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.
As I’ve noted before, my two daughters, 16 and 12, spend more time on devices such as tablets and cell phones watching amateur entertainers on YouTube than they do watching television or other professionally produced entertainment. And now a survey of teens ages 13 to 18 commissioned by Variety confirms the trend.
Well-known stars didn’t even make the top five in the survey that asked teens about the overall influence of well-known personalities. The top “celebrities” in the survey were the online comedy team Smosh, No. 2 The Fine Bros., No. 3 PewDiePie (my daughters’ particular favorite), No. 4 KSI and No. 5 Ryan Higa — all online stars. Among the top 10 celebrities on the list that most parents may recognize are Paul Walker at No. 6, the star of the “Fast & Furious” series who tragically died in a car accident last year; No. 7 Jennifer Lawrence; No. 8 singer Katy Perry; and No. 10 Steve Carell.
My first clue that my kids were watching more than mainstream programming (their mother’s entertainment) was their interest in the phenomenon “Fred,” an online nerdy character created and played by Lucas Cruikshank, who talked in a squeaky, childlike voice about life in the suburbs in short sketches. The YouTube channel spawned a feature based on the character that came out on disc after airing on Nickelodeon. “Fred” turned out to be a short-lived fad in my house, proving Andy Warhol’s 15 minutes of fame axiom, but not before “Fred” sold lots of DVDs.
Those same kids that propelled “Fred” into the limelight are making famous online performers such as PewDiePie. I don’t know if these new online stars are fads that, like “Fred,” will fade quickly as kids turn to someone new (Cruikshank, by the way, has moved on to a new channel sans “Fred”). Nevertheless, it looks as if Hollywood is starting to take notice. Fox’s Teen Choice Awards this year greatly expanded its Web categories to a total of 13 digital awards, including top male and female Web star. These stars even have their own version of Comic-Con, Vidcon, which recently attracted nearly 20,000 attendees to the Anaheim Convention Center and included an “industry track” featuring DreamWorks CEO Jeffrey Katzenberg.
Whether these online stars represent a promotional opportunity or will spawn a whole new home entertainment business seems to be a looming question for the industry.
Among all the ubergeek hoopla, cosplayers, stars and Hollywood marketing events at this year’s San Diego Comic-Con International was a virtual player that could prove revolutionary for the entertainment business.
Oculus VR, recently acquired by Facebook, powered several virtual reality exhibits both on and off the show floor, resulting in long lines and quickly maxed-out showings. HBO’s “Game of Thrones” exhibit across the street from the convention center featured a harrowing, but exciting, virtual reality ride up an elevator to the top of The Wall. As my virtual trip had me cresting The Wall and falling I grabbed the sides of the booth cage in anticipation of a drop, a testament to the effectiveness of the product. Other properties using the virtual reality device as promotion at Comic-Con were “Sleepy Hollow,” Pacific Rim, Into the Storm and X-Men: Days of Future Past, which provided a virtual reality experience on the show floor in which you are Professor X heading into Cerebro and looking for mutants.
Each of the virtual reality experiences was short, and you did have to wear a rather cumbersome headset that I confess I didn’t have time to adjust properly. I don’t know whether longer-form virtual reality entertainment will take off anytime soon. (Witness the disappointing falloff of 3D, in part due to the need for glasses.) But I didn’t get sick looking around in the virtual world for the few moments I was there, which makes this entertainment consumer and observer eager to see more.
Getting physical for a moment, I also noticed the many booths selling discs at Comic-Con. Fox created elaborate and exclusive disc sets for the Comic-Con crowd, and even a booth in the anime biz, which has gone more digital than other parts of the industry, featured disc sets that fans were eagerly picking over. The collector seemed alive and well at the Con.
You’ve got to hand it to Netflix’s Reed Hastings. He certainly has a vision and follows it. In spite of a misstep a few years ago in which Netflix disc renters balked at his plans for a brave new digital world, Hastings is sticking to his roadmap of creating original programming for his streaming service, expanding streaming internationally and slowly phasing out disc.
Witness just a few of the recent events involving Netflix:
• Netflix original shows “Orange Is the New Black” and “House of Cards” picked up multiple Emmy nominations, prompting observers to lump in the online pioneer with the cable companies that are eclipsing broadcasters at the annual awards show.
• Netflix and The Walt Disney Co. July 17 announced an agreement giving the subscription streaming pioneer exclusive pay-TV access to first-run Disney movies in Canada beginning in 2015.
• According to new data from IHS, sales of DVD and Blu-ray Disc movies in Norway and Denmark have fallen more than 50% over the past few years — the fastest rate of decline anywhere in the world — in part because of the rapid growth of Netflix.
• Even though it created the by-mail disc-rental business, Netflix stopped processing disc shipments on Saturdays in June.
Netflix executives’ laser focus on the company’s three key objectives is yielding undeniable results, and any observer certainly has to credit Hastings and his executive team for their determination and success.
Where that leads the industry at large is another question. The shrinking disc business, in part hastened by Netflix’s streaming service, has been a blow to studios, and Netflix’s cord-cutting customers have shaken up the cable and broadcast businesses in the TV sphere, which may eventually result in lower income for TV content producers. Netflix has shown a willingness to fund content — Emmy-lauded content — but is that enough to make up for the loss of income to other content creators who have built our entertainment industry into the envy of the world?
Will struggling content companies merge to save costs, putting the control of media into even fewer hands? Fox’s bid for Time Warner this month is an ominous sign.
Netflix’s quest for global domination is off to a good start. I hope its disruptive business model increases strong content, rather than shrinks it.
I recently watched First Run Features’ documentary Anita, and I actually sat through an entire lecture by professor Hill that was among the extras. I’m kind of a nerd, so my viewing habits aren’t all that surprising, but I’m always shocked — in this media saturated world with all of its distractions — that my kids like to view disc extras.
Recently, we watched the Blu-ray Disc of Warner Home Video’s The Lego Movie. Believe it or not, as they always do, my kids ran through all of the extras on the disc. Their favorite bonus wasn’t the commentary or other standards. What they most liked was the section on Lego shorts produced by amateur fans.
When I thought about it, their preference was not surprising. Amateur online entertainment often dominates their attention, rather than the slick productions on television or in movie theaters. While my generation preferred to sit in front of the TV, my kids spend hours watching YouTube stars on tablets, cell phones or computers. In addition to a variety that even dozens of cable channels can’t supply, it’s the personal touch, my kids say, that draws them to the Web. They feel as if they know online performers, who answer fans’ questions, often give their fans a nickname and talk directly to the camera like a friend.
Having grown up in a media world full of digital effects and retouching, kids, perhaps not surprisingly, seem to crave authenticity — unexpected and spontaneous entertainment. While they certainly like those popcorn flicks filling theaters, the younger generation has a unique relationship with the media they consume. Media is more personal. Heck, whole friendships are cemented online rather than by talking on the phone or in person, as with my generation. Marketers who hope to appeal to the younger set may hit their target if they emphasize a closer, more authentic relationship with the movies or television shows they are promoting.
In addition to that blockbuster saturated with digital effects, kids may respond to homemade, interactive elements that don’t have all of the rough edges smoothed; extras with a personal touch.
This month’s news that longtime Sony Pictures publicist Fritz Friedman would be leaving the company at the end of the summer called to mind how many times I have depended on Fritz’s unerring class and expertise in this industry.
One of my first contacts when I joined the magazine 20 years ago, Fritz helped me navigate the changing home entertainment landscape with sage advice, praise, and polite, constructive criticism — always delivered with the utmost poise. While publicists and journalists don’t always see eye to eye, I could always count on Fritz to treat me with respect and kindness, both personally and professionally.
During his 34-year career at the studio (which spans most of this 35-year-old magazine’s existence — and indeed the home entertainment industry’s), Fritz has been a welcome fixture as the business changed. Whenever I attended an industry event, I looked for his familiar presence. He was always dapperly dressed and often had a gleeful smile on his face; it was apparent he loved this industry and the people in it. Whether at the yearly VSDA show (since transformed into the Los Angeles Entertainment Summit), the annual Wine & Wisdom event, the Hall of Fame, San Diego Comic-Con International or any of the many expertly choreographed Sony events, I relished catching up with Fritz and getting his take on the happenings in the industry.
I’ve often referred to the home entertainment industry as a small town in which everyone knows each other very well. Expanding on that metaphor, I would say that Fritz is one of our honorary mayors. The students at the University of Southern California, where he is a lecturer, couldn’t ask for a better guide to publicity and Hollywood. I can attest that he is a great teacher. His instruction has been invaluable in my career as an entertainment journalist.
If the home entertainment industry were to have a town meeting, I’m sure we would bestow upon him some sort of honorarium or medal. Thank you Fritz. You are a true class act.
One spat started with a warning that Verizon consumers allegedly got while trying to stream Netflix video: “The Verizon network is crowded right now. Adjusting video for easier playback.”
Another came to light when an anime fan, who couldn’t preorder disc titles on Amazon, complained online to supplier Viz Media and got this response: “Our products are distributed by Warner Brothers, and currently they’re in contract negotiations with Amazon. Preorders are disabled while that goes on, but we’re hoping it will be resolved soon.”
Netflix and Amazon, twin online Goliaths of the home entertainment business, are using their enormous customer bases to put the squeeze on companies that supply them with bandwidth and product.
In the middle are consumers, who have so far benefitted from the low prices provided by Amazon and Netflix — some say gained unfairly by pushing the costs of doing business onto other companies. While consumers who bought items from Walmart, the top brick-and-mortar disc retailer, had to pay state sales taxes, consumers buying from Amazon were exempted from those taxes for much of its life as a company. That, many belief, allowed Amazon to offer lower prices and build itself into a behemoth that controls a good part of the retail business that chains such as Walmart used to dominate. Netflix used infrastructure built by Verizon and other companies to deliver streaming to its customers without paying for the online streaming company’s — some say — outsized domination of that bandwidth.
Netflix and Amazon will contend that they are merely part of a long line of disruptive technologies that change the world for the better. Those on the losing side of this change say they are freeloaders or monopolists that exploit unfair competition.
While some of these issues may end up before government agencies, legislatures or in court (Verizon sent a cease-and-desist letter to Netflix, for instance), these new online behemoths are quietly trying to gain an advantage in the court of public opinion — by upsetting their customers. It may be a risky strategy.
Independent distributors have long been a crucial part of the home entertainment business, picking up films, TV shows and catalog titles that might have gotten lost in a market dominated by big-budget blockbusters. While many of these titles get some play at festivals, in theaters or on television, they often find their audience via home entertainment, either on disc or digitally.
The Entertainment Merchants Association’s Independent Product Market this month in Marina del Rey gathered top indie players who continue to support smaller films and other non-blockbuster product. The indies are facing many challenges in a multi-faceted entertainment distribution arena, and I salute them for continuing to champion good content that might be otherwise overlooked. I salute the EMA as well for recognizing top titles distributed by independents.
The EMA honored actor Haley Joel Osment with its Independent Career Achievement award. Osment, who many may remember for his breakthrough role in The Sixth Sense, stars in Well Go USA Entertainment’s Aug. 5 release I’ll Follow You Down. He noted that he was attracted to the film because it had a great script. That’s a refrain I’ve heard many times over the years when interviewing actors, actresses and other talent who have signed on to work on smaller films. These indie films and their distributors help filmmakers and performers hone their art.
Independent films have also provided a forum for young directors, actors and other talent to get their feet wet. Top talent — including Ron Howard, Peter Fonda, Jack Nicholson, Martin Scorsese, James Cameron and Peter Bogdanovich, to name just a few — polished their acting and directing skills in indie films produced by the legendary Roger Corman before they ever made their first blockbuster.
Like many people, I love a great blockbuster, but I also relish the opportunity to discover a new indie film or documentary. And I am grateful to independent suppliers for their contribution to this business.
Many years ago, during the maturing of the video industry, smaller video store chains consolidated to form behemoths such as the Blockbuster and Hollywood (later Movie Gallery) video chains. These big chains were able to garner more favorable terms from the studios on the titles they bought on VHS and, later, disc. Blockbuster, at one point, even had a content acquisition arm that picked up films for distribution in Blockbuster stores.
Now, I’m experiencing a bit of déjà vu in the digital arena. Phone behemoth AT&T is looking to acquire DirecTV, giving them access to more screens on which entertainment can be consumed. That comes on the heels of the announcement of a prospective deal between the Comcast and Time Warner cable companies. Meanwhile, Netflix is both lamenting the end of strict net neutrality — the FCC’s program making a level delivery field for online programming — and is making exclusive deals to make sure its content gets better treatment at the services that deliver it. Like Blockbuster, Netflix is also embarking on owning the content it delivers: “House of Cards,” “Orange Is the New Black,” etc.
I guess this is the digital business maturing, consolidating and jockeying for advantage in a developing digital world. But it also seems that what’s old is new again. The players and the format (digital) are different but the process seems similar. The content delivery players are trying to bulk up and gain advantages over their competitors, while also dabbling in the content ownership realm dominated by the studios that supply them with content.
And that’s why I’m getting déjà vu. What’s old is new again, as companies try to dominate the entertainment delivery highway. Blockbuster or Netflix, Hollywood —which at one time owned Reel.com, one of the first entrants in the digital realm — or Amazon Prime, the competitors change but the essential business is similar. And, judging by the past, we are in the era of consolidation.
Just as pundits are praising the digital delivery revolution and the death of physical media, along comes a hot title called Frozen, which has topped disc sales charts nearly every week since its March 18 release, when it tallied sales of 3.2 million units on its first day.
Walt Disney Studios, which includes Walt Disney Studios Home Entertainment, reported a revenue jump of 35% ($462 million), due to higher disc unit sales (boosted by Frozen and Thor: The Dark World).
But Frozen isn’t the only strong title spurring unit sales. Even TV content — which has been the lifeblood of subscription websites such as Netflix and Amazon and the darling of the digital revolution — is selling on disc. HBO April 30 reported a first-quarter income jump of 11%, with content revenue increasing 13% largely from packaged-media sales of Game of Thrones: The Complete Third Season. Time Warner CEO Jeff Bewkes said first-month disc sales of the third season of "Thrones" were the highest of any previous HBO original content. Consumers want to own TV series as well as hit features.
While DreamWorks Animation CEO Jeffrey Katzenberg lamented the disappointing theatrical performance of Mr. Peabody & Sherman (a good movie, by the way, which may yet be discovered in the home entertainment market), disc sales continued to stream in for previous DreamWorks Animation titles. Turbo contributed revenue of $22.3 million for the first quarter, having reached an estimated 4.8 million home entertainment units sold worldwide. The Croods contributed revenue of $41.7 million, primarily from domestic pay-TV and home entertainment, reaching an estimated 7.1 million home entertainment units sold worldwide. Rise of the Guardians reached an estimated 5.5 million units sold, and Madagascar 3: Europe's Most Wanted reached an estimated 9.1 million units sold. There is hope for Mr. Peabody & Sherman yet.
Who is buying all those discs if packaged media is dead? The collector.
Even before the advent of DVD, consumers collected titles they really loved on VHS. It’s a habit that continues, even with all the digital offerings available. The collector still prizes — and wants to own on physical media — quality content.
Online companies are starting to feel a margin squeeze. The era of extreme low pricing, supported by temporary laws and technology advantages that came about with the advent of the online explosion, may be coming to an end.
Netflix April 21 announced it is raising the price of its $7.99 monthly streaming subscription by as much as $2 to new customers, in part to offset rising content costs for such original series as “House of Cards” and “Orange Is the New Black.” The price hike affects only new subscribers for now, but there are plans to incorporate existing subs in coming years.
The change follows competitor Amazon’s recent move to raise the price of its Prime Instant Video annual fee $20 (the program includes access to Amazon’s streaming video programming in addition to free two-day shipping).
Amazon prices are going up in certain states as well, and not because the company itself hiked its prices. Certain states are starting to collect sales taxes from online sales by Amazon and others to bolster ailing budgets, and it may hit Amazon’s bottom line. A recent study out of Ohio State University indicates that online buyers are very price sensitive. In the study, researchers focused on five states — California, New Jersey, Pennsylvania, Texas and Virginia — that began a permanent collection of taxes on Amazon purchases between 2012 and 2013. Results showed that the introduction of the “Amazon Tax” resulted in a decline across all states of 9.5% in the value of products (net of sales tax) purchased on Amazon, and that the total dollar amount spent on Amazon, including taxes, decreased by 2.8% in the wake of the law’s implementation.
Until now, online companies Netflix and Amazon have been able to reap the benefits of what they sell (via subscription or otherwise) without paying some of the cost their competitors and suppliers incur. Netflix benefitted from content it had not paid to create and from an Internet infrastructure it hadn’t built. Amazon had a leg up on brick-and-mortar stores subject to state sales taxes because during its meteoric rise it was exempted from sales tax on items sold on its site. Now that states are starting to apply sales taxes to Amazon as well as brick-and-mortar stores, that era is waning.
The free ride seems to be coming to an end, and online services will have to adjust — by raising prices.