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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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19 Oct, 2003

MPAA, Junior Achievement School Program on Slippery Slope

Last week, the Motion Picture Association of America (MPAA) and the Junior Achievement organization announced a new program called “What's the Diff?,” designed to teach kids “responsible digital citizenship.”

For reasons I cannot fully articulate, this leaves me with an unsettling feeling in the pit of my stomach. Primarily, because it strikes me that this effort, as legitimate as it appears on its face, is in many ways an effort by one industry to penetrate the hearts and minds of a generation of middle-school kids on an issue of vital financial importance to that industry.

OK, before you fire back an angry e-mail to me, please understand that I am not a proponent of file trading of copyrighted material. I understand that it is illegal, and we all have a responsibility to act accordingly in front of our PCs in the privacy of our own homes and offices. I understand that there may reasonably be a place for a discussion of intellectual property rights in our schools' curriculum in some form or fashion.

But at least in the middle-school curriculum that I reviewed on Junior Achievement's Web site, I found no similar “sponsored” tracks for other single-industry issues as this issue is for the entertainment industry. Indeed, the JA's programs on personal finance, math in business, economics in action and others don't appear to be attempting to convince kids of anything other than the value of staying in school (there's even a track called the “economics of staying in school”). I don't see the cable industry sponsoring a track on the impropriety of illegally taping cable or satellite programs to which one has not subscribed. I don't see the computer industry sponsoring a track focusing on the unlawful copying of computer programs (maybe they'll be covering this in the MPAA program, but it wasn't mentioned in the press release).

Now, I recognize the problem that exists. A recent Gallup Poll found that 83 percent of teens ages 13 to 17 felt that downloading free music was morally acceptable. The Internet culture has bred the feeling that anything on the Web is free to do with what you want if you can get it, and that is wrong. But so is taking two newspapers out of the dispensing machine when you only paid for one — and I don't recall seeing the newspaper industry trying to integrate that message into America's education program. Parents, I think, must be the source for this sort of teaching. The Recording Industry Association of America's (RIAA) efforts to prosecute file swappers and the online and TV public service announcements about the illegality of downloading are all legitimate exercises of “educating” a public about these improper practices.

The message of responsible digital citizenship is important to those in the entertainment industry from a financial standpoint — I agree. But is it of such national priority that we use a portion of the already precious educational time and attention in our schools (even in ancillary programs such as Junior Achievement) to focus on it at such a significant level? It is an issue of ethics, and I agree that kids need to be able to understand the file trading of copyrighted materials they have not paid for individually is stealing. I just wonder if our entertainment culture is not penetrating too deeply into areas of our society once governed by a more broadly based set of intellectual standards.


16 Oct, 2003

And Now for Some Really Creative Ways to Use EZ-Ds

I don't know yet how Disney's disposable disc test is going, but let me tell you, I'd bet my three sons that no one's going to buy a disc for $6.99 that's good for only 48 hours before it self destructs if they can go into any Wal-Mart and buy top-quality catalog titles — even real hotties like MGM's special edition of When Harry Met Sally — for $5.88.

That said, I don't think the folks at Flexplay have a complete turkey on their hands — although if you've seen the package, it does bear an uncanny resemblance to lunch meat.

The way I see it, EZ-D is simply in the wrong market.

I can see two far better uses:

  • It's a great way to solve the screener issue. As you may have read, the Motion Picture Association of America has instituted a ban on Oscar screeners because too many of the movie-only discs are winding up on eBay or in the hands of pirates. Awards voters, meanwhile, are in a tizzy because now they have to physically go to screenings and the problem is, many of the smaller pictures simply don't play in Peoria, which puts independent films at a decided disadvantage.

    EZ-D to the rescue. The little things are only good for 48 hours after opening, so there's little risk of them being sold on the black market. Studios can send the discs out to award voters — and probably save a little on postage, because the packaging is so flimsy. The recipient can then watch the film and chuck it — which I presume many of them did (with their ancient movie-only videocassettes) before eBay came along.

  • EZ-D also offers game manufacturers a way around the rental conundrum. They want fans to try their games, but they hate the concept of rentals because they don't get to share in the spoils. It's the same mindset the studios had in the early days of video rental, and which they continued to have until revenue-sharing gave them a way to get their much-longed-for cut.

    With EZ-D, they don't have to worry about retailers buying them and then renting them out over and over again because the damn things commit suicide after a mere two days.

    Consumers can buy them for a few bucks — as opposed to $40 and up for a real game disc — and joystick away for two whole days before they decide whether to go all the way with the real deal.

    Flexplay execs, you can send my consultancy check directly to me, care of this magazine.


  • 14 Oct, 2003

    How Gov. Schwarzenegger Contributes to Digital Piracy

    I knew that would getcha. What, you ask, could Arnold Schwarzenegger being California's governor-elect possibly have to do with digital piracy?

    I think, to some extent, Hollywood brings piracy on itself and encourages scofflaws. Not just because of leaks in the studio marketing and distribution system, but because Hollywood has, for decades, built up this mystique around its darlings. The entertainment industry spends wads of cash to convince us that stars are somehow better, more attractive, more deserving of rewards than the rest of us.

    As singer/songwriter Liz Phair said in a recent appearance on HBO's “Real Time with Bill Mahr,” fans see their favorites on a carefully calculated pedestal.

    She's right – you never see Nicole Kidman pull up to a premiere driving a battered VW Beetle. Or driving at all, for that matter – stars have drivers for that. You never see the cast of “Sex and the City” arrive at an awards show wearing anything less than Versace. Tabloids are filled with the exploits of stars and former stars, from Michael Jackson to Ben and JLo.

    And then there was the California recall, which proved that even without answering most questions, stating a position on most issues or participating in debates, a movie star could get elected governor.

    So without condoning illegal conduct, I can understand why some people think downloading one song or movie won't really hurt anyone. No doubt that's why the Motion Picture Association opted to focus on the “little people” in its antipiracy ad campaign.

    What the recall election here proved was that if you have a high enough profile, if you're famous enough, you can have anything you want. Including a term in office.

    Maybe things will change the night we turn on the Academy Awards broadcast and see a sea of our favorite screen idols in ratty Levis and chambray trade show shirts.


    13 Oct, 2003

    How Are You Driving Your Used-Disc Sales?

    While in Toys “R” Us the other day to purchase a birthday gift, I naturally inquired how The Lion King was doing. It was soon after street date, and the store had a large display near the cash register. The clerk said it was doing fine, but what was really in short supply was Sleeping Beauty.

    “Why Sleeping Beauty?” I asked.

    The clerk said a Disney title offer the store had with The Lion King had cleaned out the store's supply of the older Disney classic.

    It got me thinking about how important loss-leader promotions are to the big sellthrough chains. The too-good-to-pass-up offer on the Disney titles obviously brought in the customers, who likely purchased something else at Toys “R” Us that helped the chain make a profit on its traffic.

    In the sellthrough business, this has been a time-tested practice, one that frustrated rental dealers who felt they could not compete and gave up trying to sell videos. But now the rental dealer has a new option: previously viewed DVDs. While customers never held pre-viewed cassettes in much esteem, the previously viewed disc is a highly valued product, something many customers look at as almost as good as new.

    Blockbuster and the other big rental chains have taken to aggressively promoting used discs – often combining them with free rental offers. Independent rentailers, too, have wised up to the used-disc phenomenon. I'm curious to hear what sorts of promotions have worked best – and conversely, which ones have proven to be less so. I'm sure fellow rentailers can use some tips in the relatively new arena of used-disc sales.

    Readers?


    12 Oct, 2003

    Politics as Entertainment

    You can always count on California to bring a little entertainment into your homes every evening, if not through the TV programming and movies produced out here in “la la land,” then through its politics.

    The recent election of Arnold Schwarzenegger as governor in the recall of Gray Davis captured the attention of the entire country and, as you'll see in this week's issue of Video Store Magazine (page 40), at least helped to keep sales of Arnold's videos moving along after the release of T3. I can't help but think that Schwarzenegger's own continued references to his movie personas could not help but fuel sales a bit.

    Of course, we have been down this road before with Ronald Reagan, but no one can argue that Reagan's 60+ films, such as Knute Rockne: All American (from whence he got his nickname, The Gipper) or his critical success in Kings Row, ever put him in the same realm of fame during his Hollywood years as have Schwarzenegger's “Terminator” films or other efforts. To be sure, Reagan's terms as president, spanning 1981-89, likely had little impact on the rental or sales of home videos of his movies, coming as they did during the early years of the home video business.

    Voters had begun to learn about Reagan while he honed his political chops as two-time president of the Screen Actors Guild, then as a reborn Republican who took the governorship of California before moving on to The White House. No need to watch Bedtime for Bonzo to try to understand what sort of president he would make.

    This time around, however, voters in California and those around the nation following the election here had no such background on Arnold from which to try and figure out what sort of political leader he might be. And his reticence to engage in but one public debate (and a few interviews on “Larry King” and “Oprah”) gave voters little real substance as to his specific views or what he would do as governor.

    Nope, Schwarzenegger, it can be argued, took advantage of a bizarre moment in California political history to leverage his fame, moderate Republicanism and Kennedy clan connection (through his wife, Maria Shriver) into winning the popular vote in an angry voter backlash recall election. My guess is no small percentage of voters retained images of Arnold as the indestructible Terminator — who can “clean house” with a swoosh of his formidable arms — when they punched their chads. My bet is Arnold's staff continues to keep the “Governator” in controlled media circumstances, and the electorate will be kept at arm's length as Arnold and staff struggle with California's fiscal problems.

    It's that curiosity factor that likely will continue to draw a stream of people back to Schwarzenegger's videos seeking, if only jokingly, to get some idea of how he will govern in the next three years.


    10 Oct, 2003

    Entertainment Industry Needs to Prepare for DVD's Inevitable Decline

    The holiday selling season is shifting into high gear, with a blitz of summer blockbusters and high-profile catalog titles arriving on DVD amid a splash of elaborate launch parties and expensive, high-tech marketing campaigns.

    The studios are already starting to battle over bragging rights — no sooner had Universal put out a press release touting first-week DVD sales of 2 million units of Scarface than Disney countered with a claim of 3 million The Lion King DVDs passing into consumer hands in just three days.

    And with the DVD penetration rate among U.S. households fast approaching 50 percent, I fully expect at least a half-dozen sales records to be set and promptly broken in the coming two months.

    Underneath the glee in studio executives' eyes over the continued, and still-accelerating, DVD juggernaut, however, is an undercurrent of uncertainty.

    That's because one of the unwritten laws of consumer products is that all good things must come to an end. DVD has been hailed as the hot gift item in 2001, 2002 and now once again this year, but believe me, one day this ride will come to a screeching, grinding halt and something else will arise in its place.

    The entertainment industry is hoping this “something” will be high-definition DVD, but precious little progress has been made in bringing the feuding sides to the table for a compromise everyone — Sony, the DVD Forum and all the other next-gen wannabes — can stomach.

    Guys, I'm afraid we're running out of time. DVD's still going to go strong for another two or three years, but by the time the steam starts running out we'd better have something else waiting in the wings.

    I have no doubt that getting consumers to rebuy their movie libraries will be a lot easier than anyone probably imagines — provided there's a new and better format out there on the table.

    But if we're still squabbling over blue lights and red lights and whatever else at the time high-definition television rolls out a few short years down the pike, our entire industry's going to be in big trouble.

    We need a leader. We need a summit. And, perhaps most importantly, we need to get the consumers involved, or at least aware of what's going on — that we're making some progress behind closed doors.Assuming, of course, that we are.


    7 Oct, 2003

    It Could Be a Happy Holiday Season – Or Maybe Not

    Fasten your seatbelts. And then tighten them, because I think this holiday season is going to be a bumpy ride.

    Already analysts are making predictions that range from wild optimism to utter doom for retailers this holiday season.

    The National Retail Federation released an optimistic 5.7 percent growth projection in mid-September, but said it would probably revise that forecast down as consumer confidence and debt reports are telling a different story. Forrester Research predicts a 42 percent increase in online spending, but that may just mean shifting sales from malls to computers.

    I don't have answers or analysis as much as gut instinct, but my gut instinct is usually pretty good in these matters, so I'm going with that.

    My gut instinct says spending this year, with a few possible exceptions, will be dismal, because pretty much everyone whose job title isn't initials starting with a ‘C' is in pretty dire straits these days.

    Some people, victims of the longest “jobless recovery” ever, have no job titles at all. Chances that they will be blowing wads of cash on robotic pets or high-end video game consoles seem pretty slim; I expect a lot of those folks to spend their unemployment checks on the family holiday dinner, new winter clothes and maybe one or two special gifts.

    For the rest of consumerdom, worries about the economy in general, credit debt and job stability are likely to cool spending. We've all heard how home refinancing has propped up the economy during this recession, but by now that cash has to be running out for a lot of people, and mounting interest rates have stopped others from refinancing at all.

    That could be good for game and video rentals, because people who are counting their pennies are more likely to opt for the incremental expense of renting as opposed to the outlay of a purchase. It could be really good for rental subscriptions, which offer a real value in tight economic times.

    Or maybe the quantity and quality of bonus features will make some folks buy discs instead of renting them, figuring they will get more bang for the buck by getting several hours more of entertainment for their money. It could add up to a “buy the disc, rent the game” mentality, partly because game prices tend to be stable and higher, while mass merchants make discs accessible with discounts in their first week or two of release.

    For now it's anyone's guess, but I'll try to keep you posted.


    6 Oct, 2003

    Disney Pulls Out All the Stops for ‘Lion King' Release

    In a decade in this industry, I've never seen Michael Eisner in person – until he showed up Friday night to introduce the new digitally remastered Lion King Special Edition at Hollywood's El Capitan, which pointed up the increasing importance of DVD in the studio ledger.

    Disney also brought out Elton John to perform two songs from the beloved animated hit: “Can You Feel the Love Tonight,” which won an Oscar, and “Circle of Life,” which the singer said he thought should have won the Oscar.

    While Disney is known for its galas, I haven't seen such high star wattage for a Disney video release in a long time – if ever. The Robin Williams appearance during the 1996 VSDA convention to promote Aladdin and the King of Thieves comes to mind, but I've never before seen Eisner.

    Much of it can be chalked up to the increasing importance of event marketing with the advent of sellthrough DVD, but I also think Disney has a lot riding on the Lion King release. Heretofore the highest-selling video of all time, with 25 million units sold, The Lion King has some strong competition this year from Pixar's Finding Nemo, due on video less than a month later, also from Disney. It's also probably no coincidence that Eisner, et al, is renegotiating the Pixar distribution deal. The Lion King this summer lost its animated box office title to Finding Nemo. It will most likely hold onto its title as the biggest-selling video of all time, but Disney doesn't appear to be taking any chances. The studio has a lot riding on this classic, which marked the apex of its animated hit parade under Eisner as well as a high point in traditional animation. While CGI hits like Nemo and DreamWorks' Shrek are pushing aside the old guard in more ways than one, Disney is out to prove it's still the King of the video jungle.


    5 Oct, 2003

    Is It Time for a Rate Hike?

    A number of areas of opportunity for business and profit growth for rentailers were discussed during last week's East Coast Video Show, including ways that smaller retailers can expand their Web sites into more transactional vehicles. The simplest and most obvious was raising rental rates.

    The just-released benchmarking study by the Video Software Dealers Association shows that average rental rates in 2002 rose to $3.29, up from $3.05 in 2001. Combine that with the lower cost of goods in the DVD era, and effective operational cost controls in employee salaries and rent, and it helps to explain why, according to the study, the average “contributing margin” (gross margin minus operating expenses) of those retailers surveyed rose 44 percent in 2002 over 2001.

    It seems like a simple concept, yet many retailers at the show said they have been hesitant to raise rates because of the competitive nature of the business. However, it's the nature of things in retail that prices always tend to grow at least some every year due to the inexorable rising cost of doing business. Add to this the fairly stable higher perceived value of DVD over VHS, and it's plain that, for many retailers, there is room to grow their bottom line through judicious rate hikes.

    “I have never had anyone complain about rate changes,” said Halsey Blake Scott of C'Ville Video, during one session.

    “Don't sweat it, just do it,” added Ken McLeer of Video Headquarters.

    Some retailers in other panels also talked of how they have kept their catalog rate pricing the same as that of new releases. The thinking there is that when someone comes into the store looking for a specific title, they are not going to quibble over the fact that it's priced the same as a new release, although typically, catalog pricing is almost universally priced lower. The benchmarking study also reported that between 2001 and 2002, average adult rental rates rose from $3.50 to $3.98.

    To be sure, not every retailer in every market has room to raise rates, and most everyone at ECVS agreed independent retailers have to be competitive with the big chains when it comes to rates. But the message was clear: If you haven't increased your rates in some time, you're probably leaving some money on the table. If that's the case, and you're looking to improve your bottom line (as you should always be), then, in the words of Mr. McLeer …

    “Don't sweat it, just do it.”


    3 Oct, 2003

    Everyone Wants A Piece of DVD

    Two unconnected events happened this week that got my mind a-thinkin'.

    Earlier this week, the Motion Picture Association of America, the mouth of the Seven Major Studios, announced it would no longer be sending out screeners of films to awards voters because of concerns over piracy. In recent years, these so-called “Oscar screeners” — which contain only the movie, no extras, but typically come out long before most films make it to consumer DVD — have popped up with surprisingly regularity on eBay, the online auction house.

    This morning, I checked my e-mail and found a promotional message from eBay, saying some of its most popular categories may now be instantly accessed via keywords. At the top of the list: DVD.

    Now, I'm not saying that eBay condones piracy — they've actually been quite good in shutting down suspicious auctions once they're alerted by the studios.

    But DVD has become so ingrained in popular culture that everyone wants a piece of it, and the bigger it gets the more vulnerable it is to mischief. Growing the number of DVD households is a good thing, but it also widens the audience for DVD bootlegs. And the nature of the digital technology is such that pirates can make beautiful copies virtually indistinguishable by the real thing. If there's a lag, it's in packaging, but even there we've made tremendous progress in recent years.

    I was talking to a source the other day who told me a key catalyst in the studios' decision to stop sending Oscar screeners was an earlier event in China. No sooner had Harry Potter and the Chamber of Secrets hit the big screen than bootleg DVDs appeared throughout Asia, mostly grainy and wavy — the result of handheld camcorders smuggled into movie theaters, for years the preferred modus operandi of pirates.

    But some DVD bootlegs were remarkably clear. Watching them, studio executives who had been given the contraband scratched their heads — until they saw the telltale disclaimer float across the screen.

    It's great that eBay is embracing DVD. It's only natural, too, given their appearance at home video trade events to proselytize selling previously viewed DVDs on their site.

    But the question remains, how many of these previously viewed DVDs really are previously viewed?

    And, more importantly, who did the viewing?

    The auctions eBay has shuttered are all for movies not yet issued on DVD. I wonder how many other bootlegs are being sold, without anyone knowing?