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.
Paramount Pictures has brought together two segments of the home 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.
The May 2 Showtime pay-per-view fight between Floyd Mayweather Jr. and Manny Pacquiao may not have proved to be the most engaging live event ever, but it certainly made a bit of history in live Web broadcasting.
As the fight took place on pay-per-view, with many potential viewers fighting the rush in PPV traffic rather than watching a fight, Periscope members broadcast the event live from their cell phones. The Periscope service, which offers live streaming, shut down those “broadcasts” as soon as they were nabbed for piracy, according to Periscope executives. But the point — and the danger — was clear. Even live broadcasts, the last bastion of television, could be taken over by Internet video.
As observers in the home entertainment realm over the years, we’ve seen that access to content, other than that delivered by the studio at the theater or a broadcast service via the television, is desirable and profitable. Consumers crave control over what content they can access and when. That desire will never go away. But it’s up to content owners to extract a price for that access, for the fighters, players and actors, for the grips, for the directors, for the special effects team, for everybody who works to produce content.
Our annual Digital Drivers section attempts to outline and recognize some of those key players that are guiding that negotiation between content producers/owners and consumers. We are very proud of this piece, and hope it offers a bit of clarity in the murky digital future.
If there is an equivalent of a crystal ball for home entertainment, it is the box office take of films in the pipeline. When theaters have more hits, typically studios and retailers sell and rent more home entertainment product.
At the annual CinemaCon trade show in Las Vegas, John Fithian, president and CEO of the National Association of Theatre Owners, offered an optimistic view for 2015. He predicted a record-breaking year for the industry in part based on the quality, genre breadth and expert timing of releases. He also gave a shout-out to the industry’s greater appeal to women moviegoers, citing such films as Fifty Shades of Grey, Cinderella and Insurgent. He said there would be several movies topping $1 billion in box office worldwide. The hits include Furious 7 (already raking in the dough) and the anticipated “Avengers” and “Jurassic Park” sequels as well as the “Minions” spinoff. Of course, the “Star Wars” sequel is a potential blockbuster of galactic proportions.
This is welcome news after a bit of a drought in box office power. As California has thirsted for more rain, so too have the studios suffered a drought in hits. Soon it will be the home entertainment industry’s turn to reap that expected record harvest. But this time there are many more digital competitors in the home entertainment realm that will take a bite out of the crop, putting more pressure on the traditional home entertainment business. If you have a team of all stars and still can’t bring in the trophy, pundits turn to the management to blame.
It is the home entertainment industry’s job to extract as much bounty from this wealth of hits as it can. The pressure is on. New releases have made up an ever-increasing segment of the top 50 sellers on the VideoScan charts. When the new releases are stellar, it makes sense that the home entertainment business will profit. Theaters are throwing the home entertainment industry a soft ball, and the industry needs to hit it out of the park.
A group of top recording artists, led by rapper Jay Z, wants to make streaming pay talent more. They’ve launched a new music streaming service — Tidal — designed to offer artists better pay for their work.
The service starts at $10 monthly and is designed to take on the likes of Spotify and Pandora by offering better-quality audio and better remuneration for artists. Such luminaries as Beyonce, Kanye West and Madonna were on hand for the announcement.
This isn’t the first time a big-name music star has called out cheap (or free) streaming services for underpaying artists. Singer Taylor Swift, fresh off the launch of her blockbuster album 1989, pulled her catalog from subscription streaming service Spotify, saying artists and their labels aren’t paid enough for the many times listeners stream their songs on the free version of the service.
“Valuable things should be paid for. It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is,” she wrote in a column in The Wall Street Journal.
It seems Tidal may be one step in that direction, as far as artists are concerned. Artist Alicia Keys, at the press conference in New York, said Tidal will “preserve the value of music,” according to the Los Angeles Times, and will offer exclusive content not found anywhere else. Sound familiar? Tidal has no free service; it’s $9.99 monthly for basic service, with standard streaming of music and high-definition music videos, and $19.99 monthly for CD-quality streaming, HD videos and access to original content.
But in the Internet realm, who really is in charge? Is it the content producers or the technology companies that deliver content? It’s a question that has not only plagued the music business, but also the entertainment business at large.
Will Tidal’s quality streaming, offering better compensation to talent, convince consumers to pay more (or, really, pay anything at all)? That’s an open question. I, for one, hope it will, and probably so do the many movie and TV show producers out there that find they don’t get enough of the bounty from the Internet revolution. But it’s not the top stars that are really in danger. It’s the upcoming talent that is taking the biggest long-term hit for low-cost streaming. I hope Tidal finds a way to include them, too.
It wasn’t so long ago that the top dog in the video rental business was Blockbuster Video. Blockbuster executives crafted the rental deals that the rest of the industry emulated or worked around. Now that mantle seems to have passed to Redbox, the kiosk company that was characterized as an upstart not so many years ago.
I remember a spokesperson for a major public video store chain telling me that the kiosk market was just a marginal business that would never overtake stores. He said, “How could they possibly replace video store clerks?” Another such spokesperson said online physical rental (Netflix) was a side business, never to rival the store experience. (Now, by the way, Netflix executives think disc rental is a side business, too.)
Those public video store rental chains are long gone — and still standing is Redbox. Following the stores’ demise, Redbox is the dominant outlet at which consumers rent a physical disc. Netflix has sidelined its physical disc rental business in favor of streaming and original programming for streaming, and independent or mid-level chain video rental stores are few and far between.
Pretty much every time I go to a grocery store in my neighborhood, I see a Redbox kiosk with a customer or two. For most consumers who want to rent a physical disc, Redbox is the easiest, cheapest and quickest way to view content, especially movies. Just before Blockbuster went bust in late 2013, Home Media Magazine editors fanned out to find the closest rental outlets and Redbox kiosks were by far the most convenient. I personally had to get on a freeway and travel a half hour to find the nearest Blockbuster or indie rental store. The writing was on the wall.
After the demise of many video stores, Redbox has become important to content owners as well. The studios look to Redbox to buy and rent all of their new releases (popular or not) under output deals. Independent content owners look to Redbox to pick up art house or genre titles that used to find a place in a larger video store rental market, but that the mass merchants increasingly won’t sell.
“Everybody is taking them to lunch,” one industry observer told me of Redbox. Until some other market (perhaps digital) eats their lunch, Redbox looks to be on a roll.
Are gathering clouds raining on studios’ digital sales?
It seems Warner CEO Kevin Tsujihara thinks that might be the case. Different studio-backed cloud-based content ownership services are confusing consumers and slowing digital growth, he said.
Since the introduction of UltraViolet, supported by most major studios, Disney has been a holdout, preferring to support its own subsequently introduced cloud-based service, Disney Movies Anywhere, rather than join the UV accumulation. Various industry observers have debated the merits of Disney’s different path, but many came to the conclusion that both clouds could coexist nicely without damaging digital growth on the horizon.
Tsujihara appears to disagree.
“It would be my goal to bridge [UltraViolet] with what Disney is doing, so the consumer doesn’t have to guess is that a Disney movie, or is that a Fox, Sony, Paramount, Universal or Warner Bros. movie?” Tsujihara said March 4 at the Morgan Stanley Technology, Media & Telecom confab in San Francisco. He noted that while digital sales of movies increased 50% in 2013, growth slowed to 30% in 2014 and is about the same so far this year, which will not be strong enough to offset declining disc sales.
While two cloud services can coexist — indeed they do — it seems to me that they need to be connected through consistent marketing and operational logistics, making access to both seamless to the consumer. Consumers want simple services, and they really don’t care (or often even recall) which studio owned the content they want to acquire. Format options can stimulate, rather than kill, a market. But sometimes, as with the many TV versions of 3D, they scramble the message so much that consumers begin to boycott the market altogether.
“We have to focus on what the consumer is looking for: Simplicity. The magical thing about DVD was it was simple, easy and worked everywhere. I think we have to replicate that in EST,” Tsujihara said.
Making that sort of simplicity work for non-physical ownership is one of the key challenges facing studios, no matter which cloud they follow.
Digital ownership took a hit recently with news that Target had abandoned its Target Ticket service, a key supporter of UltraViolet, the cloud-based digital content storage platform supported by most of the major studios. But Target’s digital surrender may be less of a defeat for digital ownership, than it is a case of the tortoise losing to the hare.
A key reason why another retailer, Walmart, has been able to bridge the digital gap is its quick decision to embrace digital technology and ownership with its Vudu service and its adoption of the UltraViolet platform as well as Disney’s cloud-based service, Disney Movies Anywhere. In the digital arena, often companies that move more quickly win the race. Unfortunately, Target’s caution may have cost it, making it an also-ran.
That’s why Walmart’s Louis Greth and Chris Nagelson are so worthy of our Visionary Award this year. Walmart’s decisive move (before competitor Target) to embrace UltraViolet digital cloud ownership as a complement to its robust physical disc business put it at the forefront of innovation in the retail arena. Walmart was key to supporting the UltraViolet service, and working with its studio partners, has helped consumers get what they really want from entertainment ownership — the ability to possess a physical copy with the highest possible quality and numerous extras, as well as the option of viewing content they already own on their digital devices, from tablets to PCs to cell phones. Walmart this January accepted a Software Retailer of the Year award from DEG: The Digital Entertainment Group, and Greth put it best in accepting the award for the retailer: “Our customers love your product.” Giving customers what they want is the top calling of retailers, and Walmart has never lost sight of that, whether it be physical product or digital.
As the competition heats up in the retail space, Walmart is facing the future and embracing it. Target, still an important physical disc retailer, seems to have ceded control of the digital territory, finding that it was too far behind in the digital race.
It’s hard to see now how this marathon will ultimately end. Digital ownership certainly faces challenges, as Warner Bros. CEO Kevin Tsujihara reportedly told a tech group Feb. 18 at Re/code’s Code Media confab in Dana Point, Calif. But in this tale of two retailers, one competitor is out of the race.
The media business is abuzz with talk of OTT (over-the-top distribution via the Web). Not since DVD has a three-letter distribution format garnered so much attention in the industry.
Chase Carey at Fox said his studio is going to be careful to control it, making sure to preserve the profitability of the legacy business while cultivating a marketplace with many players ¬— and customers to which the studio can sell its valuable content. Bob Iger at Disney said the “Star Wars” and Marvel properties might make marvelous online channels, and that the Disney brand itself is also perfect for OTT.
The major studios aren’t the only players in the OTT game. Dish Network’s Sling TV, fresh off the announce of its launch at the Consumer Electronics Show, added Univision content to its lineup, which also includes ESPN. Shout Factory announced the launch of its catalog of cult TV and movies OTT with an ad-supported service.
And then of course there are OTT heavyweights Netflix and Amazon Prime, which are both basking in the glow of awards season, with their original content earning numerous plaudits.
The growing marketplace is reminiscent of the early days of cable, when the TV channel choices suddenly multiplied from the original three broadcast networks. But this is channel multiplication on steroids, with almost limitless possibilities. Finding the consumer in the cacophony of competitors will grow ever more difficult. Conversely, with an almost limitless amount of content at their fingertips, consumers may not be able to find or discover exactly what they really want to watch, distracted instead by what they stumble upon.
How will a revolutionary indie film be discovered or produced? What profit stream will finance high-quality product?
I applaud services Netflix and Amazon Prime for getting into the content game rather than just distributing others’ content. Granted, both services see it as necessary for self-preservation on the Web, where the barriers to competition are low. But the services also are committed to quality, which is laudable when much of the “content” on the Internet is amateur-produced distraction — makeup tips, gags and gimmicks. Like fast food supersizing, more isn’t always better in the content realm either.
“It’s the Wild West,” a top digital executive told me during the Consumer Electronics Show as we discussed what was happening both domestically and abroad with content distribution. Recently, the digital shootout with traditional Hollywood has resulted in more broken windows and online series lassoing some of the industry’s top awards.
Amazon has followed Netflix into the theatrical realm through its Amazon Original Movies, planning to produce and acquire original films for theatrical release (and release on Amazon Prime Instant Video subscription video-on-demand four to eight weeks later). Netflix made its own deal with The Weinstein Co. to debut the Crouching Tiger, Hidden Dragon follow-up simultaneously in theaters and via streaming. Amazon has inked a deal with legendary filmmaker Woody Allen, Netflix with Adam Sandler. Both Sandler and Allen previously had been theatrical heavyweights.
Sony’s The Interview, plagued by controversy after terrorists threatened harm, hit the VOD market early, stepping on the theatrical window, and will be released on Netflix before its traditional window on disc.
Meanwhile, among the Golden Globe nominees and winners were several from Netflix and Amazon original series. Amazon Prime's critically lauded "Transparent," a comedy starring Jeffrey Tambor as a family's transgendered patriarch, won two major awards — Best TV Comedy or Musical Series and Best Actor for Tambor —a first for Amazon. Netflix’s “House of Cards” earned a Best Actor in a TV Drama trophy for Kevin Spacey.
Exercise programming started with home video — Jane Austen in fact got her start in exercise videos with our magazine’s founder Stuart Karl — but is now moving further into SVOD. Comcast Cable and Gaiam have unveiled Gaiam TV Fit & Yoga, a subscription-based video-on-demand service enabling Xfinity TV subscribers access to yoga and fitness training. Lionsgate is planning its own fitness SVOD service under the BeFit brand, which has more than 1.3 million subscribers to its ad-supported YouTube channel.
If this were a poker game to dominate Hollywood in an Old West saloon, there would be a lot of deck shuffling. And, to really push this Western metaphor, the real question is: “Is there gold in them thar hills?” Will digital models ever be able to rival the kind of money that Hollywood has earned with the traditional window system? Or will the digital players get a bigger part of a shrinking pot? So far, indications are fuzzy.
The release of The Interview — which is an unprecedented case — has earned plaudits for its revenue on VOD, but I’m fairly sure the traditional release schedule would have generated more profit. We will never know, but those who say this Hollywood Western is in the final showdown are wrong. I think we have only seen the first few scenes.