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.
For the third consecutive year, we at Home Media Magazine are getting ready to salute the women of home entertainment, our annual tribute to the most influential female executives in Hollywood's home entertainment sector. With so many more ways to bring entertainment into the home — from DVD and Blu-ray Disc to digital downloading, streaming and VOD — we also are broadening our scope this year beyond packaged media suppliers and retailers.
But as the industry, and our home-entertainment delivery mechanisms, change, the character traits of these women-in-charge do not. The women of home entertainment remain a smart, savvy and tenacious bunch; well-educated, intelligent, ambitious and determined to not just ride out the troubled economy but to grow their businesses. Look over the roster of any major studio's home entertainment division and you're likely to see several of these women in key decision-making roles. The same goes for independent suppliers, retailers and technology companies where all eyes are not on home entertainment's presence, but, rather, on its future.
Some of these women are out in front, frequently quoted in the press and always dashing about the country for meetings with corporate higher-ups, analysts and key clients. Others work behind the scenes, in operations, legal affairs, accounting and other so-called "quiet" professions that are out of the spotlight. But their roles are all critical to the success of their respective businesses, and they all go about their jobs with equal diligence and professionalism.
The 2010 edition of our Women in Home tribute will run in our Nov. 1 issue, and for the first time ever, we are going to produce a gala luncheon to honor these women that will be held Nov. 3 in Beverly Hills, Calif. We're hoping to have a surprise celebrity guest speaker and a healthy turnout of home entertainment industry leaders who recognize the importance of events such as this, which tend to elevate the entire home entertainment category in the eyes of both Hollywood and the business community.
There's still time to nominate women executives — click here to do so electronically — and reserve tables at the luncheon (contact our editor in chief, Stephanie Prange, at firstname.lastname@example.org). And lest I forget, let me call out some very special women in home entertainment: Stephanie Prange, Angelique Flores, Julie Savant, Renee Rosado, Krystal Lund and Valerie Cano. They're the women of Home Media Magazine — and a critical component of who we are, what we are, and what we can be.
Death, as the song (and most religions) contend, is not the end. And nor will bankruptcy signal the end of Blockbuster, the venerable video rental chain that come next year will celebrate its 25th anniversary.
Blockbuster's bankruptcy (to see our story on the filing, click here) is the same pre-packaged deal corporations typically file to get out from under a crushing debt load. We've seen it happen many, many times in the last few years, generally with companies that were under pressure to grow by acquisition and then, when the economy tanked, were stuck with a mountain of debt higher than their asset sheets. It's sort of like being under water on your house, only on a much grander scale.
The Sept. 23 filing by Blockbuster is essentially a recapitalization plan that allows the chain to reduce $1 billion in debt to about $100 million.
And that debt was the single biggest obstacle to Blockbuster's survival, tying management's financial hands to the point where they couldn't even effectively promote, market and advertise Blockbuster's big advantage over rivals Netflix and Redbox: The fact that it gets ALL movies from ALL the studios the day they are released on disc. When three of the six major studios announced 28-day holdbacks on new releases to Netflix and Redbox, many industry insiders likened the deal to throwing a lifeline to Blockbuster. But it's hard to reach for a lifeline when your hands are tied.
In a column several weeks ago, I opined that Blockbuster's debt wasn't the only thing hurting its chances of survival. I speculated that the Blockbuster brand had become a negative, identified far too closely with the traditional brick-and-mortar rental model and all its related evils, such as return trips and late fees.
Not so, argued some of the sharpest minds in our business. So I did a little due diligence. I spoke with random friends and acquaintances, popped my head into a few Blockbuster stores--not just on Friday nights, but also during the week--and lo and behold, they're right. In the proverbial nutshell: consumers equate the Blockbuster brand with movies, not with the old, tired store-rental approach.
Indeed, in the midst of my research I visited the local Vons supermarket and almost couldn't get in the door, thanks to a new Blockbuster rental kiosk right next to the front door. It's a spiffy-looking machine, even shinier and cooler-looking than Redbox's red box (sorry, Mitch!). And the line of consumers waiting to rent a movie seemed excited and motivated--they were getting a movie from an old friend, just in a different way.
In our story on the bankruptcy, longtime Blockbuster analyst Michael Pachter, with Wedbush Morgan Securities, expressed his doubts over Blockbuster's long-term prospects. According to the story, Pachter maintains that "offering a large retail selection and service requires space and staffing, and puts Blockbuster at a cost disadvantage to chief competitors such as Redbox and Netflix."
I can see that, but I happen to think that Blockbuster's current management team, led by Jim Keyes, is quite smart and savvy. And, as I pointed out in a previous column, Blockbuster, unlike fellow rental giant Movie Gallery, has done pretty much everything right these last few years, in terms of aggressively forging into new business models and strategies instead of sticking its head in the sand and sticking to the tried-and-true.
Already, an "evaluation" of its U.S. store portfolio is under way. I happen to think that if Blockbuster draws a hard line in closing marginal stores, reduces the footprint of others and steps up its efforts to compete with Redbox and Netflix in their respective kiosk and on-demand arenas, the chain very well could reverse its fortunes. Much depends, however, on marketing and positioning. Sure, maintaining physical stores puts Blockbuster at a "cost disadvantage," but this disadvantage could easily be overcome by the immediately availabability of Warner, Fox and Universal titles.
Blockbuster doesn't need to rebuild its brand. But it sure as heck needs to rebuild brand awareness.
I'm generally quite a fan of Nikki Finke and her "Deadline Hollywood" tip/gossip sheet. She breaks stories and isn't afraid to give us the real dirt on what's going on behind the scenes in Hollywood.
But her latest "scoop" makes me wonder.
In today's "Deadline," one of the top stories is headlined, "Studios Choking Off 3D Blu-ray Demand?" And the lead really sucks you in: "There's an accusation that Hollywood studios are holding back their hottest 3D Blu-ray releases, including Avatar 3D and Toy Story 3, until they see how much demand there is for the new format." The story is based on a Screen Digest report on 3D for the home and concludes with a quote from the research company's analyst, Richard Baxter: "Our research shows that all the studios support 3D BD but many of them are unwilling to release their strongest 3D titles before the installed base of home 3D hardware is large enough to generate serious returns."
Duh! Of course studios want to hold off releasing their marquee titles until there's a bigger installed base. That's what studios traditionally do when there's a new format being rolled out. Remember DVD? Heck, when that format first launched, only a handful of studios were even releasing any product — and Universal Studios' entry into DVD consisted of licensing 100 catalog titles to an outside supplier. Uni simply didn't want to be bothered. It also took studios several years before they came to market with some of their true classics, including the "Star Wars" movies. And in each case, the explanation was the same: "Why waste a marquee release on a small audience? We're going to wait until DVD is more mainstream. There's much bigger upside."
We saw the same thing happen with Blu-ray Disc. So why is Screen Digest coming out with a report with the ominous title, "Studio Caution May Stymie 3D, Blu-Ray’s Potential Killer App" — particularly now, just months (not years) after the first 3D TVs hit the market?
And, perhaps more importantly, why is Nikki Finke, the Mother Theresa of Muckracking, making such a big deal out of it?
Honestly speaking, there's other data in the report I find a lot more compelling, a lot more newsworthy. What about the prediction that within three years, 75% of U.S. households that have 3D-enabled TV sets will be able to show 3D Blu-ray Discs?
That's a tremendous vote of confidence in our business. But I guess it's just not nasty enough to warrant a Deadline headline.
As we move toward yet another critical fourth quarter--which in this business tends to have a "soft opening" in September, with the first trickle of high-profile DVD and Blu-ray Disc releases--is there anyone out there with a firm grasp on where, exactly, this business is heading?
The national economy is certainly one factor, and here the prognosis is cloudier than ever. For months, we've been talking about "recovery," and yet with joblessness still at record highs and the recent news of an abrupt slowdown in the housing market, the latest jabber from Washington is about this being a "jobless recovery," whatever that's supposed to mean. Let's face it: if people don't have jobs, they aren't going to have money. And if they don't have money, they can't spend it. And anytime you have a slowdown in consumer spending, guess what? It's the "R" word again (as in "recession," for those with short attention spans).
So in short, the recovery is petering out--if there ever was a recovery. And there's a whole school of economic thought that believes once the Bush tax cuts expire at the end of the year, the economy will tank even further than it did the last time around. This could mean a robust fourth quarter for DVD and Blu-ray Disc sales, followed by another dramatic slowdown--for the third consecutive year.
Of course, that's the worst-case scenario--and, ultimately, we're not going to know what's going to happen until it happens. And if we're looking for clarification by studying some of our own industry's economic indicators, the outlook is just as murky. DVD and Blu-ray Disc software sales are still down from last year, and what's more frightening is that if you compare the box office strength of movies released in the first half of this year to that of movies released in the first half of 2009, you'll find the 2010 tally is significantly higher--which makes the gap in consumer spending even more disturbing.
Just in the last week, we have learned that 1) shipments of televisions in North American fell 3% in the second quarter; 2) sales of HDTVs with big screen sizes (40 to 65 inches) rose 26% in June; 3) Coinstar, parent of home entertainment wunderkind Redbox, made Fortune magazine's list of 2010's top 100 fastest-growing companies (on the eve of Redbox's upcoming announcement that it has just clocked its one-billionth rental, I'm told); 4) Blockbuster is on the verge of filing for prepackaged bankruptcy; 5) summer movie attendance, despite 3D, fell to a 13-year low; and 6) just as 3D software, on Blu-ray Disc, is gearing up to appear on the market, we're hearing talk that Toshiba is developing a 3D system that doesn't require glasses, creating further confusion--and, potential, consumer hesitancy.
So what to make of all this information? Your guess is as good as mine. I will say that I had an interesting conversation the other day with a manager at the local Best Buy, and he said that while Blu-ray Disc hardware sales had slowed--a fact he attributes to 1) some consumers wanting to wait for 3D players, and 2) other consumers still not knowing what Blu-ray is--Blu-ray software sales had picked up significantly. "It's the price," he said. "You can get Blu-ray Discs for 10 bucks, and that's making Blu-ray owners, who already are really into movies, buy like crazy."
I remember back to those dark days in late 2008, when Detroit's auto makers were complaining to the government that they were in danger of going under. General Motors, in particular, was in a fine fix, stumbling on the threshold of bankruptcy. "No one wants to buy their cars," I observed. A friend immediately responded, "Well, maybe they should stop feeling sorry for themselves and start making cars people do want to buy."
There's a lesson here for our studio friends. For more than two years, we've heard that sales of new releases were slipping, while the bottom has all but dropped out of the market for theatrical catalog. Each quarter we try to present the numbers in a positive light, and each quarter it becomes increasingly difficult. The big challenge every studio executive is grappling with is how to get consumers excited about buying discs again--DVD, Blu-ray Disc, it doesn't really matter which format, at this point. "We need to get people buying again" is the battle cry that's being sounded all over Hollywood, and if anyone can figure out exactly how to do that--well, please don't keep it to yourself.
I don't profess to have the answer, although I have my hunches as to why sales are down: No more room, the thrill of owning movies has faded, no need to buy The Terminator or Rocky a fourth or a fifth time, why buy "Leave It To Beaver" on disc when I can watch it for free on Hulu.
I do think, though, that perhaps we are looking at the problem from the wrong side. Instead of scratching our heads and wondering why consumers aren't buying discs, let's take a long, hard look at what the studios are putting out on disc--and maybe tinker with that end of the business model.
New theatrical releases and catalog movie titles will always be a key part of the mix, as will TV shows. But with all three categories down, aren't there other sources out there we can mine? Again, I make no pretenses about having the answers. I don't know where the search will lead. The point I am trying to make, rather, is that we need to search, long and hard, for something to put on those shiny little discs that will excite the consumer and get them running to Walmart or Best Buy or Amazon.
Maybe the answer lies in the old movie theater serials of the 1930s. Let's followup hit movies with a regular series of direct-to-video sequels (or prequels) that come out within a few weeks of the original movie. The DVD/Blu-ray Disc release of The Hangover, for example, could have been followed with a series of shorter featurettes on, say, post-married life; the funny brother as a child; or the parents' own marriage. I loved the movie and certainly would have bought related programming on disc, had it been available.
Or maybe we need to look at the web. With all the rich content on YouTube, surely a savvy studio executive could come up with something--a compilation of top-viewed clips, an expanded feature based on a popular series of shorts, or even something original but influenced by the latest YouTube trend.
These are just some ideas to get the proverbial ball rolling. Just like General Motors, the solution to Hollywood's ills isn't necessarily to rekindle consumer interest. It's to start making stuff people will want to buy on disc.
I caught quite a bit of flack over an article last week in The Wrap that quoted me as saying Blockbuster would likely follow Movie Gallery down the path to extinction.
"I'm really surprised you went on the record with that," one studio president emailed me.
The passage from The Wrap story--headlined, "How Much Longer Can Blockbuster Hold On?"--that apparently raised quite a few eyebrows in home entertainment circles:
"The question is not if Blockbuster will fold, but when. The Dallas-based movie rental chain has struggled mightily against upstarts Redbox and Netflix, but Wall Street is openly predicting that the home entertainment veteran is headed to the movie palace in the sky. Blockbuster recently made a list of brands that analysts think will vanish by the end of 2011.... 'I see Blockbuster following Movie Gallery into bankruptcy within two or three years,' Thomas K. Arnold, publisher of Home Media Magazine, told The Wrap. 'They've done some smart things and [Blockbuster CEO] Jim Keyes is a smart guy, but sometime you just can't win. Everything they do, somebody else does better.'
I don't really understand why my comments were seen as so controversial. I merely said what many an analyst had said before me, and quite honestly I don't see how anyone could come to a different conclusion.
Blockbuster, even if viewed through rose-colored glasses, is in deep doo-doo.
Granted, my published quote was a bit terse. The author of the story began by asking if the exclusive 28-day window Blockbuster and other brick-and-mortar rental retailers now enjoy from Warner, Fox and Universal would at long last put the beleaguered chain into recovery mode.
Too little, too late, I asserted. Heck, Blockbuster couldn't even afford to properly market its new exclusive. The chain should have been all over TV, radio, magazines and the Internet with ads touting the availability of hot new releases a full month before Netflix and Redbox. The only plausible reason for not putting on the blitz: a lack of money to do so.
And that's a sorry predicament to be in, I told The Wrap. Blockbuster is effectively too weak to grab the life ring, a life ring tossed it by the studios whose only reason to want to save Blockbuster from drowning is to weaken the iron grip Netflix and Redbox appear to have on the renting public.
I really don't want to see Blockbuster go away, I added. Unlike Movie Gallery, which did practically everything wrong, Blockbuster did virtually everything right, I said. Movie Gallery was doomed by its unwillingness to change; Blockbuster, on the other hand, has consistently changed its business model, venturing into satellite TV, mail-order rentals and even kiosks.
You can't accuse Blockbuster of failing to keep up with the Joneses. Blockbuster's fatal flaw, if you will, is its very brand, which in the eyes of the public is synonymous with an antiquated way of bringing movies into the home.
This perception may be wrong, but it is a perception, nonetheless--and we all know that in this business, perception is reality.
The concept of UltraViolet, the newly branded movie storage and retrieval system championed by most everyone in entertainment and technology except for Disney and Apple, is indeed an enticing one (see our story here).
Imagine being able to buy movies, either a physical disc or a download, and then sending a copy up into the cloud — a giant mega-server — that will store it forever. You can access your purchased content anytime you like, for play on whatever connected device you choose — be it the home-theater setup in your living room, the tablet on your plane or your smartphone while waiting in line at the bank.
There are no compatibility problems and no clutter. Heck, you can even toss your discs once you’ve purchased them because UltraViolet will always be there for you.
It certainly sounds great in concept, and if it does, in fact, come to fruition, I am sure it will be wildly popular.
And yet, I have these nagging doubts that UltraViolet may not be for everyone — me included. You see, once I buy something, I don’t want to send it up into some cloud. If I own it, I want to see it, touch it, feel it. I’m the type of guy who still buys CDs, and when I do buy songs through iTunes, I always burn a CD, as a backup.
Once I buy something, I also want to be able to do with it what I please. I won’t buy a home subject to HOA restrictions for the same reason — if I pay good money for a house, please don’t tell me what color to paint it, or how to landscape my front yard.
About six months ago, I was burning a CD from my iTunes library. Apple wouldn’t let me burn one of the songs. I kept getting a message saying I had reached my limit and the song couldn’t be burned anymore.
So much for ownership. I haven’t bought anything from iTunes since.
My fear is that UltraViolet will impose similar restrictions — maybe not at launch, but at some point down the line — and then the movie I bought won’t really be mine.
As observer Jef Pearlman wrote on the Public Knowledge website, “The media you buy is yours to do what you like with. … But in the world of DRM, the copyright owner gets to decide when, if, and for how long you get to do those things ….”
Michael Robertson, of MP3 fame, shares those sentiments. He was quoted as saying, in Pearlman’s blog, “Do you own your digital property? If the media companies can say, ‘I know I sold you that, but you can’t play it on a portable device or put it on the Internet,’ you’ve turned everything into a rental or a lease.”
Food for thought.
"Blue ray" redirects here. For the fish, see Neoraja caerulea.
And thus begins the Wikipedia entry on Blu-ray Disc. America's most popular source of information about anything has a nice, long entry on Blu-ray Disc, but that entry begins with a caveat.
The fact that "Blue ray" takes visitors to the Blu-ray Disc page makes me think that a lot of people are curious about the format but don't know how to spell it.
Or they're simply looking for the fish.
In any event, there's a lingering awareness problem with Blu-ray Disc, and short of yanking all DVDs from the market and only issuing movies on Blu-ray I don't quite know what to do about it. Two years ago, I was impressed that so many people from all walks of life — even my painter — had bought Blu-ray Disc machines. Today, I'm wondering why so many people from all walks of life — even the contractor who just remodeled our offices — still have no clue about what Blu-ray is.
Said contractor marveled at our office collection of discs and wondered if he could check one out. No, he didn't have a Blu-ray Disc player. Did that matter, he asked?
I also wonder why we can't seem to get past 40%. I'm referring to the percentage of total disc sales that come from Blu-ray. Again, in December 2008 I was jumping for joy when The Dark Knight generated about 20% of its first-week sales from Blu-ray Disc. Within a year, 40% had become the norm for blockbuster action titles. It still is, today. The bar hasn't moved.
Maybe it's the economy, maybe it's no more room in the home for any more discs, maybe it's technological burnout. But we seem to have hit a plateau for Blu-ray Disc, which over the last two years has steadily crept past the early adopters and into the mainstream — only to stop just past the threshold.
We, as an industry, need to do something to get Blu-ray Disc back on track. BD Live certainly isn't the "killer app" some in our industry had hoped it would be. 3D for the home may take us there, but it's going to take awhile. And in the meantime, I just can't get past the fact that the Blu-ray Disc format is now more than four years old, and consumers still aren't nearly as gaga over it as they were over DVD in, say, that wonderfully explosive fourth quarter of 2001.
I can tell you one thing, it isn't the product. Our family is 100% Blu-ray and even the kids won't watch standard DVD anymore. I truly enjoy the clear, crisp picture and superb sound. I like the fact that the discs are a lot hardier than DVDs, and I love the packaging — small, neat, cool-looking.
I wish I could somehow bottle up the feeling I get when I watch a Blu-ray Disc and let the studios sprinkle it on everyone else. We'd be a country of diehard Blu-ray fans in a heartbeat.
So just how do we spread the love? That's Hollywood's No. 1 riddle.
No, as far as I know, Hell has not frozen over. And pigs aren’t flying — at least, not the last time I looked out my window, which overlooks the flight path into John Wayne Airport.
But lo and behold, we’ve just received a glowingly positive forecast for the film business, from no less reputable a source than PricewaterhouseCoopers, the respected accounting firm. And packaged media, everyone’s favorite whipping boy, no longer has to duck its head in shame.
The PricewaterhouseCoopers report predicts that over the next five years, worldwide consumer spending on movies — meaning theater tickets, DVDs, Blu-ray Discs, VOD and EST — will grow to a record $107.5 billion in 2014, from $85.1 billion in 2009. That’s an annual growth rate of nearly 5 %.
The growing popularity of 3D films will spur box office revenue, while Blu-ray Disc sales, shorter theatrical-to-video windows (a la Alice in Wonderland) and low-price rentals of the sort offered by the proliferating Redbox kiosks will help “reinvigorate the physical home-video market,” according to the report.
Say again? Disc sales are expected to start rebounding next year and then will slowly rise each year to $15.6 billion in 2014, according to the report. That’s not a big gain — about 1.6% from 2009— but hey, we’ll take it. After the declines we’ve been seeing in our business, even staying flat would be a good thing — particularly in light of the fast growth expected to be seen in the digital arena, with PricewaterhouseCoopers predicting digital downloads of movies will triple from $364 million in 2009 to about $1.1 billion in 2014.
That’s not the only bit of good news we’ve been hearing of late. The NPD Group reports sales of 3D televisions and compatible Blu-ray Disc players surpassed $55 million in the first 90 days since their February introduction. And as of March, consumer electronics sales in general have once again been trending in an upward direction, Shawn DuBravac, chief economist and director of research for the Consumer Electronics Association, told attendees at the opening presentation of the two-day CEA Line Shows event June 22 in New York City.
Of course, our home entertainment business is by no means out of the danger zone. The latest concern I’ve been hearing from studio executives is that catalog sales are down a dismal 20%, TV DVD is a shadow of its former self, and new releases continue to be hit or miss — to the point where Tuesday is easily the most stressful day of the week at the studios.
But at least there’s hope that things will get better. The party may be winding down, but it’s not over.
I spent much of today in Century City at the ESCA Edge conference and had the honor of introducing an old friend to deliver the keynote: Mitch Lowe, currently president of Redbox and, before that, a key player in the launch of Netflix and the owner of the Video Droid chain of Bay Area (California) video rental stores.
My favorite line came when Lowe discussed the fact that his company now has deals in place with all six majors and Lionsgate, and that he's back on amicable terms with even the heads of the studios with which Redbox was embroiled in litigation. "I can even hug Craig Kornblau again," he said, referring to the Universal Studios Home Entertainment president who was the first to challenge Netflix's dollar rentals of new releases. "Just not too close," he added.
The most interesting part of Lowe's presentation, however, was the presentation of data from NPD that suggests kiosk rentals may actually help rather than hinder sales. Fears that dollar rentals at Redbox were cannibalizing DVD sales prompted the whole Redbox-vs.-Hollywood brouhaha in the first place, with first Universal Studios and then other studios refusing to sell their product to the kiosk company on street date.
As our senior editor, Chris Tribbey, notes in his story (click here to read it), Lowe said NPD research showed that 41% of Redbox customers typically rent movies before they choose to buy them, and 9% of Redbox rentals later result in a sale. Lowe also said Redbox customers tend to buy more discs than the average consumer and often use Redbox as a sampling mechanism in deciding what to buy.
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On another note, 20th Century Fox Home Entertainment is doing something I'd like to see a lot more of: offering a rebate if consumers buy a new and improved version of a previously issued title. The studio on Sept. 14 is releasing the complete first season of the hit TV show "Glee," and anyone who bought the earlier Glee: Vol. One: Road to Sectionals gets a $10 rebate. That's nearly a third of what the new DVD/Blu-ray Disc release is going to sell for in stores (I know, I know, the suggested retail price, or SRP, is $69, but everyone knows SRP is merely a "value mark" that is generally a lot higher than the actual sales price.) 20th Century Fox is giving consumers a great deal here, and I hope the rebate offer is fantastically successful so more studios will follow suit.
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I know I called this out a few weeks ago, but now that I actually have the product in my hand I am WOWED. I'm talking about MGM's new Elvis Presley's 75th Birthday Collection, a set of seven films (including Clambake, Kid Galahad and Love Me Tender) presented in a compact boxed set with absolutely stunning box art. This is one of those rare releases of which I want a second copy to stash away, unopened, in my closet — next to such previously issued treasures as the complete series set of "Outer Limits" and Warner's The Wizard of Oz and Gone with the Wind 70th anniversary releases.