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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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10 Aug, 2009

10 Big Ones

We’re getting ready to celebrate our 30th anniversary. Yes, it’s been exactly three decades since Stuart Karl, who would later rise to fame for launching the Jane Fonda fitness video series, started publishing what was then known as Video Store Magazine in the garage of his Orange County, Calif., home.
 
To celebrate our 30th birthday, we are planning a special issue next month, and a key part of that issue will be a retrospective feature highlighting what our editors consider the 10 biggest stories of the home video era.
           
This task gets harder each time we celebrate an anniversary, since so much tends to happen every five years. Since our last anniversary issue was published in 2004, we’ve seen an end to soaring year-over-year DVD sales gains, the launch of a new format, a divisive format war and the unexpected resurgence of rental. We’ve also seen the emergence of digital delivery. Five years ago YouTube, “user-generated content,” Hulu and EST were in no one’s vocabulary; today, they’re every bit as much a part of our business as DVD, Blu-ray Disc, sellthrough and rental.
           
I’d like to throw my own personal list of the video era’s 10 biggest stories out there for our readers to review. This list was compiled one morning on my Blackberry during my daily pre-work hike, stream-of-consciousness style, and is presented here in reverse chronological order. I’d love to hear from you—please email me with your comments at tarnold@questex.com.
 
10. The resurgence of rental (and studio haplessness as kiosks proliferate but share none of the spoils, at a time when the economy, and DVD sales, take a tumble).
 
9. Digital delivery takes off (not so much streaming and downloading of movies as the fast acceptance of alternative forms of entertainment, from YouTube clips to Hulu).
 
8. The launch of Blu-ray Disc (and the protracted format war that preceded it).
 
7. Rental’s do-or-die transformation (from traditional brick-and-mortar to the Netflix subscription model and the proliferation of kiosks).
 
6. Sellthrough’s explosive growth, 2001-2004, and home video eclipsing theatrical as Hollywood’s primary revenue stream.

5. The demise of the independent video rental store (round two, as DVD takes the business sellthrough and the mass merchants take over).
 
4. The launch of DVD (which changed consumer habits from renting to buying and took our industry to new heights).
 
3. The rise of the public video chains (which grew the business but also undermined the base of independent rental stores, triggering significant changes in the way the business operates—including revenue-sharing, supply-side economics and direct selling by studios).
 
2. The First Sale Doctrine, which solidified retail’s right to rent just as our first format war,
between VHS and Beta, was beginning to wind down.
 
1. Andre Blay birthing the business by licensing 50 films from 20th Century Fox and releasing them on videocassette.
 


7 Aug, 2009

Redbox Plays the Customer Card

All right, I'm back. In case you were wondering where I was and aren't following me on Twitter or Facebook, I spent the last week backpacking in Yosemite National Park, making do without running water, bathrooms and electricity. Am I glad to be back? HECK YES!!!
 

 I spent last night catching up on emails and industry news and saw that another salvo has landed in the stare-off between the studios and Redbox: 20th Century Fox is calling for a 30-day delay in new release DVD movies becoming available in buck-a-night rental kiosks (for the original story, click here). 

That's in sync with the perception by some studios that rental kiosks are the home entertainment industry's equivalent of dollar movie houses and, like their theatrical brethren, should not get first-run movies. 

Our story prompted this official rebuke from Redbox, which appeared in my email box early this morning: 

Oakbrook Terrace, Ill. – Despite 20th Century Fox’s effort to delay consumer access to new release DVDs by 30 days at rental kiosks, redbox reaffirms its commitment to providing consumers new release DVDs.  Redbox will protect consumers’ rights to access new release DVDs at their preferred retail channel at the price the consumer deems reasonable.  Redbox will continue to carry all major new releases, including 20th Century Fox titles, at the more than 17,000 redbox locations nationwide. The first priority at redbox is the customer.  

Smart move by Redbox to play the customer card--although the studios could rightly argue that if the customer is always in the driver's seat, new release movies routinely could be downloaded for free over the Internet. The customer, you see, is not always right, particularly in this new era of entitlement when nobody feels they should have to pay for anything. But by the same token, Redbox is complying with the law, specifically the First Sale Doctrine--and it does have a point, saying it is merely following the business. 

The real issue, of course, comes down to dollars. Redbox is making a mint by renting studio movies and not sharing any of the proceeds with Hollywood. And at the same time, the kiosks are undercutting not just regular rental dealers, but also the sellthrough business, which in the studios' eyes is far more important. 

I don't think this matter will be resolved anytime soon, if ever--hence, the differing approaches the studios have taken in dealing with Redbox, from Universal Studios' lawsuit to Sony Pictures' five-year deal to lease its titles to the kiosk company. 

Stay tuned for what happens next.

 


1 Aug, 2009

A Picture's Worth a Thousand Words

Thanks, David!
Thanks, David!

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."

 


30 Jul, 2009

Following the Money

You’ve got to hand it to the studios—if nothing else, they sure know how to follow the money.
 
After more than half a year of slumping DVD sales but soaring rental action, studios that had previously all but ignored the rental market are all of a sudden clamoring to get back in.
 
Two studios, Paramount Home Entertainment and Summit Entertainment, last week announced a “back to the future” ploy in which they will release titles exclusively to the rental market before selling them to the big retail sellers of DVD and Blu-ray Disc software.
 
When Summit’s “The Brothers Bloom,” currently near the end of a limited theatrical release, hits DVD and Blu-ray Disc Sept. 29, sales will be limited to rental dealers. Wal-Mart, Best Buy and other big sellthrough merchants are going to have to wait until the first part of 2010 before they can buy the title from Summit, at a discount from the usual wholesale price for a new release.
 
Similarly, Paramount announced that when the Wayans brothers comedy “Dance Flick” comes out on disc Sept. 8, a DVD of the original, rated version will only be sold to rental dealers. Sellthrough retailers will have to pick up the Blu-ray Disc edition, featuring an unrated version of the film plus gobs of extras, or wait four to eight weeks for a sellthrough DVD release.
 
Both moves came just one week after Sony Pictures Home Entertainment stunned—and, some say, angered—other studios by reaching an agreement with Redbox to effectively lease its titles for distribution through the chain’s 17,000 rental kiosks, in a five-year deal valued at $460 million. Studio executives have long railed against Redbox for allegedly devaluing DVDs by renting them for only a buck—and, more recently, for cannibalizing the sellthrough business by setting up shop in the entryways of Wal-Mart stores. Universal Studios Home Entertainment has even gone to court to try to stop Redbox from renting its titles, while another studio president told me that in his view Redbox kiosks are the equivalent of “dollar movie houses” that certainly should not get first-run releases.
 
But hey—according to mid-year estimates from Rentrak, consumer spending on video rentals is up a remarkable 8.3% so far this year. And studio executives, who undoubtedly are getting hammered by their bosses for lackluster DVD sales numbers, are going to do what they have to do to make those elusive budgets and forecasts—even if it means sleeping with the enemy.
 
Business, after all, is business.
 

 


29 Jul, 2009

The Blu 'Watch'

Man, is Blu-ray Disc ever picking up some real steam. And we're not talking industry-hype steam, but REAL steam, as in Big, Serious Numbers.
 
According to this week's Nielsen VideoScan data, 36% of consumers who picked up a copy of Warner Home Video's Watchmen its first week in stores went with the Blu-ray Disc edition. Granted, that movie was aimed squarely at the young-male demographic that in our biz tends to be synonymous with the "early adopter," but still, 36%? That's a real healthy number. I remember at the end of last year, when we were all crowing about The Dark Knight generating nearly 20% of its sales from the Blu-ray Disc edition.
 
There's more: Universal Studios Home Entertainment's Coraline, an edgy animated hit that didn't zero in on young males, nevertheless generated 18% of its total sales from Blu-ray Disc, and Summit Entertainment's Knowing, in week three of release, had 17% of its sales coming from Blu-ray Disc. (For our complete chart story, check out our Web site by clicking here.)
 
Hey, all you skeptics out there. Can you say "M-O-M-E-N-T-U-M?"

 


27 Jul, 2009

A Little of This, A Little of That....

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%.


24 Jul, 2009

Guess Who's Back?

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.


20 Jul, 2009

Rental Strong in Hawaii

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.


15 Jul, 2009

Scaling the Summit

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.


14 Jul, 2009

A Blockbuster of a Perception Problem

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.