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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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9 Feb, 2003

<I>Matrix</I> Takes Next Step in Entertainment Evolution

The recent glitzy kick-off event at Warner Bros. Studios to the integrated media event that will be The Matrix this year — in all its permutations — heralds yet another step in the evolution of creatively managed multimedia properties focusing on one entertainment franchise.

What will make The Matrix suite of film, video and video game products so interesting to see will be the impact of their connected world that the creators have crafted.

The Matrix special edition two-disc DVD set, coming out April 29, offers a full load of samples from the upcoming movie The Matrix Reloaded (May 15); the Enter the Matrix video game (also May 15); The Animatrix DVD, featuring nine CG-animated/anime shorts based on “The Matrix” story line (June 3), and three hours of techno music from Matrix properties. A CD soundtrack from The Animatrix is also planned for June 3.

The coordinated effort on the part of Warner Bros. to leverage the talent and content of The Matrix is truly impressive as these products seemingly came to fruition almost simultaneously.

It helps that the studio chose to compress the final two segments of film trilogy — The Matrix Reloaded and The Matrix Revolutions (November) — into one year. That gave the various creative partners in home video, video game and music plenty of material to work with and provided Warner Bros. with a unique opportunity to fuse some of the content together and extend the Matrix experience from one entertainment platform to another.

Thus, you have some story lines and themes from The Animatrix DVD that extend to the movies. You have a significantly greater degree of movie footage and character involvement showing up in the video game. And Warner has developed a strong music component that can stand alone on a CD.

Entertainment companies have been moving down this road during the past several years. Universal managed to stretch the The Fast and the Furious franchise from its initial movie success to hit DVD, to DVD special edition, to a planned video game this year ... and to the next movie in the franchise — 2Fast 2Furious — which comes to theaters in June.

Warner's Harry Potter is an ongoing franchise behemoth of books, movies, videos and games. And, of course, New Line's Lord of the Rings set a new standard, with an extended version DVD that transcended the typical DVD approach and offered a whole new enhanced experience for fans of the trilogy.

The exciting part is that the DVD video medium's multimedia capabilities put it at the center of this evolution.

6 Feb, 2003

A Sure Thing in Uncertain Times &ndash; For Now

Consumer habits are puzzling. And this uncertainty certainly contributes to — nay, is primarily responsible for — the sinking feeling deep down in many studio executives' stomachs that while DVD sales continue to soar and everyone's making their numbers and then some, sorry, Charlie, it ain't gonna last forever.

My point is this: Right now, consumers are avidly collecting movies, something they never did in the VHS era. But for how long will this trend continue, and even if it does, is there a saturation point? How big is the optimum home movie library? A hundred DVDs? A thousand?

Take a look at what's happened on the music side — and I should point out that prior to my joining Video Store Magazine more than a decade ago, I was a rock critic, writing for Billboard, The Los Angeles Times and San Diego Magazine.

In the heyday of vinyl, everyone collected records. My parents had a cabinet filled with about 200 LPs, while my friends and I bought fruit crates and filled them with vinyl — with some of our collections topping out at 1,200, 1,500 or even more.

When CDs came along in the middle 1980s, the joys of collecting were diminished. Part of the thrill of record collecting was those big, flat covers, so eye-fetching and yet easy to store. With CDs, the size shrunk — and while many music fans did, in fact, rebuy their libraries, many others, me included, only selectively bought CDs. Even today, I still have about 800 vinyl LPs, but no more than 300 CDs.

The transiency of pop music that began manifesting itself in the late 1980s — the lack of any sustained superstar — further squashed the collector spirit. And with the advent of digital downloading, coinciding with the stupid refusal of the record companies to drop CD prices (for which they are paying out a class action settlement to pretty much anyone who visits musiccdsettlement.com), it was all of a sudden over. I don't know anyone who avidly, passionately, collects music anymore.

Home video is a different story. For starters, in the VHS era very few people collected movies— rental was it. You had favorite directors or actors, but there was a certain affinity between pop star and consumer that was never quite duplicated on the film front. Plus, music is inherently repeatable — I've been known to play the same song a dozen times, if not more, on the way up to work — while movies are geared toward one-shot viewing.

That's why no one, with the possible exception of Warren Lieberfarb, ever thought people would actually collect movies, at least not to the extent they are now.

With DVD, the improbable has happened. People are avidly, passionately collecting movies — and music videos, and TV shows and all the other cool stuff that comes out on DVD. The studios have gone out of their way to make DVDs collectable, chiefly through attractive pricing and the gobs of special features that make it virtually impossible to digest a disc in a single evening.

I've got about 1,400 discs and storage is beginning to be a problem. I'm continually weeding through my collection and I'm becoming a lot more selective in what I bring home.

I expect others will do the same and begin setting parameters. We've got nearly 100 years of movies in the vaults; eventually, everything that can be released will be released, and at some point consumers will have bought every old movie they want to own — or have room for. They will limit their purchases to new releases, and buy very selectively, simply because they will have run out of room. You're likely to see a resurgence in rental — and even if the studios have killed it off by then, there's always the specter of digital downloading.

At the same time, fewer new DVD households will come online, as the format becomes ubiquitous.

Therefore, logic would dictate that at some point, buy rates will drop dramatically.

That's the future — I think we can all agree on that. The uncertainty is in the time frame, which in my opinion rests chiefly on the ceiling for your typical home movie library. How big will home collections get? That's the key question everyone in this business should be asking.

4 Feb, 2003

A Different Reason To Consider the Subscription Model

In doing the series about video store crime, I realized how many things video stores have in common with convenience stores. Things that make both businesses crime targets.

Both businesses do a lot of cash traffic, tend to have a lot of obstructed views, cash registers at the back or one side of the store, long hours, short staff, lots of mom-and-pop shops. Lots of common risk factors.

One difference, though, is that the DVD era has ushered in a new approach to doing video business that might have an unexpected fringe benefit in discouraging crime. The subscription model just might be a pure rental business' answer to the convenience store's drop safe.

Experts say the best way to avoid being a robbery target is to be low-yield. Many street criminals actually do evaluate and choose targets based on how much they think they will get and how much hassle it will be to get it. Doing business by prepaid subscription could reduce the risk of a store getting robbed by reducing the amount of cash moving through the brick-and-mortar business. Sociologist Rosemary Erickson, who contributed many of the crime prevention tips we published, noted that bandits seldom rob trendy boutiques because they know most the the business there is done by credit card.

That is, provided the business advertises the fact. When convenience stores and gas stations first started installing drop safes for periodic cash deposits, they found they had to post signs advertising them or the crooks thought the employees were lying about not having money. Bandits mistaking the truth for resistance cost more than one life. So a store with an all-subscription model would want to post prominent signs advertising that there is little cash on the premises.

That could cut down on incidental purchases and sellthrough trade, unless the store owner could devise a way to manage a tab or credit card billing system for customer accounts – like a good, old-fashioned general store. But in this electronic age, those hardly seem like insurmountable obstacles. Candy and zapcorn sales might even increase, since people tend to spend more when they don't have to fork over cash.

It's an individual evaluation, since there are tradeoffs. A store with high-volume customers in a low-risk neighborhood might lose too much in rentals and late charges to make subscription fees worth the extra prevention value.

I'm sure it's not practical for everybody, but it's an idea worth considering if your business is in a high crime area. Who knows? It might help streamline other aspects of a business too.

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

3 Feb, 2003

Keeping Up With Some Fitness Vids Is A Stretch

I'm just going to come right out and say it: Darrin's Dance Grooves is hard.

I mean, it's hard to the point of not being enjoyable, even with the high-energy music and fun, funky moves that mimic Britney and other young chart-toppers.

Or maybe it's just me. I certainly am not the most graceful person in the world. But good old Darrin moves so fast when teaching the two-minute routines of the video and assumes so much prior knowledge of dance terminology that I was often left standing hands on hips or scratching my head, staring perplexed at the TV screen in the middle of a combo.

Not the greatest workout I've ever had, to say the least. And I'm a fitness video junkie, so I have plenty with which to compare it. I taught aerobics all through college and have never before had a problem picking up complicated choreography from a video. But Darrin's Dance Grooves had me plopping right back into my overstuffed chair and reaching for the snacks. So I was really surprised to see how the video is ranked on exercise sales charts. As of Jan. 5, VideoScan had tracked the VHS at No.2, and the DVD was No. 1.

To me, this says a lot about the power of the teenage discretionary dollar, because that's really the market for Darrin's Dance Grooves -- the teens and young adults who are firmly ensconced in the music and the artists Darrin himself trains for their videos. I think I fit the average demographic of home workout enthusiasts -- female, late 20s to early 30s, busy people with a history of body image problems that makes working out at home sometimes a popular option, etc. -- and Grooves doesn't really fit into our mold — or our spandex. Or maybe it's us who don't fit into theirs.

Now I see that no matter how many fitness releases out there are marketed and designed for us -- the perennial fitness video consumers -- it really only takes some snazzy moves and hip-hop video clips to draw a different, younger, hipper crowd to our market in droves.

Not that it bothers me. There are still plenty of my favorites out there. But Darrin and his groovetastic moves made me feel old, uncoordinated and unmotivated -- pretty much the opposite of what you want from a workout. I have no doubt that the kids who it's really meant for had the exact opposite reaction. I guess I just halfway wish I was still one of them.

What the heck, back to my “Step Reebok” tapes. I'll just continue to pound my knees into oblivion and shake my cane at Darrin's Dance Grooves Vol. XXII when it arrives.

2 Feb, 2003

VHS Pricing Will Have to Change

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

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

It's all about cash flow.

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

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

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

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

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

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

30 Jan, 2003

Too Little, Too Late?

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

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

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

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

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

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

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

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

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

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

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

28 Jan, 2003

Fading to Gray

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

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

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

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

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

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

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

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

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

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

27 Jan, 2003

Can a Retail/Online Entertainment Distribution Marriage Work?

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

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

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

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

26 Jan, 2003

Fighting Back Against Violent Crime in Video Stores

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

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

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

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

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

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

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

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

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

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

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

23 Jan, 2003

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

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

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

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

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

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

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

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

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

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

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

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