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.
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:
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.
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.
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.
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.
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?
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.
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.
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.
I'm up in Beverly Hills today for Blu-Con 2.0, the industry conference and Blu-ray Disc showcase that is being put on by DEG: The Digital Entertainment Group, along with Home Media Magazine (in lieu of our annual Home Entertainment Summit) and several other trades. Our editor in chief, Stephanie Prange, is moderating one of the panels, and I'll be up on stage during lunch to present our annual Home Entertainment Visionary Award, which this year goes to...well, I'd hate to spoil it for you, so you'll just have to check back.
On another note, our magazine's annual TV DVD Awards contest is now in the consumer voting stage. Voting actually began yesterday and within an hour we had already tallied more than 1,000 votes. Join in on the fun by clicking here.
I went to the world premiere last night of the Michael Jackson concert film This Is It, a patchwork documentary of sorts about the concert tour that never was. And while I have never considered myself a diehard Michael Jackson fan, I will say the movie captivated me for its entire two-hour run. I'll admit, part of it was my almost morbid curiosity about what, exactly, Jackson was like in what turned out to be the final three months of his life. And what the film portrays is a more personal, more revealing portrait of the real Michael Jackson than any previous documentary or film I've seen about the King of Pop. Director Kenny Ortega really did a good job with this movie, taking what one would think would be a series of random behind-the-scenes clips from Jackson's rehearsal sessions and fashioning them into a real movie that requires neither narration nor plot to offer a revealing glimpse into one of the most interesting pop cultural icons the world has ever seen.
Much has been made of Sony Pictures' contention that it will only keep the film in theaters for two weeks; I think if the movie catches on, it will stay longer, but then again, it's aimed at Jackson's fans, and those fans are going to rush out and see it right away. My prediction: The film will wind up grossing about $60 million in U.S. theaters, but when it comes out on DVD--and I've heard varying dates, both before and after Christmas, although nothing's been officially set yet--it's going to become one of the biggest-selling music discs of all time. It's made for Blu-ray--and I don't think Sony Pictures Home Entertainment executives will be disappointed in total sales, even though their hoped-for total, 3 million discs, seems a little high.
I sympathize with President Obama’s frustration with Fox News over what he perceives to be the network’s not-so-hidden agenda to “get” him.
Our industry has been fighting similar battles for years, but in recent months the rhetoric has been stepped up by such big mainstream media outlets as the Wall Street Journal and the Los Angeles Times, both of which seem to consider it a preordained destiny that packaged media is on life support and will soon disappear altogether.
The Wall Street Journal, for example, just published a story on the Walt Disney Co.’s latest venture into electronic delivery, a quasi-secret project (dubbed “Keychest”) that would allow consumers to pay one price for permanent access to a movie across several different digital platforms or devices. The headline: “Disney Touts a Way to Ditch the DVD,” which paved the way for the writer to proclaim, “the decline in DVD revenue has undermined the business model Hollywood has relied on for more than a decade.”
Reality check: We’re in the midst of a format transition, and it’s going to take a little while for Blu-ray Disc to fully compensate for the decline in DVD. Blu-ray is, however, making significant gains, particularly in light of the troubled economy, and remains the only way for consumers to watch movies and other programs in true high-definition on their expensive new HDTVs, which are now in nearly half of all U.S. homes.
Moreover, Disney and the other studios that are aggressively going after digital delivery options aren’t trying to “ditch the DVD,” but, rather, broaden the home entertainment market to include on-the-go users armed with iPods, laptops and smart phones. Convenience is the primary selling point; the quality just isn’t there for proper viewing in the home, especially now that everyone and his brother is getting a high-def TV and snazzy home theater system.
Not to be outdone, the Los Angeles Times took a decidedly negative spin on third-quarter home entertainment numbers issued by DEG: The Digital Entertainment Group, maintaining that “Hollywood’s biggest and most profitable business shrank a little slower in the third quarter than in the first half of the year, thanks entirely to rentals.” As for the dramatic gains in Blu-ray Disc sales that were duly noted in reports in our magazine and other publications, the Times had this snotty reaction: “In its news release with the data, DEG attempted to highlight sales of Blu-ray disc sales, which rose an impressive 66.3% in the quarter. That’s a substantial slowdown, however, from the category’s 91% growth in the first half of the year.”
Reality check No. 2: Blu-ray’s first-half growth rate was bigger because HD DVD only gave up six weeks into the first half of 2008, which held back sales. So it’s really an unfair comparison. What the Times should have noted is that in an economic climate where everything is down, Blu-ray is one of the few products that’s selling better than it did a year ago — and that’s a significant accomplishment, by any measure.
The Times also failed to even mention what I consider the key point in the DEG release: That the number of consumer transactions to bring entertainment into the home rose 6.6%. That tells me that consumers have hardly lost interest in home entertainment; indeed, they’re snapping up more discs than ever, which translates into a tremendous vote of confidence for packaged media.
But then again, that’s apparently not the sort of analysis the Times wants to hear.
It was interesting to see the various news stories based on home entertainment spending numbers released yesterday by DEG: The Digital Entertainment Group. Most news outlets, including ours, really played up the rosy Blu-ray Disc numbers (to see our story, click here). Others, in particular the Los Angeles Times, chose to feed their own perception that packaged media is dying by focusing on the continued slump in DVD sales, which even with the mitigating factor of Blu-ray Disc are now down 13.9% for the year, slightly worse than the 13.5% deficit reported at the year's halfway point. Still other media outlets took the middle ground by noting that total consumer spending on packaged as well as digitally delivered media was down 3.2%, a modest drop given the troubled economy but still nothing to cheer about it.
Not one focused on what, in retrospect, is the real story: Consumer transactions, meaning purchases as well as rentals, rose a healthy 6.6%. That's a resounding vote of confidence in the core premise of our business, which, after all, is simply the act of bringing movies and other pre-recorded programming into the home (or the car, or the laptop) for at-will consumption. The transactions number does not distinguish between a purchase and a rental; both, it can be argued, involve a conscious decision by a consumer to go out and spend money on bringing a DVD or a Blu-ray Disc into the home. Now, studios don't like rental because they don't get as big a piece of the pie as they do from a sale. Heck, sometimes they barely get crumbs, if that.
But looking at things solely from a consumer interest angle, rentals are the same as purchases, and the fact that transactions are up 6.6% is a healthy indicator that consumers most certainly have not lost interest in home video. They're simply going back to their old ways--renting rather than buying--and they're doing so in record numbers.
What the studios need to do now is figure out a way to monetize that 6.6% gain so it doesn't continue to wind up as a 13.9% loss.