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Thomas K. Arnold is considered one of the leading home entertainment journalists in the country. He is publisher and editorial director of Home Media Magazine, the home entertainment industry’s weekly trade publication. He also is home entertainment editor for The Hollywood Reporter and frequently writes about home entertainment and theatrical for USA Today. He has talked about home entertainment issues on CNN’s “Showbiz Tonight,” “Entertainment Tonight,” Starz, The Hollywood Reporter and the G4 network’s “Attack of the Show,” where he has been a frequent guest. Arnold also is the executive producer of The Home Entertainment Summit, a key annual gathering of studio executives and other industry leaders, and has given speeches and presentations at a variety of other events, including Home Media Expo and the Entertainment Supply Chain Academy.


TK's Take
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23 Dec, 2009

Kudos to David Poland!

Up until this morning, I had never even heard of David Poland. But after getting a link to his latest blog (you can see it by clicking here) I am a devoted fan.

In a blog entry titled "NYT + Brooks Barnes = Embarrassment," he assails the august "newspaper of record" for misunderstanding the movie business and the movie-making process. He also calls the paper's repetitive "DVD downturn" chant "completely half-assed."

Poland's angry blog posting underscores a very real problem in the consumer media: Too often, they just don't understand our business, and rely on superficial analysis that bears no resemblance whatsoever to reality. The "packaged media is dead" mantra, which the press has been repeating for years, is now louder than ever, with journalists picking up the downturn in DVD sales while completely ignoring the uptick in rentals and the significant and impressive gains in Blu-ray Disc sales--as well as the studios' all-out efforts to truly take Blu-ray to the masses by both encouraging lower sales prices and making the transition to the high-definition format as easy as humanly possible through the proliferation of affordable, all-in-one combo packs and flipper discs.

I'm also going to do what I can to set the record straight, to make sure the real story about our business gets out in the widest possible way. Check back here on Monday for my annual year-end analysis, which also will be featured in next week's print and digital editions of our magazines. Pass it around to anyone and everyone you know. I've also written a shorter, more pointed analysis for The Hollywood Reporter that's getting some pretty nice pickup, including the New York Times. You can read that piece by clicking here.

Happy holidays to all--I'm taking the family to Disneyland today for our annual visit. I'll be here throughout the holidays, however, so please check back often! It's been quite a year, and if you read my analysis you'll see rumors of our industry's death, with apologies to Mark Twain, truly are exaggerated.

 

 


15 Dec, 2009

Random Thoughts, Observations and Musings....

Ah, technology! I am listening to a CD of Christmas songs that includes a rare 1971 rendition of "Oh, Holy Night" by Gary Puckett, the 1960s pop star I once managed (1979-1981). I found the song on YouTube, downloaded it for my RealPlayer, transfered it to iTunes and ultimately burned it onto a CD.

But hey, we're not here to read about me boasting about my technological prowess, are we? As the Christmas tunes play on I am reading a surprisingly thoughtful update on Blu-ray Disc in the Wall Street Journal, by Sarah McBride (to see the story, click here). The story details the studios' big push of Blu-ray Disc in the holiday season and skillfully avoids using any industry jargon to explain such elements of said push as price reductions, combo packs and flipper discs. McBride also quite accurately describes Blu-ray Disc as "potentially a critical bulwark against the plunging DVD market, now in its third year of decline."

It's a good story, an accurate story, and a far cry from the "disc is dead" stories we've come to expect from the mainstream media. McBride notes that while Blu-ray Disc sales are on track to account for about 14% of packaged media sales this year, half what DVD was doing compared to VHS in year four of its existence, the big push could realize significant gains in the coming year, beginning in January, when the studios will target new Blu-ray Disc households drawn to the format by the cheapo players we began seeing in Wal-Mart and elsewhere in the days leading up to Black Friday.

I did find it a little ironic that the only studio president quoted in the story, talking up Blu-ray Disc, was Craig Kornblau, who during the format war was the chief cheerleader for the rival (and ultimately vanquished) HD DVD format. But hey, he's a smart guy, and he went Blu in a big way as soon as HD DVD backer Toshiba threw in the towel back in February 2008.

On another note, let me throw some kudos toward 20th Century Fox Home Entertainment for throwing a spectacular party Saturday night at Seth MacFarlane's Beverly Hills home for the DVD and Blu-ray Disc premiere of the latest "Family Guy" feature, Something, Something, Something Dark Side, a sequel to the animated sitcom's Star Wars spoof. The unexpected downpour proved no challenge for Fox SVP James Finn and his team — MacFarlane's backyard was tented and plastic-sheeted and the party went on as scheduled, complete with a 50-piece orchestra and a guest list that included Paris Hilton and Alyssa Milano. (see story here)

Clearly, event marketing hasn't fallen by the wayside. And I've got a hunch when other studios see how much press Fox got for this little shindig, we should start to see more of these events again, regardless of the economy — or the weather.


9 Dec, 2009

Studios Wise to Focus on Turning the Masses Blu

I hate cliches with a passion, but in this case there's simply no better way to say it than this: The studios are finally putting the cart behind the horse instead of the other way around.

For much of this past year, I questioned the wisdom of increasingly inventive BD-Live options when 1) Blu-ray Disc still had not gone mainstream and 2) the vast majority of people who had Blu-ray Disc did not have it hooked up to the Internet. Exclusive content and climate-changing menus were all well and good, but--and here's another cliche I feel compelled to use--it seemed the studios were throwing a lavish, over-the-top party and no one was coming.

But in recent months, there's been a discernible change in the studio mindset, and it is one I heartily applaud. The new way of thinking is to save the thrills and frills for later, when everyone has Blu-ray Disc, and instead focus on getting Blu-ray Disc hardware and software into the hands of everyone and his brother.

The way to do that is simple: Focus on one compelling, easily understood message centered around Blu-ray's superior picture and sound quality ("Your high-definition TV needs a high-definition disc")--and then work like hell to get the masses to bite.

To do that, we need to make the transition from standard DVD to Blu-ray Disc as simple and easy as humanly possible--and everything I've seen coming out of Hollywood lately seems to be a step in the right direction.

Pricing parity is certainly one big step. Particularly in this economic environment, you can't expect people to pay $30 for a movie, especially when they can get the same film on DVD for $15. The proverbial "sweet spot" appears to be under $20 for new releases and less than $10 for catalog, and that's what we're already seeing. For those who still cry "devaluation," keep in mind that if Blu-ray doesn't catch on, and catch on quick, we might not have any product to devalue.

The other big step is to offer consumers convenience by adopting some sort of "a disc for all seasons" approach. Recognize that even if someone owns a Blu-ray Disc player, it is not a given that he's going to buy the Blu-ray Disc version over the standard DVD, since that same person probably has a DVD player in his car and in his bedroom and a DVD drive in his laptop. For the time being, at least, we need to offer consumers both, which is why I think the Disney-pioneered "combo pack" and Universal's flipper disc concepts are so smart.

Once we get Blu-ray firmly entrenched into the mainstream, we can always go back and jazz up the extras. We can produce BD-Live features that scratch your back and make the morning coffee, for all I care. But first we need to take care of the basics. And I'm relieved to see that's precisely what the studios appear to be doing.


2 Dec, 2009

Incentives Galore

Every day, it seems, there's a new development that makes Blu-ray Disc even more irresistible to the masses. The latest development: Universal Studios Home Entertainment's "flipper" disc, with Blu-ray Disc on one side and DVD on the other. Priced about the same as a regular Blu-ray Disc — or DVD, for that matter — the package offers Blu-ray Disc owners the chance to watch the movie in high-def in their home theater room and on DVD in their car, bedroom, laptop or anywhere else they haven't yet upgraded. And for non-Blu-ray Disc owners, it's an enticing lure to be able to buy something they can watch on their existing DVD player, while all the time the Blu-ray Disc side beckons to them, "Watch me, watch me...you don't know what you're missing." I know if I had an HDTV and hadn't yet gotten a Blu-ray player, all the hype about a six-times clearer picture would at the very least make me curious — and if I could now buy a disc with Blu-ray on one side and DVD on the other that Blu-ray side sure would make me antsy. I'd feel as though I was almost done with a puzzle, and the last piece was a Blu-ray player.

Uni's flipper disc comes on top of other nifty incentives to get the masses to convert. There's the Disney-pioneered combo pack, with a Blu-ray Disc, a DVD and a digital copy disc all in one package; there's loss-leader Blu-ray Disc pricing on hot new releases at Wal-Mart and other big discount chains; and there's a sharp drop in actual selling prices for Blu-ray Disc catalog titles, most recently an under-$7 promotion at Best Buy (click here to read our story).

There are a few things we still need to really get the masses addicted to this potent format:

1) A generic ad campaign aimed at those HDTV buyers who haven't yet upgraded to Blu-ray Disc. This is critical, because HDTVs clearly are the hot item this holiday season, and rampant discounting — I saw some decent sets, 19 inches, going for $149 at Best Buy on Black Friday — is going to make them even more hot as the season winds down to its Christmas climax. So let's go for broke and make it perfectly clear that those HDTVs just aren't complete without a Blu-ray Disc player. I'm not an ad copywriter, but I'm thinking something along the lines of "Go Blu. Your High-Def TV Needs a High-Def Disc."

2) TV combos. When are we going to see HDTVs with built-in Blu-ray Disc players? Those TV-DVD combo players that popped up shortly after DVD's launch more than a decade ago no doubt encouraged consumers to transition from VHS. They were like an affirmation that DVD had arrived. Now, we have a perfect opportunity to marry those HDTVs with high-def players. Why haven't we done so? It galled me to no end on Friday when I saw an Emerson HDTV-DVD combo unit. That's like installing a Blaupunkt stereo with an eight-track player. And just think of the message that sends to consumers: "Here's your shiny new HDTV and a DVD player, which really is all you need...." Let's counter this crap ASAP.

3) TV series on Blu-ray. So far, they've been few and far between. Kudos to Universal for putting out the complete series of "Battlestar Galactica" on both DVD and Blu-ray Disc, and ditto to HBO for "Rome." But what about "The Sopranos" or "Seinfeld"? We need to up the ante in TV DVD land, particularly on the complete series front.

Here's hoping we all have a Blu Christmas.


27 Nov, 2009

Black Friday: The Good, the Bad and the Just Plain Ugly

I headed out for the stores early on Black Friday not so much to do my own Christmas shopping as to see what retailers were doing to take advantage of what's traditionally hailed as the single biggest retail day of the year.

A full report on Black Friday activities, which is being updated all day long, can be found by clicking here. But if you'd also like to get my take on what I saw, please read on:

THE GOOD:

At Best Buy, people seemed to be buying handfuls of DVDs and Blu-ray Discs again. I was pleasantly surprised at the Blu-ray Disc racks, where several titles, including Disney's Snow White, were sold out long before 8 a.m. Smart merchandisers, again from Disney, also seemed like a beacon in attracting shoppers. Best Buy was a bustle of activity, and I rarely saw a cart with a 42-inch HDTV that didn't also have a Blu-ray Disc player stuck in there.

At Wal-Mart, $78 Blu-ray Disc players were everywhere, including right by the front door, in that aisle filled with promotional merchandise you have to pass by to get anywhere else in the store. I counted at least half a dozen carts with Magnavox or slightly higher priced Sony Blu-ray Disc players.

THE BAD:

Wal-Mart may have created quite a bit of buzz in the days leading up to Black Friday with word of its deep-discounted Blu-ray Disc releases, both new releases and catalog titles. But my visit to the Oceanside, Calif. store was a big disappointment. Large cardboard Blu-ray Disc bins had been handed over to regular DVDs, and it took three passes through the electronics department before I finally found any Blu-ray Disc software--still behind lock and key. That's hardly a way to encourage the masses to go Blu, regardless of how many cheap players you've got stacked in the center aisle. If things were different at other Wal-Mart stores, by all means, let me know. I'm hoping against hope that lowball Blu-ray Disc pricing meant depleted inventories by 8, when I got there, and that the Blu-ray bins had been emptied by eager consumers and only then restocked with budget DVDs.

THE UGLY:

Stupid, stupid, stupid. I still saw several HDTVs with built-in DVD rather than Blu-ray Disc players. Why on earth would CE companies do something this asinine? Why not put an eight-track into the next home theater-in-a-box? Or a VCR in the plasma? The message we need to get across to consumers is this: Your high-definition TV needs a high-definition disc, or you're missing out. What companies like Emerson, the guilty party behind the combo I saw this morning, are doing is just wrong.


24 Nov, 2009

Black Friday Beckons

I just read a story on the discount wars between Wal-Mart and Amazon that indicated a wide selection of Blu-ray Disc catalog titles will be selling for as little as $9.95 at most major retailers, including Best Buy. And at the risk of again offending the Guardians of Premium Pricing, let me say this is great news for those of us who are anxious for Blu-ray Disc to penetrate the mainstream. Let's face it--in this day of instant gratification, celebrities of the hour and mass ADD, impulse buys are only goiing to become more and more significant. We simply don't have time to draw up Excel sheet holiday gift lists (present company excluded). If we see something that looks cool, we will buy it. The sorry state of the economy means attractive pricing is more important than ever, and under-$10 Blu-ray Disc catalog titles, in my view, is the perfect storm our business needs to finally get this format off the ground. The fact that Blu-ray Disc players will be available for under $100 will further fuel the Blu wave I see coming. Just think--for $200 you can get a player, eight catalog movies and a new release. That's a compelling purchase.

And if you still think I am full of hooey, put yourself in Joe Consumer's shoes. He's got a DVD player, and it looks mighty fine with his HDTV. And yet...he can't help but wonder about this Blu-ray thing, which everyone says is true high definition. He's got his nagging feeling that he's missing out on something.

It's nighttime. Joe walks over to his DVD collection to put on a movie for the kids. He can't help but notice the cases are starting to look a little shabby. He pulls out the first Indiana Jones movie and sticks it into the player. Just past the opening credits it becomes pixelated. He yanks it out, turns it over and realizes it's been scratched to death. He tries another movie. This one works, but still....

Joe pours himself a stiff drink. He vows to hit the stores Friday morning, just to look, mind you. Just to look....

What do you think Joe is going to do if he wanders into Best Buy or Wal-Mart and finds the first three Indiana Jones movies available for $9.95, Crystal Skull at $19.95 and a player for $89?

Joe's no fool. He's going to buy. And once he gets that Blu-ray player into his home and realizes what he's been missing, he will be hooked.


20 Nov, 2009

Rosy Forecast for 2010

Could it be? Yes, I believe it is. Ladies and gentlemen, ahem, we have some, uh, good news for a change. It's hard to say that phrase, "good news." But it feels refreshing, uplifting, invigorating, even — as foreign to these ears as it may be.

The good news I am referring to is that Screen Digest, a respected industry analyst that's been tracking home entertainment trends and statistics for years, believes packaged media is in for recovery as early as next year. A surge in Blu-ray Disc sales, brought on by the proliferation of cheap players, will trigger a boom in software sales that will be big enough to more than offset any further declines in DVD sales (for the complete story, click here).

Now, I'm certainly not one to do any premature celebrating, not after the year we've had--a year that is mercifully coming to an end. But I do believe Screen Digest's rosy prediction is a valid one, because there seems to be a perfect storm brewing that just might blow the roof off previous Blu-ray Disc sales projections.

You've got prices for big hit titles falling below the $20 mark at major retailers from Wal-Mart and Best Buy to Amazon.com.

You've got brash new front-and-center Blu-ray Disc displays at Best Buy, Fry's and other big retailers.

You've got HDTVs in more than half of all U.S. households, and the growing realization among consumers that the highest-quality source of true HD entertainment is Blu-ray Disc.

And you've got innovative programs like the Disney-spawned combo pack, which lets consumers buy a Blu-ray Disc, a DVD and a digital copy all in one affordably priced package, and Warner's new trade-in offer, in which consumers can send in their old DVDs and get a new Blu-ray Disc for just $7.95 (plus shipping, which brings the total cost to about $13, still well below the cost of a new Blu-ray Disc movie).

What we need now is an industrywide education campaign that ties everything together. I'm talking ads and commercials with the message: "Go Blu. The best gift for your high-def TV is a high-def disc."

Who's going to take the lead on this one?

 


17 Nov, 2009

Loss-Leadering Coming to Blu-ray Disc

My, my, how times have changed. Studio executives used to cringe at newly released theatrical DVDs selling for below $15 their first week in stores, generally at big discount chains like Wal-Mart and Target. The mass merchants were using DVDs as loss leaders to drive traffic into their stores, devaluing the product in the consumer's eyes and later coming back to the studios and complaining about margins. Studio executives were reluctant to lower wholesale prices, even though that's what their big retail customers wanted, and all of a sudden that taboo word that's not supposed to be discussed in public — pricing — was on everyone's tongues.

Now, we're finding loss-leader pricing has come to Blu-ray, a year before anyone expected it to. Wal-Mart and several other mass merchants are advertising, and selling, hot new Blu-ray Disc releases for less than $20 — and this, mind you, is before Black Friday, when we traditionally see the lowest prices all year for everything from digital cameras and computers to kitchen sinks (I mean that literally).

Studio executives, frankly, don't know what to think. They're stunned to see it happening so soon, and worried that in the future not only will their visions of incremental profits fade away faster than those visions of sugarplums we keep hearing about each Christmas, but that retailers will start pressuring them for lower wholesale prices and, before you know it, Blu-ray Disc will suffer the same price erosion that plagued DVD within several years of that format's launch — something studio executives have vowed to not let happen again.

While I was among those decrying the race to the bottom in DVD pricing, in this case I'm singing a different song. With apologies to the Beatles, "Let It Be." Given the economy and the slump in DVD sales, we had better do something quick to pick up the slack and take Blu-ray Disc to the masses — and there's nothing better than making the format affordable to everyone, particularly when low-end Blu-ray Disc players are expected to sell for as little as $75 come Black Friday and even final-spec players should be available in the low $100s.

If you think about it, the fact that Wal-Mart and the other mass merchants are using Blu-ray Discs as loss leaders is a tremendous vote of confidence in the format. It means they believe Blu-ray Discs are hot enough to lure people into their stores, as long as the prices aren't out of whack with what they're used to paying for DVDs.

Sure, down the road we might moan and groan about "leaving money on the table" (one of Hollywood's favorite laments), but in this economy, when more and more people are going back to their old habit of renting movies instead of buying them, we need to do something, anything, to get people back in the habit of buying and collecting movies and TV shows.

Let's worry about the potential fallout later. If we don't get Blu-ray Disc to the masses now, regardless of the price, there might not be a later.


10 Nov, 2009

Blu-ray Disc, Front and Center at Retail!

Best Buy EVP Mike Vitelli's admonition at Blu-Con 2.0 that we'd better do everything we can to take Blu-ray Disc to the masses, and do it now, seems to be a fourth-quarter battle cry for retailers across the board.

Wal-Mart is finally selling certain newly released Blu-ray Discs for less than $20, about the same as the DVD, and probably taking a loss just to use the format as a lure to drive traffic into stores--the same approach the giant discounter took with DVD nearly a decade ago.

Best Buy has remerchandised certain "lab" stores to put Blu-ray disc software right up in front, taking the place of music CDs, which have been unceremoniously shuttled to the back. I walked into the Best Buy near my home in Carlsbad, Calif., and was surprised at how prominent Blu-ray had become--and what a neat fit it was with the store's existing blue color scheme.

And on a trip last week to the Fountain Valley, Calif. Fry's Electronics to buy a new digital camera, I almost tripped over the huge racks of Blu-ray Discs positioned between the entrance and the checkstands, a long row of high-def discs at unbelievably attractive prices.

Retailers seem to be finally getting it, realizing both the promise and the potential of Blu-ray Disc to be DVD, all over again. True, DVD's fast ascent was triggered by a far superior visual and audio experience, but Blu-ray has the same advantage over DVD that DVD had over VHS. Maybe it's an advantage that's only recognizable on an HDTV, but everyone's getting a high-def TV these days--and regardless of what the cablers say, Blu-ray disc remains the only way to bring TRUE 1080p high-definition into the home, a fact I believe is slowly but surely beginning to sink in with the public (remember my Richard the Plumber blog posting from a few weeks back?).

That's why I am so befuddled by yet another story in the mainstream media, this time in the Los Angeles Times, that is headlined "Discs Facing Ejection: As CD and DVD sales sink, Best Buy plans for a future when it stocks fewer hard copies while pushing downloads." The premise of the story is sound: retailers are looking at ways to capitalize on digital downloading. But the execution left me scratching my head and wondering what universe authors Ben Fritz and Dawn Chmielewski are living in.

The article paints a rosy, glossed-over picture of both the current state of downloading (no one's doing it because it takes too long, it's too complicated and the quality isn't there) and the inherent differences between music and movies (we buy music by the song, which is why downloading took off so quickly; we buy movies, well, by the movie, so why spend $20 and two hours downloading a movie when you can buy it for $15 at Wal-Mart?).

The article also completely ignores the fact that the same retailers experimenting with digital downloads are the ones giving Blu-ray Disc a massive push, and that the state of the home entertainment industry is actually quite healthy, with consumer transactions up nearly 7%, year over year. Indeed, Blu-ray is conspicuously absent from the entire article, which keeps referring to the slump in CD and DVD sales but says nothing about the dramatic year-over-year gains in Blu-ray Disc sales.

Oh well, I guess that's why we exist. Trade journalists and trade magazines that cover the business, that know the business and that understand the business. That puts us in a prime position to give everyone a fair shake, and to report what's really going on out there.


5 Nov, 2009

Best Buy's Code Blu

Best Buy's Mike Vitelli waxed philosophical at Blu-Con 2.0 when he said the chief obstacle to Blu-ray Disc going mainstream is the gap between consumers' awareness of the format and their familiarity with it. The two are hardly the same, he pointed out, noting that while just about everyone has heard about Blu-ray Disc a surprisingly large number of people still don't know much about. Citing anecdotes related to him by store personnel, he told a rather sobering tale of ignorance, with many people still thinking all they need to get true high-def out of their DVDs, and DVD players, is to hook them up to their high-definition TVs.

Education certainly is key, but first you have to get people to want to learn. And that's where pricing and portability come in. Blu-ray Discs may be sexy, but we have to level the playing field before anyone's going to initiate a courtship. Specifically, he was talking about price and portability.

All right, let's talk about price. I remember when Blu-ray Disc was launched and everyone was hoping for a $10 premium. "We're not looking for a replacement technology," one studio president told me at the time. "We're looking to grow the business." Well, those dreams went right the door when the economy tanked, and with a DVD purchase slippage of nearly 14% so far this year a "replacement technology" that will stop the slide sounds perfectly OK to my ears. The bottom line is that we simply cannot expect consumers who for years have been able to buy any new DVD release for around $15, at least its first week in stores, to shell out twice as much for a Blu-ray Disc. Bring the price of a new Blu-ray down below $20--heck, $19.99 sounds just fine--and you're in business, particularly now that player prices are under $200 (for a good one) and even under $100 for some cheapo models.

But that's only half the equation. When DVD was launched, the DVD player replaced the VCR n the home. Sure, you might have had a second VCR in the bedroom, but that was about it. Today, we've got DVD players everywhere--in the car, in each bedroom, even on the plane or train (courtesy of your laptop computer). There are way more players out there than ever, and Blu-ray Disc, unfortunately, is still pretty much home-bound. The computer industry has been slow to include Blu-ray Disc drives in their new computers, and I have yet to see a commercially available Blu-ray Disc player for my car--at least one that I can afford.

Put these two factors together and the combination is a tremendous roadblock to Blu-ray Disc's advances. You're being asked to pay more for something that's a lot more limited in terms of where you can play it. As Vitelli said, consumers walk into a store and have to make a choice: Blu-ray Disc or standard DVD. Even if they have a shiny new Blu-ray Disc player in their family room, they may ultimately opt for the DVD because they can play that DVD anywhere and everywhere.

As a parent with a yen for long road trips, I understand what Vitelli's saying. I am absolutely wowed by Blu-ray Disc and its superior picture and sound. If I could, I'd toss out all my DVDs and go completely Blu. But only one of my three kids could then watch the film in his own room, on his PlayStation 3. And our road trips would be endless bouts of the alphabet game or "I Spy."

We, as an industry, have to aggressively attack the two Ps standing in the way of Blu-ray going mainstream. Actual selling prices have to be lower, crossing that psychological $20 barrier. And we need to put the pressure on CE and computer companies to go Blu in everything they do.

At this point, I am convinced that Blu-ray Disc's ultimate success is inevitable. But how long it takes to achieve that success--well, to a large degree, that's up to us.