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Lost in Digital Space

7 Jul, 2014 By: Erik Gruenwedel

In the rush to keep up with an evolving home entertainment business, independent distributors are embracing digital distribution — channels dominated by Netflix, Amazon and Apple.

While riding on the coattails of the SVOD pioneer, e-commerce giant and iTunes creators might seem akin to Burger King’s policy of setting up shop opposite McDonald’s, the challenge, say some analysts, hinges on the independents’ ability to attract consumers in an online market saturated with major brands.

“I don’t think anyone can overcome the first-mover advantage of Netflix, Amazon or Apple,” said Michael Pachter, senior analyst with Wedbush Securities.

He contends Comcast represents one of the few “newcomers” with a realistic shot at digital distribution because of its No. 1 cable household penetration and broadband capabilities.

“It’s clearly one of the things AT&T is looking to do with its [pending] DirecTV purchase,” Pachter said, alluding to the telecom’s penchant for increased household and broadband penetration. “But, the little guys [independents] are going to have a lot of trouble gaining traction for themselves and their content.”

But that doesn’t mean indies aren’t trying.

MarVista Digital Entertainment (MVDE) is a newly created division of MarVista Entertainment, with a mission to license original and acquired content (about 2,000 hours) to digital platforms throughout North America.

MVDE’s content pipeline includes 40 new titles that it will produce, finance, co-finance or acquire. Original productions include more than 150 movies that have been licensed to The Disney Channel, Nickelodeon, Lifetime Television, Hallmark Channel, ION and Syfy, among others.

MVDE kicks off Aug. 1 with the release of the teen comedy Zapped, starring Zendaya (Disney Channel’s “Shake It Up”); thriller Fatal Acquittal, with Joely Fisher and Denise Richards; family comedy If I Had Wings, starring Craig Bierko (“Boston Legal”) and Jill Hennessy (“Crossing Jordan”); and thriller Betrayed, with Amanda Schull (“Suits”).

“The timing is right … to capitalize on opportunities in the digital space by creating an in-house division to proactively build relationships with the established and emerging digital platforms across North America, and to do this, we have made a sizeable investment in our operations and human resources,” CEO Fernando Szew said in a statement.

Since launching in 2011, RLJ Entertainment’s Acorn TV qualifies as a quasi early adopter in subscription streaming. It’s $4.99 monthly menu of British TV shows and movies — including “Agatha Christie’s Poirot,” “Foyle’s War,” “George Gently,” “I, Claudius,” “Upstairs, Downstairs,” “Brideshead Revisited,” “Midsomer Murders,” “Prime Suspect” and “The Forsyte Saga,” among other programs — made it an online beacon for fans of British fare — well before Netflix and Amazon Prime jumped on the U.K. content bandwagon.

The service is available online and via Roku, iPhone, iPad, and Apple TV, among other platforms. Last year, Acorn TV featured exclusive premieres of “Doc Martin,” “Miss Fisher’s Murder Mysteries” and Guy Pearce’s “Jack Irish,” among others. The service also sells select packaged-media releases of its titles.

The platform generated nearly 4 million visits in 2013, and in the past six months has grown unique weekly visitors 475%, according to RLJ.

“[We have] worked aggressively the last two years to create and program a subscription service that can fill the void for the millions of Americans craving high quality British content,” RLJ CEO Miguel Penella said earlier this year.

Lost in the Crowd

When Redbox last year began renting indie mystery thriller Vanished from indie distributor Osiris Entertainment — about four months after its street date — the delay wasn’t due to any embargo, but rather the result of an increasingly crowded content field.

For Osiris — which this year is distributing Bottled Up, with Oscar-winner Melissa Leo; Matt’s Chance, starring Edward Furlong; romantic comedy A Big Love Story, and horror thriller Bloodline — abundance of digital options to consumers doesn’t guarantee distributors the financial returns of packaged media today or in the past, according to CEO Evan Crooke.

“Netflix is a great account, but it’s highly unpredictable,” Crooke told Home Media Magazine in a recent interview. “You never know on the digital side if they are going to order something because [content licensing is] driven more on [recommendation] queue, demand matrix and demand algorithms, as opposed to human desire to pick up [the DVD] and rent or buy it.”

Crooke said the transformation of home entertainment to digital distribution has not included the relative safeguards packaged media enjoyed at retail — notably select shelf space and foot traffic. He said the plethora of content selections on digital platforms means individual indie titles can easily get lost in the crowd.

“DVD, while it’s going away or being hidden under a rug, hasn’t been replaced by anything substantially sufficient,” he said. “There’s too much competition in too many places.”

SVOD Bandwagon

Ubiquitous digital access isn’t fazing Cinedigm Entertainment Group, which is embracing subscription streaming in a major way.

The company, which claims to be the largest home entertainment distributor of independent fare, is in the process of rolling out branded over-the-top video platforms, including a partnership with The Dove Foundation. The Dove Movie Channel will target families and kids seeking faith-based and family friendly content approved by Dove. The service is expected to launch in early 2015.

Another OTT channel, to be called ConTV and created via a partnership with comic book convention organizer Wizard World, is targeted for launch in the fall.

CEO Chris McGurk said the streaming channels open up three new revenue opportunities, including advertising, subscriptions and merchandising. He said Cinedigm can launch the channels more cost effectively than its competitors because it already operates a distribution business with the necessary infrastructure to support the new channels.

“That gives us a real economic advantage,” McGurk told analysts June 25.

The SVOD channels’ goals are to reach upwards of 1 million subscribers each paying $4 to $10 per month within two-to-three years after launch.

In addition, Cinedigm thinks it can generate $10 to $20 CPMs (cost-per-thousand) in advertising revenue from marketers. “The potential for our OTT business is huge and real,” McGurk said.

The distributor also inked a deal with Amazon Prime Instant Video for streaming rights to select Drafthouse Films, the delivery arm of Alamo Drafthouse Cinema. Drafthouse Films are distributed by Cinedigm.

Under the deal, Amazon Prime members have access to black comedy Cheap Thrills; Ben Wheatley’s psychedelic sorcery film, A Field in England; sci-fi thriller The Visitor; and Abel Ferrara’s Ms. 45. Acclaimed rock-doc A Band Called Death and coming-of-age film I Declare War also are available.

“The shift to digital is happening much more rapidly than anyone anticipated,” McGurk said. “If we successfully implement our strategy with these brands, the Cinedigm Digital Channel essentially will become direct-to-consumer narrowcast versions of Hulu or Netflix or Amazon.”

B. Riley & Co. analyst Eric Wold said digital distribution is one of the best options Cinedigm has to monetize its content library without incurring incremental costs acquiring new-release content. Cinedigm, which last year bought Gaiam Vivendi Entertainment, has a portfolio of about 52,000 movies and TV shows.

Wold said digital channels enable Cinedigm to target specific customers with unique content — an a-la-carte model not available in the bundled cable ecosystem.

“There has been increasing demand for narrowcast digital channels that focus on one genre (e.g., anime, documentaries),” Wold said. “With a launch cost per narrowcast channel of roughly $2 million, the payback period is quick and the profitability ramp is fairly steep.”


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