to 20 percent of the business that is shifting from one form of rental to another. And while publicly traded chains must always be seeking business models to show signs of growth (or maintenance of market share) or be hit by investors, small businesses can still enjoy profitable years without reinventing themselves — to a point. Are smaller retailers adjusting their rental models in any way to either squeeze for ROI out of their rental business, or keep customers with more attractive rental options? Are subscriptions an option? Beyond previously viewed sales, which has proven to be a wonderful way to offset whatever level of rental decline a retailer is experiencing, what other rental adjustments are being tested?

Video Store Magazine has an online poll this week on the subscription model. Take a moment to complete it and see where you are in the scheme of things. Meanwhile, let me know your thoughts on the subscription business and other rental options. You can reach me at my e-mail link above. I hope to report back on what I hear.


22 Jul, 2004

A DVD in Every Pot

If there was one thing that struck me the most at the recent Video Software Dealers Association convention in Las Vegas, it was this: In the new DVD-dominated sellthrough universe, there's product for everyone — regardless of how niche.

I saw a supplier that specializes in exploitation films and another that releases only live music videos of reggae concerts. Then, back in the office, I got a series of DVDs that, according to the cover, promise to “transform your TV screen into an art gallery, and your room into a symphony hall.” I also got a screener for a kitesurfing video, whatever that is.

This just underscored my already-brewing contention that DVDs are becoming the paperbacks of the 2000s. You can buy all the hits, but you can also buy all sorts of specialized product. Granted, there has always been a special-interest market on video, even back in the VHS days (I remember laughing all day when I got a press release in 1991 or 1992 for a video titled, no lie, How to Butcher a Wild Elk.)

But the cheaper production costs of DVD and the format's inherent collectability have taken special-interest to a whole new level of exposure and visibility, and the emergence of online sellers like Amazon.com with unlimited cyber-shelf space have brought this product out from the back pages of obscure catalogs and well within reach of mainstream America.

My oldest son, Justin, is in surf camp this week. Last night, his instructor came by the house with a DVD, wondering if I might be able to help him find a distributor. I took a look at it. It's really pretty good. And you know what? I just might be able to help.

I wonder if there's a way for me to key into this market. Perhaps a reality show starring me? What would I do? Maybe I'll butcher a wild elk.


21 Jul, 2004

Kevin Smith: Tongue in Cheek and Feet on the Ground

I love Kevin Smith.

Chasing Amy is probably one of my favorite movies of all time. I even wrote a 12-page paper on it for my female sexuality class in college.

And the guy just cracks me up every time I hear him talk. Having interviewed him several times, I can say he's always come across like a genuinely nice, down-to-earth kind of guy — albeit one with a rather twisted sense of humor.

Granted, his work varies greatly in level of taste and quality of the finished product, but at least he's out there doing his own thing, which you can't say about everyone who's actually “making it” in Hollywood.

At the VSDA Home Entertainment 2004 show last week, he once again cracked me up during his acceptance speech for his DVD Visionary award.

He poked some fun at The Passion of the Christ, which endeared him to me all the more, saying: “You see, I could never make a movie like the Passion movie. I went to Catholic school. I was taught to love Jesus, not beat the shit out of him for two-and-a-half hours.”

What he can do, he said, is make movies that appeal to himself, his friends and about 10 people who like to go see them in the theater. DVD and the appeal of his films in the video market is what makes it possible for him to keep making those films that crack himself and maybe just a few other people up.

“Basically, I'm a glorified direct-to-video filmmaker,” he said, while accepting his award.

Whether you agree with that remark or not, whether you love Smith and his filmmaking sensibilities or hate him, it's always nice to hear someone in this business take themselves with a grain of salt.


20 Jul, 2004

Rentailers Increasingly Retailers After All

From the beginnings of the sellthrough business, industry pundits have exhorted rentailers to get into selling movies. Many said they were missing the boat, while rental dealers claimed they couldn't keep up with mass merchants' loss-leader pricing and stuck to what they did best — rent movies.

What a difference DVD has made.

Compared to VHS, the cost of the little disc was lower, the consumer appetite to buy it much higher (primed by mass merchants and first-day sellthrough availability) and its format more durable and, therefore, collectable. That opened a whole new sellthrough business for the rental dealer — low-priced previously viewed titles.

As I talked to rentailers during last week's VSDA convention, I asked them if they were worried about the drop-off in rental transactions. They all said no. Everyone said PVT had more than offset the decline in rental revenue. They all considered PVT a part of rental revenue, but I beg to differ. Whether they like to term it as such or not, rentailers are in the sellthrough business. And now that they have this toehold, I think they can move on to selling new titles with more success.

Because DVD was available as a sellthrough item from the get-go, mass merchants expanded their shelves, but data shows they may have finally hit a wall. The DVD Release Report, edited by contributor Ralph Tribbey, noted that the title total for 2004 is expected to show only a small gain for the year: 5,232 vs. 5,134 in 2003. If the number of titles is to grow, so must the sellthrough marketplace absorbing them.

And that's where the rental dealers come in. They are in a strong position with independent suppliers. During the VSDA convention, budget sellthrough supplier GoodTimes Entertainment gave dealers a tutorial on selling product that isn't Shrek 2. He urged rental dealers to learn to sell stuff that discounters won't discount or won't even shelve due to space constraints. In essence, he asked them to become niche sellthrough retailers, competing in arenas that the discounters won't or can't, much as they have with PVT.

“You have to look at independent suppliers as your partners [in tackling the sellthrough business],” he said, telling them to look for evergreen catalog and other budget product that sells.

It's a provocative idea, especially if rental transactions begin to fall off so much that PVT can't make up the difference.

If indie music retailers survived selling music alongside mass merchants (before the downloading debacle), so can indie video retailers — and they'll have the cushion of the traditional rental business and PVT. In the end, though they built their business on rentals, rentailers can be in the sellthrough business after all.