Stephanie Prange is the editor in chief of Home Media Magazine. The Yale University graduate joined what was then Video Store Magazine in 1993 and was instrumental in transitioning the publication into a tabloid newsweekly. She spearheaded the publication’s reviews section, as well as aggressive coverage of the home video sales market. She also helped launch the magazine’s Web site in 1996. In her position as editor-in-chief since 2006, she has spearheaded the launch of such projects as the daily blast, transmitted via email each day to readers, and Agent DVD, a consumer publication aimed at genre enthusiasts who attend Comic-Con International in San Diego. She has freelanced for The Hollywood Reporter, The Los Angeles Times and parenting publications. She has an M.A. in journalism from the University of Southern California.
With Netflix struggling to satisfy stratospheric subscriber expectations, competitor Amazon has made a new move. Amazon is offering for the first time a standalone subscription service not bundled with its popular shipping plan.
Amazon is making its Prime Video subscription streaming service available as a standalone option for $8.99 a month — the same price as Netflix’s entry-level plan. In contrast, the bundled Prime service offers free two-day shipping on myriad purchases with Prime Video and Prime Music included as free value-added perks for about $100 a year.
The fact that Amazon decided to separate out its video service from the bundled plan is a testament to the service’s appeal — and indeed to the SVOD marketplace at large. Amazon now doesn’t just see video as a value-added perk to free shipping, but as a valuable service on its own — on par with Netflix.
Reed Hastings has often said that competition is flattering and good for the SVOD marketplace, and Amazon’s move seems to acknowledge that SVOD services are a viable and important business on their own. As Hastings contends, Amazon’s move ostensibly validates and supports Netflix and its business plan.
There is plenty of room for multiple SVOD services, especially if they feature unique and exclusive content. Many consumers will likely buy into these services (or not) based on the exclusive content they offer. But Amazon has thrown down the gauntlet as well.
“While we don’t think that Amazon will attract many current Netflix customers, we think it is foolish to assume that potential SVOD customers will favor Netflix over Amazon every time,” wrote Wedbush Securities analyst Michael Pachter. “We acknowledge that Netflix has the much more powerful brand for SVOD, but we are confident that once it announced a standalone service, Amazon declared war on Netflix, and intends to back up its new offering with a branding strategy of its own.”
Jonathan Rettinger, president of TechnoBuffalo, told CNBC Netflix has a lot to worry about over the next few months. "Netflix has had an incredible rise, but they need to be looking over their shoulder because there is an onslaught coming led by Amazon," Rettinger said.
For a long time, Netflix has had the SVOD market cornered, but with Amazon moving more definitively into its territory, Netflix may find the road ahead is not so easy.
In the many format changes the home entertainment industry has experienced since the advent of the videocassette more than three decades ago, there have always been hiccups, causing pundits to opine that the business is in trouble, even doomed. But consistently, the industry has rallied during that change and continued to serve the home entertainment consumer.
At the very beginning, a format war between VHS and Betamax raged, a chaotic start to a business that would see more change, more often than many. Then came DVD, which faced an uphill battle when certain executives backed a D-VHS format they considered a better bulwark against digital piracy and a more familiar package for the consumer. A lower sellthrough price, great picture and sound, and its compact size made DVD the format that emerged triumphant in that design upgrade. About a decade later, high-definition loomed and the industry was embroiled in yet another format war between Blu-ray Disc and HD DVD. With its more familiar name and backing of DVD’s early proponents, HD DVD initially seemed to have the upper hand. But Blu-ray eventually emerged victorious after gaining penetration in the Trojan Horse of Sony’s popular PlayStation 3 game system.
The industry this year has embarked on yet another format change in Ultra HD with high dynamic range, along with other enhancements such as Dolby Vision, Dolby Atmos and DTS X. The industry made a major step toward growing that format at CES in January, when the UHD Alliance — Home Media Magazine’s 2016 Home Entertainment Visionary — rolled out specs. In March, Samsung launched the first UHD Blu-ray player and the studios put a handful of titles in stores. As might have been predicted, considering the industry’s history, the launch came in fits and starts, causing some to wonder if the new format had any chance. Predictably, store visits showed a slow rollout. Some stores had the player, some the UHD Blu-ray titles, and some had neither. Many clerks were clueless.
Slow and not so steady, though, seems to be the way of every format change in home entertainment. They emerge in fits and starts, not in a burst of triumph — but with competitors and naysayers. UHD seems to be no different.
This year’s CES event highlighted two facets of the home entertainment business: the exploding streaming video service of Netflix (which is more about instant access that top-quality picture and sound) and the premium-quality of 4K Ultra HD with high dynamic range (HDR).
In a press conference prior to the show, the Ultra HD Alliance made the case for premium viewing on 4K Ultra HD with HDR. Meanwhile, in the opening day keynote, Netflix CEO Reed Hastings made the case for the wide distribution footprint of Netflix, announcing international expansion with a flourish, while chief content officer Ted Sarandos mingled with stars such as Chelsea Handler on the stage to tout Netflix’s growing library of original content.
Our industry has often stressed the quality of picture and sound in the home theater as its key advantage, and the UHD Alliance is once again defining quality for home entertainment viewing with its new Ultra HD Premium logo and specs, announced at the show. Blu-ray as the delivery mechanism in the Ultra HD Premium home theater system really “lights that bad boy up,” as Mike Dunn, president of 20th Century Fox Home Entertainment, so colorfully put it. Warner Bros. Home Entertainment president Ron Sanders said the picture was so good that it looked almost 3D.
Meanwhile, Netflix executives at CES touted their unmatched international reach and burgeoning quirky and unusual content targeted at niche audiences. With its data insight, Netflix can create content for the myriad tastes of an international audience, unhampered by the quest for mass market ratings, executives argued.
In reaching for quality in home entertainment, I think both facets of the business are benefitting consumers. While 4K Ultra HD with HDR is widening the highlight, color and contrast gamut on home theater systems — offering a top-notch picture — Netflix is increasing the variety of content for niche and international audiences. It’s a great time to be a consumer of home entertainment, as the industry expands in picture and content quality.
It’s very fitting that Universal’s iconic “Back to the Future” series celebrated its 30th anniversary in 2015. Finding the right balance between the past and the future was atop the industry’s agenda.
The home entertainment business grappled with new forms of disruptive distribution while setting up the specs and packaging for a new disc-based format, 4K Ultra HD Blu-ray Disc, that promises to revitalize the legacy physical business. Indeed, it seemed that all year entertainment executives were attempting to find the right balance of revenue between new digital distribution models and the continuing cash cow from older models, whether it be physical disc or cable bundles.
Just as Back to the Future’s Marty McFly grappled with the tastes and technology of generations both older and younger, the home entertainment industry looked to bridge a technological generation gap in 2015. The industry tried to satisfy the tastes of cinephile collectors who skew older and like to build libraries of high-quality physical discs, as well as the millennial generation weaned on digital delivery and “Netflix and chill.” A generation comfortable with physical media and cable bills was joined by a younger, more digitally addicted generation ready to cut the cable cord and find the entertainment they want when they want it (often without advertisements) online — and often without a TV.
It’s no accident CES chose industry father and Netflix CEO Reed Hastings to give a keynote at the 2016 confab. OTT was the talk of 2015, as it promises to be the dominant distribution format of the future.
As entertainment executives face a business in which the old reliable revenue streams are under threat and the digital revenue of the future is uncertain, it’s perhaps useful to remember that famous Back to the Future line: “If you put your mind to it, you can accomplish anything.”
By now everyone in our industry has heard the saying “content is king” with regard to digital distribution. But considering the powerful rise of over-the-top distribution companies such as Netflix, I’ve begun to wonder if that saying is really true.
Certainly the fact that Netflix, Amazon and others have moved to distribute exclusive content is an argument in the favor of giving the crown to content. I remember when Netflix touted its famous recommendation engine as what made it unique. (As an aside, my mom once got frustrated that after watching one depressing drama, Netflix kept recommending the same depressing stuff. “I like to laugh, too!” she said.) Now, I don’t hear much about that engine as the driving force for Netflix’s success. Netflix is too busy pushing its own original content, such as “Orange Is the New Black,” “House of Cards” and theatrical releases such as Beasts of No Nation. Amazon, too, has gotten in on the originals game with such acclaimed series as “Transparent.” Score a point for content being king.
On the other hand, as evidence in favor of giving the crown to distribution is the growing dominance of OTT channels, which are helping consumers cut the cord on the studios’ cable revenue stream. Cable subs are down, and the research evidence of millennials’ cord-cutting is growing. Home entertainment sellthrough and rental, as well as theatrical revenue, are also under threat as OTT services help consumers bypass traditional revenue streams. Time Warner’s Jeff Bewkes in that company’s most recent financial call noted that his studio may have to revisit its content deals with SVOD services such as Netflix and widen those windows, while Disney’s Bob Iger said his studio could make “different decisions” with regard to OTT services as millennials cut the cord. Heck, even World Wrestling Entertainment Network’s OTT service is taking off after an alarmingly shaky start. Score one for distribution.
So which is king? Content or distribution. I think the kingdom is up for grabs.
Over the past month I’ve attended a couple of events designed to shed some light on the digital delivery business and its effect on content owner revenue and business models. The only conclusion I can come to is that it’s indeed the Wild West out there, as Vubiquity CEO Darcy Antonellis once noted to me. The rules are in flux, and no one has created the perfect model that will create revenue growth for the studios as the physical disc business melts.
“Is the current distribution model maximizing revenue?”; “Who profits from it?”; and “How is that revenue divided across the revenue chain?” were three salient questions put to the audience by industry veteran Mitch Singer at the Entertainment Merchants Association Digital Media Pipeline event Oct. 14. Singer, who moderated a panel, is president of the Digital Entertainment Content Ecosystem (DECE), which is the consortium around the buy-once-play-anywhere system UltraViolet, but he has also worked in the studio system at Sony. He queried fellow studio vet John Calkins about such window experiments as Paramount’s recent revenue-sharing scheme with theaters on VOD, as well as the day-and-date (some say forced) VOD and theatrical release of the controversial Seth Rogen film The Interview, which spawned a hacking attack on Sony. Did the studio maximize its revenue by releasing the title on VOD so early? Calkins expressed doubt.
“We’re all in this very complex ecosystem,” he said, adding that it’s hard to determine the revenue model with one title.
Fellow panelist Patrick Corcoran, VP and CCO of the National Association of Theater Owners (NATO), said that theater companies, which participate in that ecosystem, want to be consulted about window changes, which Paramount did in the rev-sharing scheme, though several chains opted not to participate. “Ubiquity and ease of use cheapens your product,” he said, warning about collapsing windows.
There is also a difference between the models for tentpole titles and independent films, the former warranting longer windows and the latter more day-and-date releases, speakers said.
So much for the good old days of the four-to-six month window on most titles on disc.
At THE Summit: Transforming Home Entertainment, put on in Sept. 24 by the Media & Entertainment Services Alliance (MESA), panelists discussed the coming 4K Ultra HD format, as well as HDR (high dynamic range) that offers more vivid contrast among other advantages. There are also Dolby’s and DTS’s various technologies for better picture and sound, as well as frame-rate choices. All of this must flow through either digital delivery, Blu-ray Disc (which just announced 4K Ultra HD specs) and various consumer electronics devices. And then there’s the question of whether digital delivery will meet the quality of Blu-ray for this upgraded technology. (Hint: Blu-ray seems to be winning that battle at the moment.)
It’s enough to make your head spin (mine did). This rapid change is good for at least one thing though: Panels at industry events. With little clarity on the future revenue model for content owners, there is a lot to talk about.
Wes Craven, who just passed, has left a legacy in my family beyond just the enjoyment we had watching his horror films. My daughter Sydney is named after a character in the “Scream” franchise, Sydney Prescott. I remember seeing one of the “Scream” films while pregnant and thinking, “Sydney. That’s a good name!”
It seems destined perhaps that my daughter would have the same darkly humorous take on life that infused many of Craven’s films. She’s a brooding blonde, a contrast that would likely make a great character in a Craven film, her sunny appearance belying a contemplative and serious personality underneath.
Craven always seemed to be on the inside and on the outside of his movies at the same time. While presenting his characters, he was also an omniscient eye on the proceedings — often a satirical and humorous eye.
This duality is what made his type of horror so compelling. Unlike the gore-filled horror that followed, exploiting every cringe-inducing torture imaginable, or the reality-spawned horror such as The Blair Witch Project or the “Paranormal Activity” franchise, Craven’s films, from Scream to A Nightmare on Elm Street to the original The Hills Have Eyes, had a point of view. It was somewhat matched by Joss Whedon in his screenplay for Cabin in the Woods (co-written with director Drew Goddard), which also touched on the satirical aspect of horror. However, Craven’s viewpoint was unique. It will be missed.
It lives on, perhaps in my daughter Sydney, who projects the same kind of duality that Craven always exhibited — light-hearted humor with a consciousness of the dark side of life. Or in those who will emulate his and Joss Whedon’s take on horror. The fans will remember Wes Craven. Craven’s horror allowed the audience both to experience scares and to evaluate them from afar (via humor or satire). In between was a unique truth, that life is both scary and humorous.
This week, we present our eighth annual Women in Home Entertainment section, in which we recognize female leaders in the industry. The list includes executives from the major studios and other content owners, as well as digital and disc retailers. This year, we also put together some commentary from the women in the section, allowing them to offer insight into the challenges and opportunities they face as the business moves into the digital realm.
The top major studio female executives also offer insight into their entertainment preferences and career knowledge. They give pieces of advice they received and would offer to others. DreamWorks Animation’s Kelley Avery said “just have fun with it,” which is sage advice in a very serious world. Fox’s Mary Daily stressed honesty and curiosity. And Sony’s Lexine Wong said it’s “OK to fail” but to not repeat the mistake and to perform at a level above.
Our industry faced several shocks in the past month, including what seemed a seismic shift in media power after Disney noted ESPN’s loss in subscribers. Industry pundits began to wonder if over-the-top services would break up the cable bundle in such a way that it resulted in the big media companies losing out. CNBC’s Jim Cramer called Netflix a “media killer.” The Dish CEO said Netflix was “the world’s largest content aggregator,” in a nod to the Wall Street darling’s growing power. Several stock market gyrations later, that narrative had lost a little steam, but the digital OTT business had caught everyone’s attention.
The Women in Home Entertainment are on the front lines of these changes in home entertainment distribution, and we salute their work in navigating new business models.
Persevering, they see both opportunities and challenges in the enormous changes in our industry.
Paramount Pictures has brought together two segments of the entertainment industry that are traditionally at odds: theatrical and home entertainment distribution. Cinema companies have for years bemoaned the shrinking window between theatrical release and home entertainment distribution, whether via video-on-demand, streaming or disc. Each time a studio has tried to give consumers access to theatrical releases sooner than usual, the theaters have circled the wagons and protested.
While previously at odds, these two businesses are now forming an “Odd Couple,” as our July 20 cover story notes, married by digital revenue. Paramount’s Paranormal Activity: The Ghost Dimension and Scouts Guide to the Zombie Apocalypse will be given a wide release this fall with the digital home entertainment purchase available 17 days after the film dips below 300 domestic theaters, meaning consumers could have digital access to titles early — with theaters, for the first time, sharing in the digital revenue.
Looming in the background is the threat from streaming services such as Amazon Prime and Netflix. Both services are looking to slam the theatrical-to-digital window shut and offer feature films to be streamed without the usual cinema exhibition period. There’s nothing like a common enemy to unite former foes and force a shotgun wedding.
I don’t think, by the way, that the theatrical and home entertainment revenues are a zero sum game. I’ve been to many theatrical showings in which audience members leave the theater musing about when they will be able to buy the film they have just seen on disc or digital. Sometimes, there is no better time to sell a film on home entertainment than just after consumers have seen it in theaters. Perhaps marketing home entertainment in the theater lobby is the next step.
Netflix’s growth stepped into high gear in recent weeks, as its streaming model continued to take up a bigger chunk of online traffic, span the globe and spawn competitors. When even Apple, the most valuable company in the world, decides to get into streaming music after years as the download leader, it seems Netflix is no longer just a very successful video distributor, but is in the vanguard of entertainment consumption. Apple is facing its own form of Netflix competition in low-cost or no-cost streaming services such as Spotify. Thus, the company has decided to expand into the access-to-music model, which is growing more than its download-ownership model. Subscription streaming service Apple Music will launch in 100 countries this month. After a three-month trial, it will cost $9.99 a month, or $14.99 for a family plan for up to six people.
While the music industry doesn’t always model the video business, it certainly has some similarities. One similarity with the Netflix service is that shorter-form content is more conducive to streaming. A TV episode in a series is like the song on an album, a quick fix of entertainment. Thus, Netflix seems to be a bigger threat to the TV business than to the theatrical market. Case in point: Netflix executives have said episodic content represents 70% of viewing. Even so, despite its overwhelmingly episodic focus, Netflix made a big move in the film realm, signing Brad Pitt’s War Machine to be streamed to its subscribers at the same time it is released theatrically in 2016. Maybe Netflix will make its mark in longer form entertainment as well.
While OTT streaming services led by Netflix are certainly making headlines, I think there will always be a market for ownership. Humans like to collect things. Witness any of the attendees that pack the show floor at Comic-con. Whole series, such as HBO’s “The Sopranos” set or my personal favorite “Buffy the Vampire Slayer,” will always be collectible. As serialized programming, these shows are like long films true fans will want to revisit long after the shows cycle off streaming services such as Netflix.
So while Netflix may be streaming ahead, that doesn’t mean ownership won’t be an important part of the entertainment business for years to come.