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.
After reading one of my columns on the Redbox rental kiosk phenomenon, a reader by the name of David Sedman of Dallas sent in this photo he snapped at the Dallas-Forth Worth Airport. "I think the people in DFW think that Redbox is a service consumers are well pleased with, based on this photo I shot last weekend," he writes. Sedman also noted that some stores in the Dallas area with Redbox kiosks "added second units to alleviate long lines."
Greetings, everyone. I'm finally back in the saddle after a week of vacation--I tried to keep in touch but the Internet connection at my hotel was horrendous! I got back in town in time to visit Comic-Con on Friday and I was amazed at how big home entertainment's presence was this year. It's almost as though with no Home Media Expo to contend with, the studios unleashed everything they had at Comic-Con. I had a great evening of cocktails with the Universal Studios Home Entertainment team, still agog about Coraline, and ran into countless publicists who were all running around like chickens sans heads. 20th Century Fox Home Entertainment had its own booth for the first time, and our own Agent DVD, the consumer magazine we produce each year specifically for Comic-Con, was EVERYWHERE. It even made the Los Angeles Times, in a huge three-column photo of a handicapped girl eagerly clutching her copy on the show floor.
I spent most of today on the phone, catching up on gossip. Tongues are wagging over talk that one studio home entertainment president reportedly has approached Paramount about taking over as worldwide president, filling the shoes of Kelley Avery, but that studio higher-ups are looking for someone outside the industry. "They want a true visionary," a source close to Paramount said.
I also just received a copy of the Entertainment Merchants Association's annual report on the home entertainment industry, a bit anticlimactic now that DEG: The Digital Entertainment Group has positioned itself as the official provider of studio numbers, but still interesting. Among the report's key findings not part of any previous report: DVD rental kiosks in calendar 2008 had a 6% share of the rental market, up from just 2% the year before, while brick-and-mortar rental stores continued to have a commanding 69% share of the business. Do the math and that leaves Netflix and its various subscription competitors, all of them small potatoes, with 25%.
I'm back from vacation and heading down to San Diego, my hometown, for Comic-Con. For the best updates, please stay tuned to our Web site as well as that of our consumer magazine, Agent DVD, which lives in print just once a year, at Comic-Con, but online is being updated all the time. You can check out the Agent DVD Web site by clicking here.
I'm vacationing in Maui this week with the family and I couldn't help but think about our industry when I saw the proliferation of video rental stores all over the island. Every strip mall in and around Lahaina, it seems, has one. I haven't checked out the Wal-Mart by the airport yet for any sign of Redbox, but my hunch is that if there is one, it is doing boffo business.
Steve Nickerson must be feeling pretty good right about now. The ex-Warner Home Video executive, now in charge of Summit Entertainment's home entertainment division, just scored his second No. 1 home video seller and renter with Knowing, following a similar chart-topping feat in late March with Twilight--which, incidentally, remains the top-selling home video title of the year. For the full story, click here.
I read with interest our report on the see-saw share prices of Netlix and Blockbuster (see Erik Gruenwedel's story by clicking here). Netflix share prices see-SOARED to a three-month high on speculation that the aggressive online DVD rental pioneer may be acquired by Amazon. Blockbuster shares, meanwhile, took a dive to close yesterday at 58 cents, down 82% from a 52-week high of $3.19 per share Aug. 6, 2008. Heck, I remember when Blockbuster shares were trading at well over $15 per share--and thinking, "Man, that's bad--they sure took a hit since they started trading at $25 a share." I checked around the Web a little and found this little ditty from Smart Money, dated May 2005: "Low expectations have already taken their toll on Blockbuster's share price. The stock has bounced around a much-diminished ranged of highs and lows this year, ending 2004 at $9.54 a share, dropping below $9 for parts of March and April, and hitting a recent low of $8.45 a share on March 30. That's about half of the stock's 52-week high of $16.41 touched precisely 52 weeks ago." Boy, what Jim wouldn't give to be at $9, eh?
The sad thing is that Blockbuster's low value in the eyes of the investment community has everything to do with the perception that video rental, at least the traditional store-based model, is a relic and anyone associated with it isn't worth beans. Investors are keen on Netflix, mostly because of the company's history of strategic thinking, smart forecasting and willingness to talk about what's going to happen next (streaming). They also like Redbox because, well, those dollar kiosks are making a heck of a lot of money, and everyone's reading the reports that in this troubled economy people are looking for bargains and what's a better deal than a buck a night for a hot new movie?
And yet I can't help but wonder, if Netflix and Redbox had both emanated from a brick-and-mortar rental-store operation like Blockbuster, would they be the darlings that they are? Or would investors thumb their noses at them the way they do at Blockbuster, and accuse them of desperate tactics to remain afloat?
Everytime Netflix or Redbox make a move, investors applaud. Everytime Blockbuster makes a move--even if it's the same moves Netflix or Redbox have made, like offering subscription rentals or launching a fleet of kiosks--it gets lambasted as a dinosaur that doesn't know when it's time to sink back into its mudhole and let nature take its course.
Shaking a bad reputation can be a real bitch--even when that reputation isn't deserved.
I've been chastised severely by a couple of people for my blog entry from last week in which I blasted Wal-Mart for allowing kiosks into its stores that directly compete with the chain's DVD sellthrough business. I surmised the chain had allowed kiosks in because it was losing faith in DVD, a point underscored by Wal-mart's lackluster merchandising of Blu-ray Disc.
My two callers — and neither of them is a Wal-Mart executive, by the way — both stuck up for the chain, which by most accounts is responsible for about 40 percent of total DVD sales in the United States. It isn't so much a case of Wal-Mart losing faith in DVD, they told me, as it was one of Wal-Mart simply being a smart retailer and following the money. While it is true that for years Wal-Mart used the DVD sales frenzy to drive customers into its stores, the chain's “loss leader” strategy wasn't entirely of its own making. Wal-Mart never drove prices down, bur, rather, reacted to deep discounting by Best Buy and others. As a result, studios were actually making more money from DVD sales than consumers were spending on them.
Wal-Mart approached the studios several times and asked for lower wholesale prices, but the studios didn't budge, according to my callers. So now that DVD sales are down and Redbox rental kiosks are the hottest thing going since bipods, Wal-Mart doesn't feel any sense of obligation to prop up the DVD sales business in any way. Instead, the chain is going with the money and leasing space to Redbox — I'm sure, for a cut of the action.
By allowing Redbox kiosks into its stores, my callers argued, Wal-Mart also is doing what all smart retailers should do: strive to give their customers a choice. Wal-Mart customers can still buy DVDs, but now they can rent them, as well.
Readers, I'd be interested to hear where you weigh in on what is clearly a divisive issue. Is Wal-Mart a big baddie that used DVD sales to drive traffic into its stores, and is now turning its back on the sellthrough business and going with the hot new kid in town, Redbox? Or is Wal-Mart merely being a good retailers and doing something that can enhance both its revenues and its customer service?
I'd love to hear from you.