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.
Our industry is learning a lot about consumer habits this fourth quarter. With less than three weeks before Christmas, a few observations can be made that may impact how studios and retailers do business in the coming months.
For starters, the old debate about whether consumers are price sensitive when it comes to purchasing Blu-ray Discs and DVDs appears to have been settled, once and for all. The answer, judging from shopping carts filled to the brim with deep-discounted discs on Black Friday, is a resounding yes. Price it cheap enough, and consumers will buy.
Concerns about the “race to the bottom” that dominated studio boardrooms just a few years ago need to be put aside as we realize that in the new economy, it’s all about bargains. Keep in mind that consumers can rent discs for a buck at Redbox, stream movies for not much more over the Internet and access all sorts of free, or almost free, entertainment on sites ranging from YouTube to Hulu. They’re going to think twice about spending more than $10 to buy a movie, particularly one that’s been out for a while.
My conclusion: Price discs cheap enough and you’ll more wind up with more than enough additional sales to compensate. Would you rather sell 1 million discs at $8 each or 200,000 at $15? That’s what I thought.
Secondly, like sharks, consumers tend to enjoy feeding frenzies. The more the merrier is what we’ve seen this fourth quarter, with the most successful titles coming out a week or two before Thanksgiving and then being widely available, at a lower price, in time for Black Friday. Dating is still important, but go out too early or too late and you may miss your carriage.
December, in particular, is one of those months that used to be quite good for our business. But now, consumers bought so many discs over the extended Black Friday sales period that they need a few weeks to digest — although we don’t yet know whether we’ll see a rebound as Christmas draws closer, fueled by impulse buyers and last-minute gift shoppers.
The third lesson we’ve learned is one that some marketers, particularly the folks at Warner, have known for some time. There’s a vibrant and, perhaps, growing market for elaborate Blu-ray Disc and DVD gift sets, and this market isn’t price sensitive at all. Indeed, package the right movie or movies with a carefully selected batch of extras — both trinkets and content. Aim your marketing at the fan base, reaching out to them wherever they may be. Produce a limited quantity and make sure the fans know this. And, bingo, you’re going to score.
Packaged media is far from dead. We just have to keep tabs on what consumers want and give it them.
I’m writing this a few days before Black Friday, so I have no idea whether a threatened strike at Walmart stores will materialize or not.
But I will say that the negativity I see expressed toward America’s No. 1 retail chain — both in articles in the press and from various “friends” on my own Facebook wall — astounds and disgusts me.
I tend to shy away from political discourse in my columns, focusing on industry issues, trends and developments. But in this case politics and the home entertainment business intersect — a strike could hurt Walmart’s Black Friday business, and that could have a detrimental effect on DVD and Blu-ray Disc sales.
So here goes: I’m already not happy with the entitlement wave that’s sweeping our country — the belief that our government, our employer, owes us something.
I believe in hard work and personal responsibility. I’m happy to pay my fair share in taxes, and I’m more than willing to help people who through no fault of their own are in in trouble — people who have lost their jobs, people who can’t find jobs, families that are struggling to put food on the table.
But I have absolutely no sympathy for the Walmart employees who are complaining that they don’t get paid enough, or that they don’t get benefits, or that Walmart stores are opening too early on Thanksgiving Day, or various other aspects of the company’s labor practices.
If you don’t like working for Walmart, no one’s forcing you to work for Walmart. And I believe most workers understand this: They are grateful to have a job. If they want a better job, no one’s stopping them from advancing their lot in life, either at Walmart or somewhere else. They merely need to show some initiative.
But I don’t think worker discontent really is the factor here. The Black Friday protests — and earlier rallies — are instigated by the United Food and Commercial Workers Union, which has long had a bug up its you-know-what that Walmart is a non-union shop.
The American people owe unions a tremendous debt of gratitude. Unions revolutionized the workplace and are behind all sorts of labor laws that protect our workers. But throughout the years, unions in large part have become bloated bureaucracies that have lost sight of their original intent — to protect the worker — and are now out to increase their own power and might through forced payroll deductions and other onerous tactics, including riling up workers at non-union companies like Walmart.
I’m not saying Walmart employees don’t have any legitimate gripes. All of us who work for someone else do, from time to time. But there are ways to address their concerns, and pitching a fit by refusing to go to work and, instead, marching outside stores with signs and angry epithets strikes me as, well, childish.
As long as Walmart is complying with the law, there’s no cause for this hurtful, hateful disruption. Workers of the world, grow up.
For the fifth straight year, we are honoring the women in home entertainment — a smart, savvy and strategic group of executives who helped build and develop our business and are now working hard to sustain it.
A while back, one male executive who shall remain nameless asked me, “Why do you keep doing this? Women are part of the workforce — I don’t see any need to single them out.”
I gave him an earful. That glass ceiling? It still exists. Sorry, everyone, but sexism is alive and well right here in these United States, but too many people turn a blind eye toward it and pretend everything’s equal.
That’s the primary reason we celebrate our women each year — as do trade books in other industries, as well as Variety and The Hollywood Reporter, both of which focus on the broader entertainment spectrum.
We honor women because they deserve to be honored. They deserve to be called out and recognized for their success, and presented as role models for other women — and as examples to society that based on talent and ability, equality should be a given.
Sadly, in too many other industries, it’s not.
The day after the election, someone on my Facebook page posted, “Hillary and Condi in ’16.” My response: “I could go for that. In fact, if they could somehow put aside party differences and run together, I’d totally support it. It’s hard to believe we’ve never had a woman at the helm of our government. I hate to make generalities and sound sexist, but in my own experience I’ve always preferred to work with women because, on the whole, I have found them to be smarter, more reasonable and rational, and harder workers than men.”
Within five minutes, I had gotten nearly a dozen “likes” — a great response, by Facebook measures.
So here’s to the women of home entertainment — and to the women of Home Media Magazine: editor in chief Stephanie Prange, executive editor Angelique Flores, account executive Julie Savant and office manager/assistant editor Ashley Ratcliff.
Succession planning can be difficult, but in the Entertainment Merchants Association’s case, selecting a successor for retiring president and CEO Crossan “Bo” Andersen should be a snap.
Mark Fisher, the association’s EVP and Andersen’s right-hand man, will serve as interim president until an executive search is completed and a permanent successor is in place, board chairman Bob Geistman told Home Media Magazine.
I sincerely hope the board picks Fisher for the job.
It’s not that Fisher deserves the job, after all his years of service to the EMA.
It’s that the association’s membership deserves Mark Fisher.
Andersen has done an outstanding job keeping the EMA alive all these years. He took over as president of what was then the Video Software Dealers Association (VSDA) in 1999 and over the years has done his best to keep the trade group relevant. Under his watch the VSDA broadened representation from its independent video store base to include major retail players like Target, Costco and Best Buy. Andersen also in 2006 orchestrated the merger of the VSDA with the Interactive Entertainment Merchants Association, bringing video game dealers into the fold.
As consolidation continued to grip our industry, Andersen wisely concentrated more and more on legislative issues common to all classes of retailer, including the fight against video piracy, protecting consumer privacy and battling censorship.
Fisher is poised to take the EMA to the proverbial “next level.” He joined the association in 1999 after many years in retailing, running a division of video stores for Stop & Shop and then serving as senior vice president of operations at publicly held West Coast Entertainment. During his retail years, Fisher earned a reputation for being a demanding but fair manager, being driven to grow both the top line and the bottom line, and being creative both in merchandising and marketing.
In recent years, while Andersen held down the fort, Fisher ventured into new territory. He’s led EMA’s growth in the digital distribution space, recognizing that collaboration among members toward standards and common specifications will help to both grow consumer digital spending and cut distribution costs.
That shows Fisher’s foresight and ability to flex with the industry, which coupled with his many close relationships among studios as well as retailers, makes him the ideal candidate to succeed Andersen on a permanent basis.
His experience, reputation, relationships and vision are exactly what the EMA needs in today’s era of continued consolidation, when financial stability is critical but so is our ability as an industry to develop and capitalize on creative growth opportunities.
The digital distribution ecosystem reminds me a lot of the home video industry in its early days.
There’s a growing chorus of distribution outlets clamoring for content, and the studios are scrambling to make some sense of it all.
The studios are also in the same boat they were in back in 1978: They want consumers to buy their content, but the distribution outlets are mostly interested in streaming, the digital descendent of physical videocassette rental.
So far, at least, no one’s figured out how to make consumers excited about buying the way they were when DVD first arrived on the scene back in 1997.
A digital download just isn’t as appealing as a shiny disc in a pretty package, particularly when you take into account the importance of the gift market and the impulse buyer.
So the perplexing question everyone in Hollywood is asking these days is, how do we turn streamers into downloaders?
Let me throw in my two cents. For starters, observers — and I’ve been guilty of this myself — are fond of saying that with DVD, we turned a nation of movie renters into a nation of movie collectors. That’s not quite true. Consumers began buying DVDs in large numbers because of the novelty — movies had never hit home video at a low purchase price, right out of the gate — and because of the convenience. There were no late fees, no return trips to the video store.
There’s no instilled habit in the American consumer to collect movies. It’s a habit born of convenience, pure and simple. So what we as an industry have to do is come up with an equally compelling value proposition for the consumer, and in this regard all sorts of ideas have been bandied about: added value, instant anywhere/anytime access, permanent secure storage (the cloud), interactivity, and so on.
And yet we still haven’t gotten there. If I had the magic answer — a solution as simple, as easy to understand, as “convenience” — I’d be hailed as the hero of Hollywood. No one else has the answer, either, which is why EST, for “electronic sellthrough,” remains essentially a nonstarter.
But what if there isn’t one magic answer? What if it’s all those things we’re already talked about, already implemented — just more? Throw in an app so the download you bought, and which now lives in the cloud, can be accessed instantly on your smartphone, at the exact point you left off last night before you nodded off in front of the TV? Throw in constantly updated special features, like an interactive cast chat on the film’s anniversary or a Facebook game centered around watching the movie with a bunch of your friends — live, and on Facebook?
Think of it as a seven-layer dip. It’s a tasty concoction you’ll find at most every football party, but it took seven layers – not three or four, not five or six — to get there.
Is our industry moving too fast? Are we overwhelming the public with different ways to consume our product, leading to confusion, cannibalization and maybe even inertia?
Taking an honest look at things, I’d have to say the answer is yes — and no.
Yes, because we’re pushing so much onto consumers that each delivery method not only suffers from a lack of attention and nurturing on our end, but it never really has time to mature and realize its potential.
Back at the start of what I call the “home entertainment-on-demand” era, we really only had one delivery method: the humble videocassette, which broadcast and cable television aside pretty much reigned supreme from 1978 to 1997.
Sure, there was laserdisc, but that was a sideshow. The main attraction was the trusty old VHS, and for nearly two decades the only way consumers could bring movies into the home and watch them at their convenience was on cassette.
Then came DVD, which in a brilliant stroke of marketing – immediate availability not just as a rental, but also as a low-priced purchase item – expanded our industry at an annual growth rate in the double digits.
But whereas VHS had a 19-year reign, DVD’s heir apparent, Blu-ray Disc, appeared in stores just nine years later. And if people say Blu-ray has never reached the dizzying heights of success its predecessor, DVD, has, I’d say you’re perfectly right — but then again, it never had a chance.
For one thing, Blu-ray Disc players were backwards compatible, which effectively negated the whole concept of consumers having to rebuy their movie libraries. Those libraries were built on DVD and its low-price purchase model; Blu-ray Disc was merely a better disc, not a completely new format.
But just as significant in Blu-ray Disc’s slower-than-expected climb is the fact that all sorts of other delivery systems began popping up in the electronic world, especially streaming and video-on-demand. Factor in Hulu and iTunes and then, for good measure, throw in all the non-traditional, non-studio content that can be accessed through YouTube and elsewhere on the web.
I’d say Blu-ray is doing pretty damn well, considering what it’s up against.
But going back to my original question — while we may have overwhelmed consumers with choices, we really couldn’t have done anything else. Digital delivery didn’t just appear overnight, with some dark lord mandating consumers to begin streaming and downloading. No, this whole electronic model was driven by these very same consumers, who on a never-ending quest for all things cheaper, easier and more convenient ultimately would have figured out some way to get movies over the Internet for free, like they did back in the late 1990s with music.
Thank God the studios and their tech and CE compadres had the foresight to step in and respond to consumers before consumers went vigilante on us and took matters into their own hands.
So, yes, we may be moving a little too fast. But the consumer is right behind us, breathing down our necks. And really, if you think about it — what else could we, should we, do?
I can almost see our industry executives cringing at the news that this summer’s box office tally was down a “whopping” 3% from last year. The media, of course, made a big deal of this slight drop, with the Wall Street Journal running an article headlined “Summer Box Office Falters” and noting that despite a strong opening with The Avengers, “nearly every other summer film failed to live up to expectations.”
In our little corner of the business, everyone’s already nervous in the weeks leading up to the fourth quarter, where the bigger studios typically generate up to 40%, or more, of their total annual revenue. It’s never easy — we always seem to set our expectations too high; we always seem to run up against another title even though we waited until the last minute to set the date and everyone promised to keep it hush-hush; we didn’t get anywhere near the line-of-sight or endcap visibility we were promised.
This fourth quarter, once again, we will live or die by the hits. And if the theatrical hits underperformed this summer — albeit by a mere 3%, overall — well, then, it only stands to reason that we could be looking at a down home video season, as well. Not good.
It wasn’t always this way. Back in the early days of video rental, our business thrived on the principle of “consumer dissatisfaction” — which essentially held that consumers are so keen on watching movies at home that even if the movie they came in for is out of stock, they’ll just as happily pick up something else.
That went out the door even before DVD tipped the business toward sellthrough — remember all those early copy-depth and revenue-sharing programs designed to help rental dealers bring in more and more copies of hits on the cheap — and it’s never come back, at least not in the world of packaged media.
But in the other entertainment forms that are competing for viewer eyeballs, there’s less dependence on the hits. Take the wacky world of YouTube, for instance — no telling what’s going to be the next viral video to crack 10 million views. And on Facebook, kids as well as adults spend hours upon hours reading status updates and clicking on links, curious not because they’ve been told to go here for "The Next Big Thing" but, well, because they are curious.
If only there was a way to instill some of that curiosity back into our business. How do we get consumers to look beyond the hits, to sample some of the great lesser-known product out there? I just saw a great little zombie movie from Anchor Bay, The Dead, that’s as inventive as it is gory. But unless it’s on an endcap at Target the week before Halloween, it probably won’t get anywhere near the audience it deserves.
Maybe the studios should get together and create a YouTube channel in which a trusted, third-party source — Home Media is volunteering — each week talks about the week’s new releases and shows brief clips of each new film. Maybe Facebook pages should be created for virtually every movie that comes out on DVD and Blu-ray Disc, not just the big theatrical hits, with unique content and contests and other ways to fan excitement.
Maybe we need to make shopping for discs seem hip again — let’s get more video store or video department scenes in movies. Think product placement; if it works for Pepsi or Diet Coke it’s surely going to work for our business.
So far this year, home video sales have rebounded and we’re likely to finish the year flat with, or even up from, 2011. Let’s get inventive, creative and aggressive and put the spark back into our business.
Our whole business — not just the hits.
With the fourth quarter fast approaching, it will be interesting to see how the two facets of our sellthrough business — packaged media and electronic sellthrough — play into each other.
The fourth quarter, of course, is prime gift-giving season, a time period in which studios traditionally generate about 40% of their annual home entertainment revenue. And a prime driver behind pre-holiday DVD and Blu-ray Disc sales is the impulse market. That’s why you see such a hullaballoo around dating. Some studios want to be out early, hoping repeat impressions will get customers to pick up their title or titles. Others, fearful of being pulled from prime shelf-space spots after three or four weeks, choose to wait until December, hoping to snag choice positioning just as the harried last-minute gift shopper enters the store and frantically begins filling his shopping cart.
Digital downloads have never really been a factor. There’s less perceived “gift value,” if you will, of a $25 or even $50 iTunes gift card slipped into a stocking in comparison to a neatly wrapped DVD or Blu-ray Disc of The Amazing Spider-Man or The Dark Knight Rises.
But with both VOD and video streaming finally gaining traction and electronic sellthrough, buoyed by UltraViolet, promising to become a real business rather than an afterthought, studios are looking more and more toward digital distribution for future growth of the overall home entertainment business.
And in their enthusiastic push of fancy new DVD and Blu-ray Disc configurations of the big summer tentpoles, as well as elaborate gift sets, catalog collections, TV series and other programming aimed at holiday gift buyers, they’re going to have to be careful not to give digital the proverbial short shrift.
My hunch is that studio marketers are going to look for common ground, a way to continue to promote digital without taking focus away from the hot packaged-media commodities that will generate the lion’s share of their fourth-quarter revenue (and profit).
And finding that balance won’t be easy, particularly with so many bundled gift sets either already out there or waiting in the wings. After all, it makes more sense for Warner Bros., to cite just one example, to promote Batman Begins and The Dark Knight on disc when The Dark Knight Rises arrives in stores. Similarly, Sony Pictures would be smart to promote the previous “Spider-Man” trilogy on disc when The Amazing Spider-Man makes its DVD and Blu-ray Disc debut this fall instead of steering customers to the digital versions.
It may take a whole new way of looking at things. Just as in the old days, just before and right after DVD, when we pegged certain movies as a “rental title” or a “sellthrough title,” we may have to categorize movies as bringing optimal value back to the studio in either physical or digital form.
That won’t be easy — but in this business, it seems, nothing ever is.
I just got back from Germany, and aside from the wonderful Weissbier I wish I could have brought back with me some of the German peoples’ enthusiasm for packaged media.
My cousins live in an 18th century farmhouse in the small resort town of Ubersee, on the Chiemsee, about 50 miles southeast of Munich and 30 miles northwest of Salzburg, Austria.
We stayed in an apartment in the attic of the main house, and to make us feel comfortable Peter – the grandson of my cousin – brought the boys a PlayStation 3 and an armload of video games.
Turning to me, he said, “I’ve got a big collection of Blu-ray Discs – so let me know if you want to see a movie.”
We talked a little about what I did for a living – I haven’t seen him since my last visit to Ubersee back in 1991, when I was a newlywed and he was 3 – and he said he ditched his DVD collection a long time ago in favor of Blu-ray, which he absolutely loves.
“And I’m not the only one,” he said. “Blu-ray is big in Deutschland. Just go into any store and you’ll see.”
I did. And in every general merchandise store I visited the Blu-ray Discs were laid out in prominent locations, often face up. I hardly saw any DVDs. And there were always people checking out the latest Blu-ray Discs, picking them up, turning them over, reading the backsides, and then marching off to the cash register.
When I got home, I visited the Blu-ray Disc Group Deutschland’s website, and chuckled to myself as I read the introduction, which quotes French poet Victor Hugo – “Nothing else in the world...is as powerful as an idea whose time has come.”
These words, the website said, apply to technology as much as anything, and they have certainly rung true for Blu-ray Disc.
They certainly have. As Home Media Magazine noted in a December 2011 article, European BD sales ballooned 42% to 63 million, driven chiefly by “strong adoption in Germany.”
Futuresource analyst Jim Bottoms told Home Media, “Sales of discs in Germany are outstripping sales in the U.K., which is almost unheard of.” Among the reasons he cited were strong retailer support and little HD programming on German TV.
I’m still too jet-lagged to discern whether there’s a lesson somewhere in all of this that we could apply in the United States, or perform an indepth analysis of the German home entertainment market in the hopes of possibly adding to, or expanding on, Bottoms’ conclusions.
So for now, at least, take this as a cheery little tale – a positive note at a time when studio executives here in the United States are becoming increasingly nervous as another fourth quarter draws near.
Michelle Horak and her father Mark Horak, of Warner Bros.
Last week’s Los Angeles Home Entertainment Summit was a grand success. Suppliers met with key disc and game retailers for intimate two-hour discussions. They played a little golf and were treated to a first-class outdoor shindig on the Warner lot.
From what I hear, not only did a lot of business get discussed, but $400,000 was raised for the Cystic Fibrosis Foundation, a charity near and dear to the heart of Mark Horak, president of Warner Home Entertainment, the Americas. Two of his three daughters have CF.
The timing was great: right after Comic-Con, and just as everyone’s putting their fourth-quarter strategies to bed.
And the turnout was amazing: Not only were all the big studios and game companies represented, but we also saw a lot of independent suppliers and, most importantly, gobs of retailers and distributors. Walmart alone sent more than a dozen top execs, including from the United Kingdom, Canadian, Vudu and Walmart.com teams. Other heavyweights came from Target, Best Buy, Amazon and others.
Frankly, I couldn’t help but think back to those other huge July networking events our industry used to have: you know, the ones in Las Vegas, organized by the Entertainment Merchants Association (EMA, formerly Video Software Dealers Association, or VSDA). I ran into at least a dozen industry leaders I haven’t seen face-to-face since the last EMA show in Las Vegas back in July 2008.
I also was stopped by several people who said, “Hey, you’re the guy in the magazine.” Talk about déjà vu — again, that’s something I haven’t heard since the glory days of what we still fondly refer to as the “VSDA show.”
I believe it is incumbent on our industry to make this event an annual one. We are desperately in need of networking events. In the old days we had the VSDA show, the East Coast Video Show, the Home Entertainment Summit and all sorts of regional shows. Now, the only annual event where we see each other are the Entertainment AIDS Alliance’s Visionary Awards dinner and Variety’s Hall of Fame — and even those two events are notoriously shy on retailers, who remain the true drivers of our industry.
And the fact that this event has such a meaningful and important charity attached to it only makes it more worthy of our support.
Let’s work together to make the Los Angeles Entertainment Summit not a one-shot deal, but an annual event that gets bigger and better each year. Everyone needs to get involved. Our industry needs it.