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.
It must be gratifying to go out on top. Craig Kornblau’s sudden and unexpected departure from the presidency of Universal Studios Home Entertainment, after 16 years at the helm, was part of a bigger strategic move by the studio in which he was nothing more than collateral damage.
Universal, you see, was the last of the majors with separate domestic and international divisions, and with globalization being the mantra of corporations everywhere his higher-ups were faced with a pickle: They had to meld the two units into one, and yet each was headed by a top-notch executive — smart, savvy and shrewd — the company could ill afford to lose.
And yet one had to go, and one can only surmise that Eddie Cunningham, the international president, stayed on as head of the new worldwide home entertainment division because his learning curve was a lot lower: He had to learn the ropes of just one market, a market that despite its size is really quite simple, and one where Universal, thanks to the team that Kornblau put together over the past 16 years, was cresting on top. In a way, Kornblau was a victim of his own success: The former Universal Studios Home Entertainment was a smooth, well-oiled machine with some of the industry’s most respected executives, a clever marketing team, and an unparalleled supply chain apparatus. It was also coming off one of its best years in history, with the division laying claim to the top-selling DVD/Blu-ray Disc of the year (Despicable Me 2), the No. 1 EST title of all time (also Despicable Me 2), the No. 1 catalog title of the year (the original Despicable Me) and two of the top five rental titles (No. 1, Identity Thief, and No. 5, Ted). Identity Thief was also the No. 1 VOD title of the year.
Kornblau also left on a personal high. Just five months earlier, Kornblau was given expanded duties at Universal, as his division assumed responsibility for all of NBCUniversal’s digital distribution and marketing, including VOD and EST. Kornblau also won industry kudos for working closely with NBCUniversal sister division Comcast Cable to launch a digital storefront to sell digital copies of its movies to 25 million subscribers, and for crafting a fulfillment contract with Paramount Home Media Distribution to capitalize on Universal’s supply-chain strengths.
He also finalized renewal of an agreement with Open Road Films to handle all marketing, sales and distribution services for Blu-ray Disc, DVD, EST and VOD platforms of Open Road Films' theatrical titles through 2017.
Kornblau leaves behind not just an extremely efficient, and successful, domestic home entertainment operation, but also a legacy of leadership and vision. The son of a retailer, Kornblau arrived at Universal Studios 16 years ago to take over the ship from Bruce Pfander, a former 20th Century Fox executive who briefly ran home entertainment after the ouster of longtime head Louis Feola.
He was not yet 40, and an alumnus of the legendary home entertainment empire at Walt Disney assembled by Bill Mechanic — and honed to what many consider perfection by his successor and former lieutenant, Ann Daly, now at DreamWorks. It was an empire built on the concept of selling movies directly to consumers rather than retailers. In an era dominated by the rental cassette, the revolutionary sellthrough model worked at Disney for two reasons: The studio is the only one with a genuine brand that means something to consumers, and its executives were smart enough to figure out a way to exploit it through such strategies as placing hot titles on moratorium after a specific period of time to build consumer excitement — and demand.
Kornblau was a key member of Team Disney, back in those days: As SVP of worldwide operations and logistics, he pioneered Direct Account Management, and served as the chief architect of this system, which set a new standard within the home entertainment industry, particularly after the advent of DVD and the explosive growth of sellthrough.
During his 16 years at Universal Studios, Kornblau quickly established himself as one of the home entertainment sector’s true thought leaders. He saw the threat to sellthrough posed by new rental models pioneered by Netflix and Redbox and led the industry charge in establishing unprecedented, critical windowing agreements to minimalize cannibalization. He clung to HD DVD during the next-generation format wars because he thought it made more sense to retool an existing product rather than introduce something completely new; when it became clear HD DVD was a lost cause he became one of rival Blu-ray Disc’s most enthusiastic supporters, although in hindsight he may have been right. The revolutionary nature of Blu-ray prompted a hiccup on the manufacturing as well as the retail end, and the format never quite rose to the heights of DVD.
More recently, Kornblau has been a key driver in industrywide initiatives to promote consumer and retail adoption of digital content, including the aggressive push to early electronic sellthrough (EST) windows and the standardization of Blu-ray combo packs. He also influenced the development and promotional rollout of the pioneering digital storage offering, UltraViolet.
To say Kornblau had a good run is a vast understatement. To twist an old saying, he may be out, but he’s certainly not down.
The proposed merger between cable giants Comcast and Time Warner Cable — actually an acquisition in which Comcast would buy Time Warner in a deal valued at $45.2 billion — has some interesting ramifications for the home entertainment business.
One of the most significant developments in Hollywood’s push for bigger movie download sales was the decision by Comcast last November to start offering movies for sale through its Xfinity TV store. Subscribers are able to buy select movies several weeks ahead of their release on Blu-ray Disc and DVD, just as they can on iTunes, Amazon.com and Walmart’s Vudu, among other services.
In a recent conference call with analysts, Lionsgate CEO Jon Feltheimer noted that less than three months after Comcast began selling movies, it already controls 15% of the electronic sellthrough/Digital HD market — a testament to Comcast’s aggressiveness and willingness to try new things.
“Comcast’s recent entry into the EST business is already proving to be a catalyst for accelerated [digital] growth,” Feltheimer said. “We expect additional growth as other MSOs follow suit.”
Indeed — grabbing a 15% share of the market after just three months in is a tremendous achievement, particularly if that market is expected to grow significantly in the coming years as consumers become more comfortable with the concept of digital movie ownership.
And while the merger is by no means done — expectations are it could take until the end of this year for the deal to clear all the necessary regulatory and other hurdles — a combined Comcast/Time Warner, with aggressive, innovative Comcast in the driver’s seat, could really ignite the EST/Digital HD business.
Under Apple’s iTunes thumb, EST grew slowly. And as recently as 2011, iTunes still commanded about 65% of the EST business.
But with the entry of Comcast into the market last November, it was, as they say, a whole new ballgame — centered on a box of the kind Apple can only wish it had. As the Motley Fool noted, “Comcast — unlike Time Warner Cable — has invested heavily in its own set-top box technology. Gone are the days of sluggish, buggy cable boxes: the new X1 and X2 platforms offer Comcast subscribers a highly advanced, cloud-based set-top box complete with voice commands and personalized recommendations. … Not only do Comcast's X1 and X2 differentiate it from its satellite-based competition, but they also serve as gateways to Comcast's pay-per-view services.”
Comcast’s new Xfinity TV store competes directly with Apple’s iTunes, and given Comcast’s massive footprint and the nature of competition, it’s almost a foregone conclusion that we’re going to see significant growth in online movies sales — and in Comcast’s market share.
Throw Time Warner into the mix and Comcast’s already formidable clout in the marketplace becomes even stronger — positioning online movie sales for even further growth.
The studios desperately want the ability to sell their movies without the hassles of a physical product. They’ve long had the will, and thanks to Comcast the way is suddenly becoming very clear.
NBC's 'Ironside' remake
Brand equity, it has been written, is strategically crucial, but famously difficult to quantify.
Dish Network found that out the hard way through its purchase of Blockbuster Video, which it bought out of bankruptcy solely for the purpose of the “Blockbuster” brand name. Turns out, consumers didn’t care beans about Blockbuster — the iconic video rental chain was part of the past, gone, forgotten, buried, rather than a familiar friend to be forever associated with movies and entertainment.
Networks, too, are finding out, the hard way, about the vapor value of supposedly beloved brands. NBC brought back “Ironside” because it figured the 1970s crime show, with Raymond Burr, was still front and center in the hearts of TV fans. Not so. Few people younger than me even remember the show, and those who do vastly preferred watching the original on disc — thanks, Shout! Factory — instead of the reboot, which lasted all of four episodes.
And yet reinvention still seems to be the proverbial business plan that wouldn’t die. Movies continue to get remade, often with quite a bit of success. The Amazing Spider-Man reboot came out just 10 years after Spider-Man and became almost as big a hit as the original. The same thing happened with Batman Begins (2005) and Batman (1989).
One might argue that in the case of the superhero movies, they were all good films. But the “Ironside” remake wasn’t that bad, either, and the initial game plan for Blockbuster in the wake of the chain’s $320 million purchase by Dish seemed quite sound: if nothing else, it gave the satellite company a brick-and-mortar presence to promote its service.
In the end, though, I suppose it all gets down to giving consumers what they want, what they need, what they’ll spend good money on. Consumers had left Blockbuster, and filed away the chain’s name in their brains under “nostalgia,” long before its purchase by Dish.
Similarly, the “Ironside” remake might have been a pretty decent show, but it simply wasn’t what people wanted to watch at that time — a fate the network probably realized in mid-January when it scrapped plans to reboot another old crime TV show, “Murder, She Wrote,” which had been announced amid much fanfare the previous fall.
In the music industry, there’s an old phrase that holds, “It’s not the singer, it’s the song.” In truth, sometimes it’s both — and sometimes, it’s neither.
The divide over giving the rental market access to new DVDs and Blu-ray Discs is becoming more and more perplexing, as the six major studios appear to be agreeing on so many other things these days — most significantly, giving digital downloads of movies a two-week window to encourage consumers to buy product electronically.
The packaged-media business remains healthy, but given their druthers studios would much rather sell their content over the Internet than continue to incur the huge costs and logistical challenges of manufacturing discs, shipping them out to retailers and then dealing with the headaches of returns, inventory replenishment and the like — challenges that simply don’t exist in the electronic world.
Of course, studios don’t want to do anything to damage the consumer purchase model, which is where they generate the bulk of their revenue — and their profits. That’s why the same studios that are pushing electronic sellthrough (EST) — which I guess I should start referring to by its fancy new name, Digital HD — are also propping up the packaged-media disc business as much as they can, mostly by continuing to provide consumers with the best-possible viewing experience in a neat, tidy, eye-appealing little package that fits neatly in bookcases and generally comes with gobs of cool extra content.
That’s why it baffles me that some studios are still not holding off on issuing newly released movies to rental outlets, particularly Redbox. The prospect of cannibalization appears clear as day — if you can rent a movie for a buck from a vending machine right outside Walmart, why venture inside and buy the same movie for $15 or $20, particularly if it’s a new release you simply want to watch once and not necessarily own?
The three studios that do withhold movies from key rental vendors for 28 days — 20th Century Fox, Universal Studios and Warner Bros. — all swear by their decision. And the rental folks don’t appear to be as put off by the delay as one might think. Heck, Identity Thief even ended up being Redbox’s No. 1 rental title of 2013, and coming from Universal it was subject to a 28-day delay.
As for the studios that give everyone equal access to new releases, they say holding back movies from one class of trade only deprives consumers of choice – and doing that is never a good thing. Of course, those studio are also handsomely rewarded for this.
Who’s right? I tend to side with the holdback crowd, but I’m just a journalist, not a marketing whiz. I guess we’ll just have to wait and see, just as we did during previous divides, like Blu-ray Disc versus HD DVD and, going back a little further, Betamax versus VHS.
What will the new year bring? This home entertainment business of ours is so fluid, so ever-changing, that it’s hard to predict what will happen with any degree of certainty. Indeed, take a look at some of the major developments over the last decade or so and there are myriad things we simply didn’t see coming, or expect would happen.
Who would have thought that in the midst of the digital evolution, movie vending machines would stage such a dramatic comeback that they’d account for nearly half of all physical video rentals?
Who would have thought that a key factor behind Blu-ray Disc’s apparent sustainable success is the Internet connectivity of the hardware, which lets users do all sorts of other things besides watch Blu-ray Discs?
Who would have thought that the spectacular rollout of DVD would be followed by the crushing realization that the disc wasn’t good enough for the emerging class of high-definition TVs, prompting yet another software format launch (a situation that with 4K on the horizon we may well find ourselves in yet again)?
My own record with predicting the future is spotty, at best. I thought Blu-ray Disc’s launch would be every bit as successful as DVD’s, I thought Blockbuster would go out of business long before it did, and I never thought we’d be watching movies on smartphones and tablets, given the increasingly good home theater systems we were installing in our family rooms.
But once again, I feel compelled to offer some predictions for the new year — five for 2014 — and if you read them and feel I’m playing it real safe, you are absolutely right.
1. At some point, Blu-ray Disc sales will slide again, as they did in the third quarter of the year. The industry will blame the decline on a poor crop of movies, while the mainstream press will take it as yet another sign that physical media is dead.
2. During the fourth quarter, one big title will bomb, sending the entire industry into a funk. This funk, however, will be lifted when another big summer theatrical title performs remarkably well, prompting everyone to cheer and the studio behind this success to issue a press release touting its triumph.
3. EST will continue to grow, as studios step up their efforts to wean consumers from packaged media by releasing more and more titles on Digital HD anywhere from one to four weeks ahead of the DVD or Blu-ray Disc.
4. During the Black Friday holiday weekend, we’re going to see recent Blu-ray Disc hits sell for as little as $1 or $2, the threshold we saw this year for DVD. No one’s going to complain about a “race to the bottom.” We’re already there, you see.
5. At some point, we’re going to see 4K resolution on a Blu-ray Disc. I won’t hazard a guess as to which studio will be first, or how prevalent the practice will become, but I’m quite certain it’s going to happen.
Happy new year, folks. Welcome to another predictably unpredictable year.
1. Dexter: The Complete Series Blu-ray Collection (Paramount/CBS): One of the hottest and most-talked-about TV series ended its run this fall after eight seasons, and Paramount has packaged the entire show in a cool wooden slide box inspired by the one Dexter himself uses to catalog his kills. The 25 discs come in individual one-sided jewel cases decorated with a huge blood spatter on the other side. The box is a bit pricey at $460 for the Blu-ray Disc version, but it’s readily available at retailers in the low $200s. And at that price it’s a deal. There’s also an Amazon exclusive gift set, packaged in a white human head, for a C-note more, but I’ll take the slide box anytime — less money and more compact for storage.
2. Breaking Bad: The Complete Series (Sony Pictures): This is the other hugely popular TV series that ended its run this fall, and my hunch is there are very few people out there who wouldn’t appreciate finding the complete series — packaged in a “money barrel” — under their tree. Again, it’s quite pricey ($300), but could be had at a steep discount ($209 at BestBuy.com), although word on the street is it’s nearly sold out and may no longer be available by the time this story runs (Amazon already had it only through its secondary marketplace, where sellers were listing it for at least $500).
3. X-Men: The Adamantium Collection (20th Century Fox): At an average street price of $130, this one’s a real bargain: You get all six “X-Men” films on Blu-ray Disc, including the recently released The Wolverine, in a package topped with a replica of Wolverine’s claw. There’s also a bonus disc and an extra slot in the case for the seventh “X-Men” film, X-Men: Days of Future Past (scheduled to open theatrically in May 2014).
4. James Dean Ultimate Collector’s Edition (Warner): I love Warner’s stuff — the studio consistently outdoes itself with its premium “Ultimate Collector’s Edition” line, and this $99.98 SRP boxed set (around $70 in stores) commemorates the brief career of the fabled actor who has come to symbolize 1950s cool with Blu-ray Disc versions of his three films — East of Eden, Rebel Without a Cause and Giant) — as well as a glorious 48-page photo book with lots of behind-the-scenes photos.
5. The Dark Knight Trilogy: Ultimate Collector’s Edition (Warner): Another of Warner’s new UCEs, this one packages all three films of Christopher Nolan’s Batman reboot in a $99.97 SRP boxed set that also includes two new features and exclusive collectible memorabilia, including Mondo art prints, three toy vehicles (the Tumbler, the Batpod and the Bat) and a behind-the-scenes booklet.
6. JFK: Ultimate Collector’s Edition (Warner): Yet another Warner UCE, this one centers on Oliver Stone’s controversial film about the assassination of President John F. Kennedy, a conspiracy-laden thrillfest that makes you question everything you’ve ever heard about the notorious killing. The timing couldn’t be better (Kennedy was killed 50 years ago), the set sells for less than $50, and there are all sorts of cool collectibles, including reproductions of the late president’s inaugural address, a campaign poster and various photos and correspondence. There’s also a photo book and six postcards.
7. Anchorman Ultimate Blu-ray Fun Pack (Paramount): In a brilliant marketing ploy, the genuinely funny original has been repackaged into a Walmart-exclusive gift set on the eve of the theatrical debut of the sequel. The package costs less than $20 but includes not just the spruced-up “Rich Mahogany Edition” two-disc Blu-ray Disc edition, but also a T-shirt, a 16-page booklet and coupons for a free pint of Ben & Jerry’s Anchorman Scotchy Scotch Scotch ice cream and a movie ticket to see the sequel in theaters (it opens Dec. 18).
8. Twilight Forever: The Complete Saga (Lionsgate): A great compact gift set that includes the entire teen-vampire saga, spread out across 10 Blu-ray discs (or 12 DVDs) with ample bonus content, including a comprehensive multi-part documentary. If you’re a “Twilight” fan, I can’t think of a better gift — even if someone you know already owns all the movies, it’s worth the upgrade, given all the extras. And the price won’t bust your wallet: the DVD set is readily available at retail for less than $40.
9. Futurama: The Complete Series (20th Century Fox): One of the greatest animated series of all time is presented here in its entirety — all 124 episodes, plus four feature-length epic adventures, for more than 50 hours of whacked-out hilarity from “The Simpsons” creator Matt Groening. And while I liked the robot head packaging that came out in 2009, this neat rectangular box is so much easier to stash away in the movie closet. It’s priced below $200, but for diehard Futurama fans — my three sons included — price really doesn’t matter (especially when dad’s paying for it).
10. Beverly Hills, 90210: The Complete Series (Paramount/CBS): I was addicted to this show — essentially a soap opera about high schoolers growing up in ritzy BH — until my own kids started being born and I had to wean myself away from primetime TV, and honestly have been waiting for a complete-series set for years. It finally arrived last month, a dozen years after the original series went off the air, in an elegant white-and-fuchsia boxed set filled with 72 discs and 215 hours of drama. The list is $350, but I’ve seen it go for about $150 on Amazon and elsewhere.
Another Black Friday has come and gone, and as I joined the madding crowd both the day before, after a hearty Thanksgiving Day dinner, and in the early morning hours of BF itself I made a mental note of various thoughts, observations and comments I’d like to share with you in this space.
For starters, the big news was that while consumer transactions were up, consumer spending was down. Welcome to our world, I thought. This is something we’ve seen time and time again, as the actual selling price of DVDs and Blu-ray Discs has gotten lower and lower.
This Black Friday, we must have hit bottom. I honestly don’t see how we can go any lower, with high-profile blockbusters such as The Dark Knight Rises and various “Harry Potter” movies selling for $1.96 on DVD and $4 on Blu-ray Disc and hundreds of more recent hits, such as The Great Gatsby, World War Z and Pacific Rim, priced in the same neighborhood. Even top-rated TV series such as “Dexter” and “Family Guy” were readily available for less than 10 bucks for a complete season.
Years ago, we’d talk and write about the “race to the bottom” and devaluing our precious product. No one’s talking about devaluation any more. As for the race to the bottom, we’re there, baby. It’s gotten to the point where at least on Black Friday, it’s oftentimes cheaper to buy a disc than it is to stream the same film over the Internet. Packaged media can’t help but survive under those circumstances.
I also noted quite a bit of rumbling about Walmart, in particular, opening on Thanksgiving Day. Lots of people complained it wasn’t fair to Walmart’s employees, and that we should boycott Walmart for not letting their workers stay home on the holiday with their families. Heck, I even heard talk of legislation to prevent retailers from opening on Thanksgiving Day.
Whoa. The same people who complained about Walmart opening Thanksgiving night — long after most holiday meals, I might add — probably went to the gym in the morning and stopped by the supermarket on the way home to pick up some extra gravy or cranberry sauce on their way to the family meal. No worries about poor exploited gym workers or supermarket checkers, I guess. Walmart has become something of a piñata, and if I can get up on my soapbox for a minute let me opine this is because Walmart, unlike many grocery chains, is a non-union shop — a singling out I find monstrously unfair.
If you don’t want to shop on Thanksgiving, then don’t. If enough people stay away, Walmart and the other big-box stores may rethink their decision. That’s the beauty of the free market, of supply and demand. But talk of boycotts and legislation is simply ridiculous. That’s just not how America works.
Reading the bios of our 2013 Women of Home Entertainment, I was struck by how involved our industry’s women executives are in the digital evolution/revolution that’s transforming our business.
Kelley Avery of DreamWorks played an instrumental role in crafting a groundbreaking deal with Netflix to bring DreamWorks Animation titles to the streaming service.
Janice Marinelli, the new president of Disney Studio Global In-Home and Digital Distribution and Disney-ABC North American Content Distribution, has an enviable track record on the digital side. It was under her leadership that Disney a year ago struck a licensing deal that will make Netflix the exclusive U.S. subscription TV service for the studio’s first-run films in the pay window, beginning with 2016 theatrical releases.
Over at Sony Pictures, senior EVP of worldwide marketing Lexine Wong gets much of the credit for making the studio a pioneer, and leader, in such digital initiatives as UltraViolet and early electronic sellthrough.
And 20th Century Fox’s chief marketing officer and president of worldwide marketing, Mary Daily, has played a key role in expanding the studio’s product portfolio to include Digital HD.
This marks the sixth consecutive year in which Home Media Magazine is saluting the women of home entertainment — but what began as a way for us to honor the industry’s top women executives now reads almost like a who’s who of cutting-edge and visionary leaders who are forever changing the way studios deliver, and the general public consumes, entertainment.
Home Media’s Women of Home Entertainment, class of 2013, is smart, determined, tenacious and sensible. They’re taking our industry into uncharted territory with confidence, competence and zest.
We’re in good hands, the best hands.
I’d also like to again give a nod to the Home Media group’s own women of home entertainment: Stephanie Prange, Angelique Flores, Julie Savant and Ashley Ratcliff. I couldn’t ask for a better team.
So this is it.
Just like that, it's over.
With Dish finally making the announcement all of us knew was coming, even though we might not have wanted to believe it, the Blockbuster era is officially over.
Another pop cultural icon, dead and soon to be buried — another nail, critics will say, in the coffin of the packaged home entertainment industry.
Granted, the fewer than 300 Blockbuster stores that remained of the once-mighty video rental chain amounted to a mere skeleton of the Blockbuster of the pre-DVD, pre-sellthrough era. During those heady days for the company, Blockbuster’s clout was such that we in the home video trade appropriated the “Big Blue” nickname that for years had been proudly worn by IBM and applied it to the unstoppable video power chain from Dallas, which within a decade of its 1986 launch had become the dominant player in the video retail trade.
No sooner had the first Blockbuster store been opened — by a fellow named David Cook — than its feeding frenzy began. Blockbuster began gobbling up mom-and-pops, then regional chains, then national rivals such as Erol’s (in 1990, for $40 million). By then, Blockbuster had been sold to Wayne Huizenga, the celebrated waste-management king, who had an even bigger vision for, well, “Big Blue.”
In 1993, Blockbuster acquired a controlling interest in Spelling Entertainment Group; a year later, Viacom acquired the company for a breathtaking $8.4 billion. By the time Blockbuster’s 10-year marriage to Viacom ended, in 2004, the company had 60,000 employees and upwards of 9,000 stores.
The relatively swift decline and fall of the Blockbuster empire has been well chronicled, by this publication and others. The upshot is that the home video business changed, but Blockbuster refused to change with it, clinging to its physical video rental model even after DVD sent the business spiraling toward sellthrough, even after consumer discontent with late fees and return trips paved the way for Netflix and Redbox.
Blockbuster filed for bankruptcy in September 2010; seven months later, the chain and its tattered fleet of about 1,700 remaining stores was bought at auction by Dish Network, ostensibly for the value of the brand name, for $233 million and the assumption of $87 in debt.
I can only imagine what Dish executives were thinking in the days and weeks after their purchase. Talk about buyer’s remorse — things went from bad to ugly to “My God, what have we done?” Stores fell like dominos: 200 in July 2011, 500 more in 2012, and another 300 earlier this year.
Now, as noted previously, it’s all over. All remaining Blockbuster stores, as well as the company’s once-promising by-mail DVD distribution operations, will be closed by January 2014.
In a press release, Dish chief Joseph Clayton said, “This is not an easy decision.”
Come on, Joe. At this point, I’m afraid it was the only decision.
It’s good to see the studios are becoming increasingly aggressive in pushing the digital sale, rather than streaming, of movies.
Several of the majors are giving big movies an early digital release in the hopes of spurring sales, which for years were stagnant and dominated by iTunes sales. That’s because there was no real incentive for people to buy a digital movie, and my hunch is they were put off by the relatively steep price, compared to streaming.
Consumers took to buying music over the Internet because they could easily purchase their favorite songs at 99 cents a pop. Studios came into the game with a decided disadvantage: While music is sold by the song rather than by the album, with movies you have to buy the whole thing, not a scene or two. And finding the right price for a download — which lacks a physical, touch-and-feel presence — has been quite difficult, with the electronic sellthrough, or EST, needle remaining stuck in the “anemic” range even when the price of a new movie dropped to about $10.
An early window for a digital release just might be the game changer everyone’s been hoping for. Studios, after all, cling to the physical disc simply because it’s tried-and-true and we haven’t seen a precipitous sales falloff as we did with the CD (a fact that, again, can be explained through consumer purchase habits: music by the song, movies by the whole movie).
But given their druthers, every studio executive worth his or her marketing degree would like to replace that disc-based revenue stream with a digital model, with nothing to manufacture, nothing to package, nothing to ship and nothing for retailers to return.
The problem is, getting people to fork over even $10 for a download has been incredibly challenging, because the concept of ownership, at least at this point, still mandates something physical. It’s more about the product than it is about the experience.
But making a hot new movie available only as a download two, three or four weeks before its release on disc is a whole other story. The consumer who doesn’t see value in buying a download for $15 when he can buy a beautifully packaged DVD or Blu-ray Disc for roughly the same amount now has a whole new reason to do so: He’s not paying for the ownership so much as he is paying for the privilege of having something before anyone else does. Call it pride, call it vanity — it’s human nature, and clearly it’s working.
As reported in our magazine, DreamWorks Animation’s Ann Daly on a conference call Oct. 29 said the early Digital HD (now the standard name for all digital versions of a movie) release last month of The Croods generated 15% more sellthrough revenue than any other DreamWorks film.
Daly applauds 20th Century Fox, which distributes DreamWorks Animation titles into the home entertainment channel, for being “aggressive in promoting and developing the electronic sellthrough portion of their business,” and maintains, “It is having a positive effect on our overall business.”
Keep it up, guys. Clearly, it’s working.