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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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30 Nov, 2000

TK's MORNING BUZZ: Will A-Pix Survive Unapix's Bankruptcy... or Join the Legion of Lost Suppliers?

I sure hope A-Pix Entertainment survives its parent company's bankruptcy filing and emerges intact.

Over the last six or so years, we've lost nearly a dozen independent home video suppliers, and their absence is sorely missed. Sure, a good portion of their product consisted of the much-maligned erotic thriller, but a lot of it was quite good--even the direct-to-video stuff.

Academy Entertainment stands out as one supplier I truly hated to see go. The studio had one of the most eclectic catalogs I've ever encountered. Two that stand out: Liquid Dreams, a wonderfully bizarre thriller reminiscent of David Lynch's work, and The Lunatic, a wacky Jamaican comedy with a fetching soundtrack and a handful of classic scenes I still show to my friends every now and then.

A-Pix, which celebrated its fifth birthday less than two years ago, has been a scrappy little player from the start. The company developed a lucrative little horror franchise with such gruesome titles as Jack Frost, Bleeders and Uncle Sam, all three of which also featured inventive box art (on the Jack Frost box, the snowman's expression changes from a benign smile to an evil grimace).

And A-Pix also managed to pump up the star power a lot more than most indies, releasing movies with such stars as Jon Voight (Boys Will Be Boys), Isaac Hayes (Uncle Sam) and Theresa Russell (The Proposition).

Perhaps most significantly, however, is the fact that A-Pix and its dwindling roster of fellow indies have provided video retailers and consumers alike with something we just don't get on pay TV: a choice. Selection, diversity, variety--all the things that helped make video stores great, we owe in large part to the independent home video suppliers that release stuff the majors pass on or simply don't bother finding out about.

Video stores would be awfully barren if, over the years, they had not augmented their supply of the hits with so-called "secondary product" from the A-Pixes and the Trimarks, the PMs and the Triboros, the Academys and the Imperials, the Prisms and the Avalanches.

Not just barren, but boring....

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

29 Nov, 2000

TK's MORNING BUZZ: Are Distributors Selling Any DVDs This Fourth Quarter?

Are distributors selling any DVDs this fourth quarter?

With rampant discounting by mass merchants and heavyweight software-sellers like Best Buy and Circuit City, the video specialty retailers who these distributors serve are telling me that they're cutting orders left and right and, instead, buying their inventory at retail.

The same, it appears, goes for VHS sellthrough, which has always been deep-discounted to death by the Big Guys.

Ray Jewell, the feisty Texas retailer who launched the pro-windows "Red Hat Brigade" this summer, sent me this dispatch last night:

"As a result of the cheap prices available at the mass merchants I did not order any sellthrough via distribution. I was able to take newspaper ads to Wal-Mart, which matched the prices and had no limit on sales. The results were over $300 in savings on Perfect Storm. Another retailer in our group saved over $500 on one week's new releases. To a small retailer a possible $1,000 a month is big money. Distribution is being hurt badly."

Good for you, Ray, although I can't help but empathize with distributors, who truly are being caught in the middle (or should I say "crossfire?").

This problem needs to be addressed, and distributors should immediately man the phone lines and call their friendly studio rep for assistance. My hunch is that the big chains, in at least some cases, are selling DVDs for less than distribution's cost, and that's simply not right.

If the chains are selling DVDs below their cost, then it is my understanding that this is illegal. If they're making pennies, then the studios should at least afford distribution the same courtesy and charge them the same price the big chains are paying.

All of this calls to mind an earlier debate this industry entertained, about the devaluation of video. It was eloquently argued that fast-food chains like McDonalds that were using videos as premiums were lowering the perceived value of video in the consumer's mind, thus damaging the entire industry.

I believe a similar argument can be made in regard to DVD. Twenty bucks is a fair price to pay for a movie that cost millions to make, particularly with all the special features studios are now packing onto the discs. And, as John Thrasher of Tower Records and Video pointed out to me in a phone conversation Monday, even at $20 DVDs are a bargain.

"I think people understand that at $20 or less for more a movie that cost $200 million to make, that’s a good buy," John told me. "But for some band that nobody’s ever heard of, to charge $18 for a CD that cost $15,000 to make in some garage, what is that?"

So why sell DVDs for less than CDs, as some of the big guys are doing? Given the explosion in player sales, it's really not necessary. And even if there are short-term gains, they're certainly not worth risking the long-term perception of DVD as a quality product.

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

28 Nov, 2000

TK's MORNING BUZZ: The Devil of Deep Discounting Is Burning Retailers to a Crisp

The devil of deep discounting is burning retailers to a crisp, retailers who should be enjoying unprecedented sales and rental activity from the explosion in popularity of DVD.

Last year and the year before, it was the online retailers who were selling DVDs at lowball prices in the hopes of driving traffic to their sites.

This year, it's the mass merchants and big electronics chains such as Best Buy and Circuit City, who are selling DVDs at record lows to build market share.

It's VHS all over again, say frustrated retailers like John Thrasher of Tower Records and Video, with the big guys selling new releases and catalog heavyweights alike at prices smaller retailers simply can't match, much less beat.

The online menace was bad enough, they say, although customers ultimately wised up and realized that buying a DVD for $15 isn't really a bargain when you factor in a $5 shipping charge.

But now that the big brick-and-mortar chains are lowballing prices for the benefit of walk-in customers, with no shipping charge to even the score, more and more retailers are finding it difficult, if not downright impossible, to compete.

Hardest hit are the video specialists, who never were very good at selling packaged entertainment. They lost out on the VHS sellthrough boom to the mass merchants, and now they're in danger of losing out on DVD sellthrough as well due to rampant deep discounting that's letting consumers buy new DVDs for less than the video specialists pay wholesale.

DVD rental, meanwhile, is hardly the bonanza it was thought to be. It's not incremental revenue, but revenue that otherwise would have been spent on VHS rentals.

Unfortunately, there's no real solution to this dilemma. MAP doesn't really work, because the big chains have grown so powerful that the threat of lost co-op is no longer a deterrent.

And I've been chided repeatedly by retailers who say my suggestion that they cross-promote DVD sales with rentals--offering their customers a certain number of free rentals if they buy a DVD--simply doesn't work. Been there, done that, they say--having tried the same approach with VHS, only to still lose out to the mass merchants.

Is this a devil that simply can't be beat? Or are there some strategies out there that can help smaller retailers develop a vibrant DVD sellthrough business despite the plunging prices of DVDs at the big mass merchant chains?

I'd like to hear your views.

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

27 Nov, 2000

TK's MORNING BUZZ: Signs of Life in the Mythical Land of Post-Street-Date Advertising?

There are signs of life in the mythical land of post-street-date advertising.

I just saw a great commercial for Warner Home Video's The Perfect Storm, "now available" on VHS and DVD, that almost had me running to the store to pick up a copy until my wife reminded me that we already have a copy that I had brought home from work two or three weeks ago.

The power of post-street-date advertising is enormous, and it's really a shame the studios don't do more of it. You'd think they'd really step up to the plate, with the holiday shopping season now in full steam and so many new DVD players headed toward households across America.

And yet video ads are few and far between, and the ones you do see are almost always for new releases that are available at a sellthrough price on VHS as well as DVD.

With revenue-sharing now the dominant way studios sell rental-priced cassettes, we were expecting an onslaught of commercials for hot new releases. Studios now have a vested interest in the rental product they sell, we reasoned, so of course they're going to up the ante when it comes to post-street-date advertising. Retailers are no longer the only ones who benefit; now the studios can realize a direct return on their advertising dollars.

Or so we thought. The reality is that so much of studio rental product is tied up in goals and output deals that they really don't care whether the stuff rents or not. Sure, they're supposed to get a tidy chunk of rental revenue, but the actual dollar amount doesn't really vary all that much to justify a hefty expenditure on TV ads.

As for DVD, the studios aren't about to run post-street-date ads for hot new releases whose VHS counterparts are priced for rental. They worry about confusing the customer, although as far as I'm concerned an ad for a new release, "available for rent on VHS and rent and sale on DVD" would make perfect sense.

At this point, about all we can hope for is a steady increase in ads for new sellthrough releases. But even there, don't expect a massive blitz. Studios have grown accustomed to reaping respectable sales numbers with a minimum of advertising expenditures, and a significant percentage of the money they do spend is channeled through the big chains as co-op.

My suggestion is for retailers to e-mail their studios reps and find out exactly which titles they'll be advertising in the coming month, where the ads are running, and with what frequency. That should be a telling barometer of which titles retailers should support as well.

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

22 Nov, 2000

TK's MORNING BUZZ: Video Retailers May Wonder What They Have to Give Thanks For on Thanksgiving

As another Thanksgiving Day rolls around, video specialty retailers may wonder what, exactly, they have to give thanks for.

With few exceptions, their rental business is down from what it was last year, which, in turn, was down from what it was the year before.

Thousands of their brethren have gone out of business, and there's always the chance they could be next--particularly if a Blockbuster moves into their neighborhood, with its revenue-sharing-fueled wall of hits, guaranteed availability of the hits and extended rental periods.

It's quite likely that their standard of living has gone down from what it was in the past, back in the golden days when consumers would rent whatever new videos they happened to find in their neighborhood video store and customer dissatisfaction was a sound business strategy retailers used to build incremental profits and drive traffic into rather than out of their stores.

The Internet? It's hard for retailers to give thanks to that. E-commerce is for the big guys, and even the big guys aren't exactly raking in the big bucks. Then there's the matter of leisure time. The World Wide Web is just one more diversion to occupy the public's time, time that once was spent watching rented videos.

And DVD, well, that's a mixed bag. Rental DVD isn't really big enough yet to make up for the downturn in rental revenue, and selling DVD is an uphill battle, given the rampant discounting of the dedicated e-tailers and big chains like Best Buy.

So what, exactly, do video retailers have to be thankful for? Consider this:
*The fact that they own their own businesses, a feat even the top executives of the Hollywood studios can't boast of.
*The fact that they've had a pretty good run these last two decades, making more money than many of their peers.
*The fact that they're a part of the glamorous Hollywood movie scene, several stretches removed but still a vital link in the entertainment pipeline.
*And, perhaps most of all, the fact that they're experienced retailers with the savvy and know-how to be flexible, to change with the times, to realize when it's time to shore up on DVD purchases and get rid of dusty videocassettes; to realize when it's time to move to another location; to realize when it's time to branch out and diversify so that their businesses don't live or die by the rental of VHS videocassettes; and, yes, to realize when it's time to throw in the towel and close up shop in the face of insurmountable competition.

Retailers who are still in business have been on wild ride, full of unexpected twists and turns. And each stumble and fall has made them stronger, tougher, better prepared to meet the next challenge--or recognize the next opportunity.

That's certainly something to be thankful for--the fact that they're still around, because so many others aren't.

Happy Turkey Day, on behalf of the Video Store Magazine and Hive4Media staff!

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

21 Nov, 2000

TK's MORNING BUZZ: Hollywood's Wattles Should Have Known Reel.com Was a Real Dot-com Lemon Before He Bought It

In the wake of the Reel.com debacle, it's interesting to note that a new Jupiter Communications study, commissioned by National Association of Recording Merchandisers, concludes that most of the Web music sites coming online these days in the wake of file-swapper MP3's settlement with Universal aren't going to make it.

Hardest hit will be the music recommendation sites, the ones that "hope to become a key consumer destination through the lure of recommendation tools,"Jupiter says. (Reel.com began life as a movie recommendation site, venturing into e-commerce a few months after launch.)

With the once-promising market for banner ads increasingly hard to crack,there's little chance these recommendation sites will make enough money to survive; "they will have to develop relationships with larger online music orcontent destinations or license their services," Jupiter says.

Meanwhile, many e-commerce music sites are faltering and being bought out by larger concerns. Jupiter, however, warns that troubled e-commerce sites aren't always a good deal, no matter how low the price: "Companies should be cautious," Jupiter says. "The targeted sites may be among the most heavily trafficked, but the value of the prospects has less to do with the size of the pool than with the quality of its prospects."

These prospects should be evaluated based on three primary criteria, Jupiter says:
*The superfluous uses of promotions and special offers, which "often unintentionally condition customers to delay a purchase until a product has a negative margin."
*Behavioral characteristics of customers, including how long they spend online and whether they actually buy or merely browse.
*Customer overlap. The online environment, says Jupiter, has encouraged more than 80% of consumers to shop around at two or more merchants.

In light of this, it's easy to see why Reel.com failed--and that there were telltale warning signs that Hollywood Entertainment Corp. chief Mark Wattles should have noticed before he spent so much money on the Web operation that badly damaged his once-thriving brick-and-mortar operation.

Reel.com did rely heavily on promotions and special offers (who can forget Titanic for $9.95?). Reel.com was a movie information leader when the site was first launched in the middle 1990s, but as soon as other movie sites, like the Internet Movie Database, came around, with far deeper and better information, Reel.com's customer retention abilities should have come into question. And with Amazon.com, a much bigger and better-funded seller of packaged home entertainment products, Reel.com didn't stand a chance.

Perhaps Reel.com should have seen the writing on the wall, cut way back and focused on DVD, as a handful of hot little comers did the moment the format was launched.

Perhaps Reel.com would have done that, had Wattles the Emperor Builder not gotten ahold of it with the intention of turning it into the second Amazon.

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

20 Nov, 2000

TK's MORNING BUZZ: Start the Transition -- It's Going to Be a Boffo 1st Quarter for All Things DVD

The holiday shopping season begins in earnest at the end of this week, and I hope video retailers are planning their strategy with this thought in mind: If you haven't already done so, it's time to start thinking about the inevitable transition from VHS to DVD.

This means bringing in higher quantities of DVD versions of hot new titles in lieu of VHS cassettes, and also stepping up selloff of recent VHS rental titles to reduce inventories. If there are certain VHS titles that just seem to sit on your shelf, the situation isn't going to get any better, so you might as well start paring down your inventory now and taking advantage of the holiday sales spirit.

If I were a video retailer, I'd really spruce up my "used VHS" bins with bold signage and maybe even dedicate a separate section in my store. If I were a larger retailer already heavy into movie sales, I'd employ the same tactic to get rid of some of those sellthrough catalog titles that have been gathering dust for the better part of the year. Now is the time to really push VHS sales, with the objective of lowering the percentage (if not the domination) of cassettes in relation to discs.

After the first of the year, with all those new DVD players in households, consumers are going to want to rent and buy discs like never before. VHS cassettes will have about as much appeal as 8-tracks. Now, with the holidays approaching, cassette sales still have a chance, if done right.

Push them in your stores, put together collections or maybe even gift baskets, but get them into your customers' hands as soon as possible, before they lose what little appeal they have left.

Video specialists may be afraid to cut loose too many of their cassettes, since they typically pride themselves on selection and diversity. I'm not advocating getting rid of everything--just the stuff that doesn't move, and basically exists in your store solely for bragging rights. Up your DVD buys to take up the slack, and you'll end the holidays ready for what more and more people are saying will be a boffo first quarter for all things DVD.

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

17 Nov, 2000

APAR's WORKING WEEKEND: DVD on the Fly and on the Run

The versatility of DVD continues to delight me. For one, it travels well.

On a recent flight to London, American Airlines business class passengers were each proffered a portable Panasonic DVD player, a selection of 20 DVDs (19 movies, one concert) and a Bose Acoustic Noise-cancelling Headset that is so pricey, you can buy a couple of low-end DVD players for about the same outlay.

Is the Bose worth it? Put it this way: Plane noise is famous for undercutting the volume and tonal quality of very good conventional earphones and CD players. As I listened to the Roy Orbison Black and White concert, it was like being transported. Okay, so I was being transported--to London-–but I mean the sound, especially on a classic tune like “Sweet Dreams” with Springsteen harmonizing, was easily the best I’ve ever heard at that altitude.

In addition to sampling different disks--for business purposes, of course-–I was able to wile way a few more minutes trying to discern the selection pattern of the films. There were a goodly number of atypically lengthy films, such as Amistad, The Color Purple and Contact, each 2:30 or longer, not to mention The (three-hour) Green Mile. And the players plugged into a seat-side AC outlet, so passengers wouldn’t get all charged up over batteries running out before the movie did.

The marathon movies make sense, since you have over six hours to spend suspended in mid-air as it is. There also was a nice mix of comedy, action, suspense and drama, and of PG, PG-13 and R-rated. And just to keep the customer honest, the DVDs distributed are modified so you can’t play them in any other machine except the customized model made for the airline, and you can’t use other DVDs in the special player. One reason, no doubt, for that safety measure is to shelter unsuspecting fellow passengers from being exposed to some really raunchy DVD brought on board. You get the picture.

And despite the craven pronouncements of those who presume to declare with generic certainty that nobody wants to watch a movie on a PC, I have no problem sliding in a DVD and sizing the image to occupy only a portion of the monitor while I multi-task. Lately, listening to the audio commentaries in this manner of divided attention has yielded interesting nuggets. Such as Jeannot Szwarc, director of Somewhere in Time, casually complaining that the original theatrical marketing campaign “was terrible... a bad trailer... broke my heart.”

Or The Exorcist’s William Friedkin fairly immortalizing DVD thusly: “I feel it’s most important to make this digital video the most definitive version of the picture because this is the one that will last, this is the way the film will be remembered, for a very long time, perhaps forever.”

Then there are the easy-on, easy-off subtitles feature that comes in handy when running on a treadmill, especially a noisy one that might as well be an airplane drowning out earphones. Instead of blasting the volume on the TV while traversing the chattering conveyor belt, I can mute the volume and still follow the action of the fascinating Touch of Evil or the videogame-paced Run Lola Run by displaying the subtitles. Having to focus on the text to follow along also tends to further distract you from noticing how slow the time seems to be going and how much you hate to run just to stay in place.

Is there anything DVD can’t do? Rewind. You can’t have everything.

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

17 Nov, 2000

TK's MORNING BUZZ: Welcome to the Sideways Selling Superstore

Welcome to the Sideways Selling Superstore.

MetaExchange, the online swap meet for small businesses that operates a video trading site, sent out a most interesting press release that crossed my desk last night.

It appears the company is seeking to legitimize the industry's Dirty Little Secret.

No, I'm not talking about adult. I'm talking about sideways selling, which every studio executive vows to crack down on and yet which distribution sources estimate 80% of small retailers engage in at some time or another.

Sideways selling, of course, is the practice of retailers pooling their buys on new releases covered by copy-depth programs so one of them can make goal.

This chosen retailer then splits his order, divvying up the freebies so that the effective price of each new video is a lot lower than it would be had it been purchased legitimately.

Studios hate sideways selling, but many independents say for them, it's become a necessity. It's the only way they can afford to buy enough product they need without mortgaging the farm or meeting a goal they claim is invariably unrealistic.

I'll quote directly from MetaExchange's release: "The power of the Internet has been harnessed to easy buying and selling movies between retailers.

"MetaExchange ... has opened its [video] site to accommodate pre-release transactions between retailers for new movies to be delivered by street date. This method of purchasing and buying (commonly referred to as "sideways" selling) is now streamlined with automation only the Internet can provide.

"Retailers around the country can now place 'bid' and 'ask' offers on movies prior to their release. Then, a retailer who finds an attractive 'buy' or 'sell' offer for a title can enter into a transaction for copies of that upcoming release."

MetaExchange senior v.p. Bob Reid says "sideways selling is commonplace among retailers today and our system simply leverages the Internet to bring thousands of retailers together to make the process more efficient and economical."

The release goes on to state that "the absence of broker markups and studio goals can result in significant savings for retailers who don't participate in studio copy-epth programs. Currently on the MetaExchange site, a retailer can prebook the purchase of Gladiator for $52 per copy, as opposed to $70+ through normal challenge.

"Similar pricing exists for most scheduled releases."

Boy, when word about this leaks out, expect the you-know-what to hit the fan.

Studios will scream and holler and threaten and warn. They'll probably issue missives and memos telling their retailer clients that under no circumstances do they allow sideways selling of their product, and anyone caught doing it will be subject to strict penalties and reprimands, including the loss of the line.

MetaExchange may or may not be threatened with legal action, but will almost certainly receive a batch of nasty letters from studio executives (their address, by the way, is 1250 45th Street, Emeryville, California 94608).

Then, when all the smoke clears, it will be business as usual for all involved. No one's going to be punished, no one's going to get sued, and MetaExchange will continue on its merry way--provided it does so quietly.

The studios may want sideways selling to stop, but if it means bending the rules to prevent their independent retail account base from disintegrating, so be it.

They're not stupid, you know.

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

16 Nov, 2000

TK's MORNING BUZZ: The Real Winners Under Revenue-Sharing Are the Studios

Beleaguered Hollywood Entertainment Corp.'s latest financial filing with the Securities and Exchange Commission (SEC) holds some pretty interesting conclusions.

The chain blames its sorry financial state, in large part, on revenue-sharing. No real surprise there--I've always held that the cost of goods under even the most optimum revenue-sharing deals, 40%, is higher than the cost of goods retailers are accustomed to paying under the traditional buying model (which typically saw retailers spend no more than 30% of rental revenues on videos).

What is surprising is that Hollywood blames revenue-sharing for sucking many top titles out of the sellthrough pipeline. Read between the lines and its becomes clear that sellthrough pricing is still the preferred copy-depth incentive, and that while in the revenue-sharing era retailers can bring in more copies of hot new releases on the cheap, they not only get stung on the back end, but they also lose a lot of product that previously would have gone direct to sellthrough, with significantly lower margins.

Turn the cards and one sees that the real winners under revenue-sharing are the studios--which explains their continued commitment to the revenue-sharing model. They flood the market with more cassettes, and then make more money on the back end because more cassettes invariably means more turns--and more money flowing back to Hollywood's coffers. In theory, the studios are supposed to pour some of this money back in the form of post-street-date advertising, but the promised ad campaigns have been few and far between, leaving the studios with even more cash on hand.

As for sellthrough, the studios are holding back on VHS and focusing on DVD--cheaper to manufacture than videocassettes, and gaining in popularity among consumers so fast that DVD sales are more than making up for any lag in VHS sellthrough sales. The end result: Even more money for the studios.

Hollywood and other retailers can bellyache all they want about revenue-sharing. The studios know a good thing when they see one, and you can bet your bottom dollar they're going to milk revenue-sharing for all it's worth--and for as long as they can.

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