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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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22 Dec, 2000

APAR's WORKING WEEKEND: The First Thousand Years Are the Hardest

The epic, epochal election that just climaxed the 20th century may have been agonizing (for about half those who voted), but, for cosmic-conscious optimists, it bodes well for the next 1000 years -– or at least the first 12 months of the next 1000 years.

(Lest anyone is confused by the near-hysterical hype that had millions believing 2000 to be the first year of anything, simple logic suggests 2001 is Year One of the next millennium, making 2000 the coda year of the previous one.)

By working up the country –- not to mention other parts of the world -– into a state of total befuddlement, the election signalled in neon lights that nothing is what it seems and everything exists to be challenged and questioned.

How does this affect the home entertainment industry? Glad you asked.

Take Sony Playstation 2. Earlier this year, it looked to be the slam-dunk next-generation game platform of choice that would blow all competitive systems to smithereens. Going into ’01, we expect to see earnest competition for a system that has seemingly managed to tick off more people than it has impressed. Sony did a masterly job of spiking demand for its sexy DVD-equipped game machine, then underestimated how frustrated the consumer public and retailers would become when faced with marketing hype and empty shelves. Will the ill will last, or is it just a momentary spat? We’re curious to see whether other game systems sporting DVD drives, and there’ll be several you haven’t heard of, will exploit that public awareness to their advantage, and Sony’s chagrin.

Etailing is another area that already has seen its comeuppance, with more to come in 2001. For honest and dishonest e-commerce sites alike, PS2 was like nectar. Unsuspecting online shoppers paid for the system, only to discover the Brand X sites had no inventory to ship. Some sites thought they’d have product, while others knew darn well they were scamming the customer. The result is that pure-play etailers are fast losing credibility, to the benefit of clicks-and-mortar sites with brand reputations that precede them in the bricks-and-mortar marketplace.

As part of the post-apocalyptic return to simple pleasures the turn of the century will afford us, the coming year will bring a sensible rejection of those so-called personal video recorders in favor of replacing old VCRs and acquiring new DVD players. For now, the digital hard-drive video recorder is another box we can do without. Besides, our media-stupid culture would do well to reverse the obsession with TV-viewing. PVRs, or whatever they’re called this week, simply are not a quantum improvement over either VCRs or DVDs.

Digital cinema is the current darling of slick film journalists, but it’ll continue to be written about a lot more than it will be projected in theaters. Who will pay for the very costly equipment necessary to retrofit all those multiplexes already in financial quicksand?

Video-on-demand, it goes without saying, is still going nowhere fast. Bandwidth remains a bandmyth. I would gladly tell you my personal stories of disgust in dealing with cable modems or DSL, but by now you probably have your own to tell or have heard from others. Like cable companies sending high-speed modems to homes that aren’t properly connected to high-speed pipes.

My favorite anecdotes involve, what else, AOL, which seems intent on demonizing itself as the 21st century’s answer to Ma Bell. Click on an AOL banner offering to tell you if DSL is available in your neighborhood and, in a flash, you’ve ordered DSL when you never intended to. Somebody could make a fortune selling form letters to state attorneys general if AOL keeps up those shenanigans.

If you go with a modem from your cable company, you get to pay only $9.95 a month for your AOL, but if you order DSL through AOL, your monthly AOL fee stays at $19.95 plus you pay another $19.95 a month for DSL. Well, it has to pay for Time Warner somehow. Might as well be out of your pocket.

Does that mean a resurgence of VHS rentals? Not so fast, although there are signs of retro trends in amusement, such as a 23% increase in the sales of board games. And for those who bemoan a downturn in VHS rentals, there are others who celebrate the onrush of DVD sales and rentals.

What about downloading music files, which is threatening to transform the music industry before our very ears. Take this test. Ask a dozen twentysomethings how many actually rip CD tracks and download them to their computers or to MP3 players. I bet you’ll be asking a long time before five of them answer in the affirmative. It’s more involved and time-consuming than most casual users care to commit to.

Digital devices are sexy and designed to improve the quality of life, after a fashion. They also remain complicated, glitch-prone pieces of a glitzy future that can clutter our existence.

It’s enough to jolt some of us back into reflecting how lucid and light-hearted life can be at the turn of the century, in the elegant simplicity of our analog cabins.

Comments? Contact Bruce directly at:bapar@advanstar.com

22 Dec, 2000

TK's MORNING BUZZ: 2000 Has Been a Topsy-Turvy Year for the Home Entertainment Industry

This is my last column of the year; I'll be off on vacation all of next week, and our Web gurus, Steve Apple and Ed Ochs, have graciously allowed me to take a little time off from writing my daily column over the holidays.

Looking back on 2000, it's certainly been a topsy-turvy year for the home entertainment industry.

The VHS videocassette began a precipitous slide in both sales and rental. But the explosive success of DVD more than made up for the slack, particularly on the sales front.

Savvy video specialists wisely began transitioning away from VHS. Blockbuster Inc. began selling satellite dishes and making plans for a video-on-demand service over the Internet. Sellthrough champs like Best Buy and Musicland began dumping VHS inventories and replacing them with DVDs. And independent video rental stores began building lucrative DVD rental sections, despite fears that the studios, alarmed at cannibalization of the higher-priced VHS rental cassettes, would mess with the existing pricing structure.

And yet for video specialists, these fears were the least of their worries. Indies continued to go out of business as Blockbuster accelerated its aggressive quest for market share, which at the close of the year stood around 40%. Hollywood Entertainment, with 1,806 stores the nation's No. 2 video rental chain, dumped its money-losing Reel.com subsidiary but ended the year in worse shape than it began when its stock price sank below a dollar a share. And two other public video chains, Video Update and Video City, succumbed to Chapter 11 bankruptcies.

Distribution had one of its worst years ever. The year began with rumors that Warner Home Video would begin selling rental product directly to retailers--rumors that were soon confirmed. Two video distributors, M.S. and Sight & Sound, went out of business within weeks of each other. Just as summer turned to fall, Universal Studios became the second major studio to yank product from distribution, limiting its full line to two wholesalers and letting a third carry only sellthrough VHS and DVD. Distributors were still reeling from the shock of the Uni announcement when market leader Ingram Entertainment bought No. 2 Major Video Concepts and proudly proclaimed the combined company's market share was bigger than that of all six of its competitors combined.

There was a lot of hype about electronic delivery, with pay-per-view proponents maintaining they were closer to their ideal of video-on-demand for everyone and studio visionaries declaring digital downloading The Next Big Thing.

How much of this hype will turn into reality is still a big question mark as the year winds down. However, some key analysts and retailers have revised their "sky is falling" thinking and now believe digital delivery can coexist alongside packaged media, with the overall pie growing bigger.

The year ended with Best Buy announcing a merger with Musicland, the nation's top music chain, and its intent to turn Musicland's mall and rural stores into entertainment emporiums offering movie and music software as well as DVD players, satellite systems and other hardware.

The stage, many say, is set for video retail to undergo a major facelift. And that can be either good news or bad news, something we'll have to wait until next year to find out.

Happy holidays, on behalf of the entire Video Store Magazine family.

Comments? Contact TK directly at:TKArnold@aol.com

21 Dec, 2000

TK's MORNING BUZZ: A Recession Would Be Deadly to Video Retailing, Clouding Even the Bright Future of DVD

As the year winds down to a close, we're hearing more and more talk that the country may be in for another recession. Economic growth is slowing, and investors are nervous that the good times we've all been enjoying for so long now may seen be coming to an end.

Traditional wisdom suggests that the entertainment industry suffers less than other businesses during a recession, but video retailers who have been in business for awhile know full well that this no longer holds true.

During the last recession, in the early 1990s, the video retail industry underwent its first real shakeout. Renting a video was still seen as a tremendous bargain by consumers, but somehow that wasn't enough to save video rentailers from the overall economic downturn that gripped the nation.

Should another recession arise, expect video retailers to fare even worse--despite the success of DVD. When money's tight, consumers go for more bang for the buck, but the sad truth is that despite the relative cheapness of renting a video--or even buying a DVD of a $200 million movie, compared to, say, buying a CD by an unknown band for just a little less--the spectrum of free entertainment options has grown so wide that video dealers will be even less immune from the woes of a recession than they were a decade ago.

Sure, you can rent a video for $2 and buy a night's worth of entertainment, but television has improved mightily over the past 10 years. There are more channels than ever before, and many more movies playing on the tube for free.

Then there's the Internet factor, with a wealth of free information and entertainment just a click of the computer mouse away.

A recession, I fear, would be deadly to video retailing, clouding even the bright future of DVD.

Unfortunately, at this point there's not much any of us can do but keep our fingers crossed and pray.

Then again, that's what many retailers have been doing for quite some time already.

Comments? Contact TK directly at:TKArnold@aol.com

20 Dec, 2000

TK's MORNING BUZZ: Relying Solely on Video Rentals Is No Longer Viable for Video Stores

I just finished compiling Video Store Magazine's annual "year in review" issue, more than 6,000 words of clips and snippets chronicling one of the most topsy-turvey years our industry has ever experienced.

If I had to single out a single theme for 2000, it is this: That retailers of all stripes are struggling to adjust their tried-and-true business model because relying solely on video rentals is no longer viable.

We've seen Blockbuster start selling satellite systems and service in its stores, as well as launch a video-on-demand service in which movies are delivered over the Internet.

We've seen independent retailers beef up their DVD inventories and diversify into other products and services, from pizza and games to movie merchandise and photo finishing.

And we've seen Best Buy gobble up the nation's top music chain with the express intention of turning nearly 1,000 mall and rural stores into what my colleague Bruce Apar calls "e-plex entertainment emporiums," storefronts that freely mix home entertainment software and hardware to become one-stop destinations.

After years of talking about "convergence," retailers are turning talk into action.

The old video store, which relies solely on the rental of pre-recorded videocassettes, is truly an endangered species. I just hope the scores of stubborn video rentailers who have resisted and fought any type of change take note and act accordingly.

It's a whole new world out there, and only the strong, the resilient, the adaptable retailers will survive. Not every new strategy, not every radical departure from the norm, will work.

But neither will sitting still.

Comments? Contact TK directly at:TKArnold@aol.com

19 Dec, 2000

TK's MORNING BUZZ: Universal and the Cut-Out, Cut-Off Distributors -- It's Video's Version of the Hatfields and McCoys

It's the video industry's version of the Hatfields and the McCoys, a full-on shootin' match between Universal Studios Home Video, which will only sell product through three distributors, on one side and the disenfranchised wholesalers, and their loyal retail customers, on the other.

Defiant retailers have been raising a stink in the press in recent weeks about how they are determined to continue buying Universal product through their own distributors, who are undoubtedly egging on said defiant retailers, in the wake of Universal's decision to yank rental, sellthrough and DVD product from all but Ingram and VPD (with Valley Media allowed to sell sellthrough and DVD product only).

Non-anointed distributors like Flash and WaxWorks have openly stated their intentions to get Universal product however and wherever they can, most likely from Canada, and have encouraged their accounts to stand by them.

Last week, Universal announced it was delaying by one week the Canadian street date of several top upcoming titles, including Bring It On and Rocky and Bullwinkle, with the express purpose of plugging the Canadian "leak."

This, in turn, has left some Canadian retailers mighty ticked, as this e-mail to me from a leading Canadian rentailer suggests:

"My hearty congratulations to Universal and Universal Canada. First, Universal decided that only a couple distributors in the USA should be able to sell their product, raising the ire of distributors and retailers alike.

"Now, when their plan looks like it may backfire on them, they turn an entire country into a second-class market that does not even rate the same street date as the USA.

"Where will this ridiculous process end? Canadian retailers deserve bettertreatment than Universal is providing them. At least U.S. retailers can buy their product from two distributors on the real street date. Canada no longer even has that option."

U.S. distributors are also indignant, with one telling me shortly after hearing news about the Canadian twist, "That's real smart--they're going to punish an entire country just to show us they're the boss." This distributor further said that despite Universal's efforts, he's still going to obtain Uni product, and that all the Canadian street-date delay has done is give him a new market.

"I'm going to sell copies to Canadian retailers, because now I can promise delivery one week before they come out in their country," he said.

Universal, it's your turn.

18 Dec, 2000

TK's MORNING BUZZ: Copy Depth Has Done Diddly to Cure the Ills of Video Rental It Was Supposed to Fix

I'm going to make a brash and bold statement that's surely going get me a lot of flack from the studios, but here goes:

The various copy-depth initiatives, including (and especially) revenue-sharing, have done diddly to cure the ills of the video rental business that they were supposed to fix in the first place.

If you will remember back to the end of 1997 and the beginning of 1998, when the studios first began to unveil their various plans to put more copies of the hits into video rental stores, their reasoning, at the time, was that this was a necessary remedy.

Rental revenues started to decline a bit in 1997, Blockbuster was in trouble, and the Great Industry Minds that sought to address this problem ultimately concluded that consumers had lost their infatuation with the VCR, and with the video rental experience, because they were sick and tired of walking into their video store and not finding the hot new releases they wanted. The tried-and-true principle of consumer dissatisfaction was dead, the Great Minds proclaimed--and the only way to breathe new life into the video rental industry was to give the customers what they wanted, and plenty of it.

Fast-forward to the present. The typical video store is loaded with the hits, particularly those belonging to the big chains. And yet video rental revenue is essentially flat for the year, while third-quarter reports from most of the big public chains (and Rentrak) say revenues are down because of a "weak slate of titles."

Wait a minute. Isn't that the same thing everyone said in 1997, when rental revenues first started skidding downhill? Months before the studios decided consumers were bored with renting videos because they couldn't find the hits they wanted, I seem to remember that "weak slate of titles" phrase cropping up in almost everyone's financials. Why, if my memory is correct, Warner Home Video even sent John Quinn out on the road with a bunch of charts and graphs and data showing that the collective boxoffice gross of first-quarter 1997 releases wasn't anywhere near what it had been in the first quarter of 1996.

But that point somehow got lost in the Great Industry Think-Tank Sessions that followed, sessions that included Viacom's Sumner Redstone and Blockbuster's John Antioco.

So let me see if I've got this straight. When rental revenues first headed south in early 1997, the culprit was initially identified as a "weak slate of titles," but the ultimate solution was copy depth. Now, three years into copy depth, with the latest hits in more-than-ample supply at virtually every video rental store on the planet, we're once again hearing that a "weak slate of titles" is to blame for many retailers' current woes.

Gee, I can hardly wait to see what the studios' next "fix" will be!

Comments? Contact TK directly at:TKArnold@aol.com

15 Dec, 2000

APAR's WORKING WEEKEND: E-plex Emporium: The Everything Entertainment Store

You know what the problem is with etailing? There are lots, but the most fundamental is that it has failed to respect the rite of passage virtually every new technology must experience before finding a comfort level with the consumer public.

There is a kind of gestation period that leading-edge applications typically go through to smoothe out their functional flaws before being thrown into the unforgiving cauldron of the mass market. This staging phase also enables the innovations to achieve economies of scale in production and distribution that bring the consumer version within an affordable price range.

Most relevant among the many examples that prove the rule are the VCR and the laserdisc. The VCR was a professional broadcast and industrial tool long before Sony launched Betamax in 1975. By then, it was a refined product ready for prime time. By sharp contrast, the random-access laserdisc plunged headlong into the consumer market in 1978 before developing a strong industrial user base and never escaped the long shadow of the VCR, which could pluck programs off TV as well as play them back on prerecorded cassettes.

As etailing’s very soft underbelly becomes further exposed, with casualties now commonplace in business news, it is easier to discern more sensible ways in which the Internet can serve the marketplace not as a standalone service so much as part of traditional storefront retailing.

It’s part of a larger concept for which we have coined the term E-plex Emporium. It is a functional, forward-looking, even postmodern approach to shopping for entertainment goods and services. At its core is the belief that all available tools and techniques must inform channels of commerce if they are to become more highly evolved.

Stores using Internet-connected kiosks to allow customers to order unstocked inventory that can be shipped direct to their homes is a prime example. Early sightings of record stores adding a “burn-your-own-CD” service on the sales floor to accommodate a growing market segment of customers is another.

The appearance of a new entertainment platform invariably brings in tow the content needed to animate a dumb device. In the first phase of distribution, the software is merchandised alongside the hardware until enough users are in place to justify standalone software displays.

Yet, we are only just embarking on what promises to be a protracted period of new digital devices and online services that will need to be fed a steady diet of content. The marketing strategy of razors-and-blades is a recurring article of faith in the home entertainment business. Since hardware, as a Thomson Consumer Electronics executive recently reminded me, such as DVD players are too much a commodity to be provide ample margins, profits must be turned from the software. Getting the hardware (razors) into as many homes and hands as possible is but prelude to offering an endless array of software (blades). Hence, Thomson’s purchase of DVD replicator Technicolor and Best Buy’s acquisition of leading national software merchant Musicland.

The early prototypes of our E-plex Emporium, offering all manner of off-the-shelf entertainment products alongside subscription-based content delivered digitally, are Radio Shack and the similarly-modeled mall stores Best Buy intends to operate in the aftermath of absorbing Musicland.

Think of the E-plex Emporium as a food court for everything entertainment. In one generous space, you can shop for a big-screen TV, a DVD player, a broadband service or satellite dish, a surround-sound system, DVD movies, change your ISP or email account at a service desk, and consult with a personal shopper to ensure all the parts shake hands amiably (a folksy way of saying they are compatible.)

Comments? Contact Bruce directly at:bapar@advanstar.com

15 Dec, 2000

TK's MORNING BUZZ: Indies Should Keep a Careful Watch on Hollywood Happenings

With the recent fall of Video Update and Video City (along with its disintegrated merger partner, West Coast Entertainment), only three national public video chains remain, Blockbuster, Hollywood Entertainment and Movie Gallery.

Movie Gallery seems to be on the soundest footing, posting modest gains in revenues and profits and staying in small markets where Blockbuster andHollywood, for the most part, have yet to tread.

But in the escalating war for metro markets, Hollywood is emerging as less and less as a player, with chairman Mark Wattles conceding that the chain will no longer borrow money to open stores, its stock price hovering slightlyabove $1, and a leading financial house, Standard & Poor's, lowering its ratings on Hollywood stock "based on near-term financial pressures resulting from the company's heavy debt reduction requirements and limited financial flexibility."

All of a sudden, there's a very real chance that Hollywood could blow, and that would spell real trouble for the studios.

It could also be the trigger that fires the revenue-sharing gun back into oblivion, and here's why: With Hollywood out of the way, the pressure on Blockbuster would be a lotless. Big Blue has already put most of the indies in big metro areas out of business, and in some markets is competing only against Hollywood.

Blockbuster would probably take over some of the Hollywood locations, either opening a new store or moving in from somewhere else (in cases that the Hollywood store had the better location).

But overall, there would be fewer video stores than there are now, giving Blockbuster a bigger share of the market by default.

That means Blockbuster could start buying videos at a more realistic level, because its various marketing ploys--extended rentals, guaranteedavailability--have been, for the most part, to crush the competition rather than turn a profit.

If Blockbuster thus repudiates revenue-sharing--perhaps by refusing to renewdeals, perhaps by insisting on lower minimums--the whole model is shot. Figure it out--studios say 50% of rental product is channeled throughrevenue-sharing, and Blockbuster says it commands 40% of the rental market. The remaining 10%? Most of that, my friends, is Hollywood.

Will such a scenario happen? Don't bet on it. But the idea alone that it CAN happen--well, that's enough for indies to keep a careful watch on Hollywood happenings.

Comments? Contact TK directly at:TKArnold@aol.com

14 Dec, 2000

TK's MORNING BUZZ: Next Year It's the Studios' Turn to Suffer

Video rentailers have suffered--a lot--these last few years.

Next year, I'm afraid, it's going to be the studios' turn.

Already, studio executives are complaining that they are having an increasingly tough time meeting goal on their rental titles. That isn't surprising. Blockbuster has used direct revenue-sharing deals to gobble up market share and put thousands of independent retailers out of business--retailers who used to buy product.

Two public video chains have filed for Chapter 11 bankruptcy--two public video chains that used to buy product.

And now Blockbuster, which for awhile was making up for this loss of customers by buying well above the minimum guarantee contained in its revenue-sharing deals, is cutting back to more moderate (reasonable?) levels, having found that flooding the market with hits isn't always the best strategy to build profits.

Next year promises to be even worse. Consolidation among rentailers may have slowed, but it's still continuing. Meanwhile, it is unlikely that Blockbuster will step up its buys again to last year's levels. Been there, done that--and it didn't work. Add to that the fact that Hollywood Entertainment, which has been opening up hundreds of new stores a year for the last few years, is undergoing a tough financial time and, even if it survives, won't be opening up nearly as many new stores as it used to, and you have a recipe for disaster.

The baffling thing for studios is that there's no way out. They desperately need to make up the slack somewhere, but the video channel is pretty much exhausted, and my guess is that total unit buys will continue to decline.

That leaves studios with no choice but to look elsewhere, at other channels of delivery. But where? Pay-per-view, despite all the hype, has yet to grow into a viable business. Satellite growth, after a rocket-like start, has slowed dramatically. And video-on-demand over the Internet is still years away from becoming reality. Guys like me, with just a regular 56K modem, have a tough time downloading three-minute songs, which doesn't bode well for feature-length movies.

For once, Hollywood doesn't have any answers--and retailers, at least the ones I've spoken with, have very little sympathy.

I can't blame them. Reap what you sow.

Comments? Contact TK directly at:TKArnold@aol.com

13 Dec, 2000

TK's MORNING BUZZ: Studios Are Really Pushing the Envelope With DVD Special Features

Studios are really pushing the envelope when it comes to special features on DVD. You've got Universal's brilliant make-up documentary on Nutty Professor II: The Klumps and exclusive Internet chat with the cast and crew of Jurassic Park 3 on the original Jurassic Park and The Lost World DVDs.

You've got Disney's incredible boxed sets of Toy Story/Toy Story 2 and Fantasia/Fantasia 2000, each with a third disc of nothing but extras.

You've got Artisan, putting three different versions of Terminator 2 in the same Ultimate Edition package. And you've got Fox's new X-Men DVD, with a detailed chronology of the special effects, from concept to execution.

I can hardly wait to see The Grinch DVD when it comes out next year. My prediction is that with this disc, Universal will raise the bar even higher, adding such extras as the original Grinch animated classic, a start-to-finish documentary on Jim Carrey's make-up and fly-around virtual "tours" of Whoville and the Grinch's lair.

In light of all this, it rankles me to no end that some studios still don't get it. They persist in passing off as "extras," cheerily advertised on the packaging, some basics that really aren't special features at all.

Alternate language tracks aren't special features. Neither are subtitles. Surround Sound and widescreen are enhancements, not special features.

And please, please, PUH-LEASE give me a break! Trailers for other movies are not special features--they're blatant commercials for other titles the studio is hoping to sell.

So please, studio executives, if you happen to read this, promise me one thing: Try to keep special features special. I'm getting sick and tired of unwarranted hype--and I have a feeling consumers are, too.

Comments? Contact TK directly at:TKArnold@aol.com