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.
When it comes to home entertainment sales, victories are not what they once were, but that shouldn’t diminish a win. That’s why it is so important that we temper our perceptions with perspective.
The sales business, both digital and physical, is competing with an almost unbeatable proposition, from a consumer standpoint: gobs of movies, TV shows and original content for about $10 a month. First-run movies may be conspicuously absent from Netflix’s all-you-can-eat entertainment buffet, but consumers don’t seem to mind, particularly now that Netflix has ramped up its game with compelling original content that is so addicting that “binge watching,” with apologies to baseball, appears to be America’s new greatest national pastime.
I’m saying this as an introduction of sorts to our annual report on Ultra HD Blu-ray Disc, which all the studios are now supporting. Walt Disney Studios made the circle complete with its July announcement that Guardians of the Galaxy Vol. 2 would be its first release in the better-than-high-def format. But for those who are wondering why sales of Ultra HD Blu-ray Discs, 18 months after the format officially launched, still represent a tiny fraction of overall disc sales — the first-week record for a theatrical new release is 14%, set by Fox’s Alien: Covenant in August — let’s put things in perspective.
We’re in a different world than we were 20 years ago, when DVD first hit the market. Even then, DVD didn’t really gather traction until two years after its launch — and we need to keep in mind that DVD was the first format to make movie and TV show ownership both feasible and affordable. The novelty of being able to buy a movie for less than $20 just three months after it bowed on the big screen was a revolutionary thing; by the time Blu-ray Disc came around in 2006 the novelty of movie ownership, and collecting, had worn off, and even then-Disney home entertainment chief Bob Chapek opined that Blu-ray was evolutionary rather than revolutionary.
Since then, we’ve seen the rise of streaming and the emergence of digital ownership. In their first few months, Ultra HD Blu-ray Disc sales may have exceeded Blu-ray Disc sales, in the comparable period, but that simply isn’t sustainable. There are too many other entertainment options, most of them tied to the Internet, for disc sales to ever approach the magnitude of what they were in DVD’s heyday. The decline in overall disc sales over the past decade is somewhat misleading — in most quarters, Blu-ray Disc sales have held steady or even gained — but the total amount of money consumers are allocating to buying physical home entertainment continues to decline, and that’s a trend that will not only continue, but also accelerate.
Similarly, digital sales are making impressive gains, percentage-wise, but it is unlikely they will ever surpass, or even come close, to the money consumers spend on streaming, chiefly through Netflix. Subscription streaming plays into those two hallowed temples of consumer wants: simple and cheap.
But that’s OK. As an industry, we need to temper our expectations and celebrate our victories, no matter how small. When digital sales go up 10% in a quarter, we should be happy — and not moan and groan because the actual dollars are a fraction of what consumers spend that quarter on Netflix. Similarly, when the DEG releases its quarterly sales estimates, we don’t have to sulk because disc sales went down another 12%. Break those numbers apart and you’ll most likely see Blu-ray Disc sales numbers holding steady and Ultra HD Blu-ray Disc numbers soaring, compared to prior quarters.
For those of us who grew up with VHS rentals and then DVD sales, there’s no question that we’re living in a strange world, a changed world. We just have to adapt, both with our business models and with our perceptions.
I couldn’t help but chuckle at the petition drive urging Walt Disney Co. not to pull its content from Netflix.
Petitioners, comprised primarily of cord-cutters who no doubt expected to reap huge savings from canceling their cable service, call the pullout “a huge blow to Netflix users and Disney lovers who don’t want to have to pay double to access the content we love,” the Care2 petition says. “Historically, we could buy a movie or TV show from any number of sources. But now, we’re being forced to buy subscriptions to multiple sources just to get the content we love.”
No sympathy here for any pity party. My dear consumers, you can still buy movies or TV shows “from any number of sources.” Buy a Blu-ray Disc or DVD at Walmart or Best Buy or Amazon; buy a digital copy from iTunes, Vudu, Xfinity or any of a growing number of other online sellers.
In fact, the selection of movies and TV shows you can buy is far greater than the selection you can access through Netflix.
And for a good reason: When you watch Netflix, you’re not buying a movie or TV show. You’re not even paying for streaming rights to a specific program. You’re spending about the same amount of money you’d normally spend on one new movie, either on disc or as a download, for an entire month of viewing — and that’s why you have no right to be so picky.
In fact, most studios don’t sell any of their movies to Netflix — at least, nothing newer than nine or 10 years old. Even Netflix’s big announcement in May 2016 that it would be the exclusive online home to Disney, Marvel, Pixar and Lucasfilm movies was a little grandiose: Only a handful of movies were made available every month, and only after they had exhausted their sales potential, with a similar window to that on HBO, Starz and other pay-TV networks.
The popularity of Netflix has never been based on movies. The growth driver has been binge-viewing of TV shows, first popular network shows and now original programming. The movie lineup at Netflix has always been, and likely will continue to be, anemic, with the good new stuff reserved for the purchase market.
Indeed, Gizmodo last October reported that Netflix’s content library is increasingly losing its best movies: “The Streaming Observer did some analysis, and found that only 31 movies from the IMDb Top 250 are currently available on Netflix. … Even worse than the paltry selection of movies, it’s noteworthy that this figure is actually down 12% from 2014, when a Reddit user documented the 49 available films from the IMDb Top 250 then available on Netflix. The IMDb Top 250 has changed over the last two years as well, but the decrease in titles is still significant.”
Will the loss of Disney movies hurt Netflix? I doubt it — not as long as the service keeps cranking out original content (last year, Netflix said its goal was 50% original content within the next few years).
But with Disney planning to launch its own streaming service in concert with the 2019 withdrawal from Netflix, it certainly needs what we in the business call a unique selling proposition — and creating its own streaming silo for Disney movies and TV shows certainly sounds like smart business sense to me.
The petitioners, while clearly ignorant of the economics of the movie/TV business, were right on one count: they’re going to have to buy subscriptions “to multiple sources just to get the content we love.”
And you know what? They’re going to wind up buying those extra subscriptions, regardless of how much they are protesting now.
The sixth annual Los Angeles Entertainment Summit underscored the importance of our home entertainment industry leaders getting together in person every once in a while for face-to-face meetings.
And what made LAES so special was its inclusiveness. Not since the demise of the annual Entertainment Merchants Association’s annual convention and trade show in Las Vegas nearly a decade ago has there been a single event that draws participants from the entire food chain, if you will — studios, distributors, technologists, marketers, retailers and, yes, members of the press.
Every one of those groups plays a key role in moving this business forward, and while we can do all right flying solo in our silos and occasionally attending carefully curated conferences, big industry-wide events certainly still have a compelling draw.
And my hat goes off to Mark Fisher, head of the Entertainment Merchants Association, and Mark Horak, the former Warner Home Video and Redbox executive who is now focused on the Cystic Fibrosis Foundation (two of his three daughters have the disease). Through their hard work, perseverance and tenacity, they have grown the event into a respectable and viable successor to the fabled old VSDA convention, with the good sense of always having it take place in Los Angeles, the epicenter of our business.
The exchange of ideas spilled out far beyond the curated meetings between home entertainment and video game content producers and retailers that most consider the heart of the two-day event.
Intense conversations permeated the opening night cocktail party at the Loews Hollywood Hotel and the following night’s “Classic Hollywood Soirée” at the NeueHouse Hollywood, located in the landmark CBS Radio Building where the first live “I Love Lucy” telecasts were filmed.
Executives bonded at the golf tournament and chatted informally about their kids, their latest home remodels, and their vacations in the lobby bar.
And the Knowledge Exchange and Digital EMA Forum provided valuable industry insights — much like, say, Digital Hollywood, but with a broader and yet much more targeted audience.
It was, once again, a good event — and, for many studio executives in attendance, a warm-up of sorts for Comic-Con International, held later the same week in San Diego.
I went to both events and saw many of the same faces. But at Comic-Con, the focus is on sizzle and glitz — bringing out the stars to dazzle consumers, constructing elaborate show-floor booths and, of course, throwing elaborate parties like the wonderful Omnia bash organized by our friends at Fandango, and featuring a stellar performance by singer Elle King, one of my personal favorites (yeah, I was the old guy hanging out in front of stage during the whole show, taking pictures).
At LAES, on the other hand, the focus was on us, and on our business — and what we can do to make it better.
Virtual reality may still be a Great Unknown in terms of how it ultimately will change filmmaking — and storytelling, for that matter.
But while VR is essentially still in its incubation period, Hollywood sure is having a lot of fun taking baby steps, using VR mostly as a way to drum up excitement about its core product, movies.
Most recently Sony Pictures announced a new VR experience for Columbia Pictures’ Spider-Man: Homecoming movie that lets people experience what it’s like to actually be Spider-Man – in a virtual sense, of course.
They can sling themselves in the air to do battle against The Vulture, and play around with the superhero’s new and improved web-shooters that feature prominently in the newest “Spider-Man” film, the second reboot of the franchise.
The VR experience becomes available for free June 30, a week before the film opens, across all prominent VR platforms, including, of course, PlayStation VR, from a sister Sony division, as well as Oculus Rift (owned by Facebook) and HTC Vive.
According to our friends at Variety, Spider-Man: Homecoming VR was produced by Sony Pictures Virtual Reality, the studio’s VR unit, which was launched last summer under the auspices of Jake Zim, the SVP of Virtual Reality for Sony Pictures Entertainment. It was developed by CreateVR, the same agency that turned Sony Pictures’ The Walk into a VR experience.
It’s good to see Hollywood having some fun again, and at the same time, pushing the innovation agenda. Invariably, fun and innovation go hand in hand, and the whole excitement about VR is a refreshing change of pace from the regular industry news, which this summer seems to be revolving around “franchise fatigue” (which I don’t happen to believe in — in my view, a good movie is a good movie, and a bad movie is a bad movie, regardless of whether it’s part of series) and the continuing debate over releasing movies on other platforms around the same time as they debut in theaters (something I see as inevitable).
On the home entertainment side of the business, we’re seeing quite a few triumphs, including the remarkable home video performance of Lionsgate’s “John Wick” properties and Walt Disney’s live-action Beauty and the Beast.
And on the innovation front, the home entertainment business is doing quite well itself, particularly at 20th Century Fox, whose Innovation Lab has its fingers in all sorts of technological wonders. Fox also smartly set up a new business unit, FoxNext, that’s home to the studio’s video gaming, location-based entertainment, virtual reality and augmented reality productions.
It’s shaping up to be a long, hot summer — and Hollywood, despite the usual turbulence, is sizzling.
Our annual salute to the nation’s top home entertainment retailers is still a month away. But in my regular perusals of quarterly earnings reports, and earnings call transcripts, I’ve noticed that perhaps the most overused term in retail circles is “omni-channel,” an attempt by brick-and-mortar retailers to remain relevant — and stay in business — in a world increasingly dominated by Amazon, iTunes and other Web-only sellers.
What I’ve noticed is that while retail executives liberally toss around the “omni-channel” term and pat themselves on the backs for their efforts to bring the physical and virtual worlds together, only a few are getting it right. Among them is U.K. fashion retailer Oasis, which arms its clerks with iPads so if an item isn’t in stock, the customer can either order it on the spot or be directed to a nearby store that does have the item in stock. Another is Carrefour, a Belgian supermarket chain that lets customers scan items they want into an online shopping list and, when done, submit the order for pickup or delivery. And I absolutely love Apple’s approach, to let customers make appointments online to the “Genius Bar” in Apple stores, for quick, one-on-one customer service.
One of the silliest trends I’ve seen is the “ship to store” option, in which customers can order something online, through the retailer’s website, and then pick it up at the store. That defeats the whole purpose of online ordering — the primary reason we buy something from Amazon is because we don’t have time to go to the store, and want the merchandise delivered to our home or office. Why would I order a PlayStation 4 or a batch of Blu-ray Discs from Best Buy and then schlep on down to the store to pick the stuff up? Yes, I know, the lure is free shipping, but guess what? Amazon already offers that, and in fact shipping charges are fast disappearing in the online world. I know why retailers like the “ship to store” option: It brings customers into their stores, where hopefully they will buy something else. But that’s not thinking like a customer, is it?
Retailers also need to realize that speed is critical — and thanks to Amazon Prime we’re used to getting pretty much everything we could ever want within 48 hours. Our youngest son, Hunter, came home from ninth grade the other day and said he needed a copy of a certain book and movie ASAP. My wife drove down to the nearest Barnes & Noble to see what they had; neither book nor Blu-ray Disc was in stock. A cheerful clerk offered to order both and smiling said they’d arrive at the store in about a week. As she was relating this story to me on the phone, I was already on my Amazon app and by the time we hung up had purchased both online, with free two-day shipping. “Bad customer service,” I told Diana when she got back home. “The clerk should have said it will be there in two days and, if necessary, done the same thing I did, order it off Amazon,” I noted. Instead, I’ve got a bad taste in my mouth — and for our next school-required book or movie purchase we’re not even going to give Barnes & Noble a chance.
It’s a brutal world out there, folks. Brick-and-mortar retailers need to sharpen their survival instincts and get aggressive. And the whole concept of “omni-channel” is not so much integrating the physical and virtual retail worlds as it is streamlining the shopping process and enhancing the customer experience.
At 73, Warren Lieberfarb is the proud father of a very famous young adult: DVD, the most successful consumer electronics product in history, which turns 20 this year. And if he seems remarkably calm and content — he’s even taking a twice-a-week history class — it’s because unlike most parents who have weathered a turbulent adolescence, his legacy is not mired in uncertainty and what ifs. It is both assured and crystal-clear.
With DVD, Lieberfarb didn't just make Hollywood a heck of a lot of money. The argument can be made that he also set into motion the sweeping digital revolution that has forever transformed the way we consume entertainment. Streaming, downloading, mobility, even Netflix — none of it, one could maintain, would have been possible without the foresight, vision and resolve of Warren N. Lieberfarb, the original Digital Driver.
That’s why we are singling out Warren Lieberfarb for a special salute in our annual Digital Drivers issue. DVD opened the door to digital as a home entertainment delivery mechanism, and the industry has never looked back. DVD and its successor, Blu-ray Disc, also have served as an entry point for the lucrative electronic sellthrough (EST) business, with the studios shrewdly including digital copies with physical discs in an effort to acquaint mainstream consumers with the concept of pure digital transmission.
Capturing the essence of Warren Lieberfarb — and just how right he’s been about this business, all along — in a space as short as this isn’t easy. So let me go back 10 years, to our April 2007 issue, when I related a few personal anecdotes: “I first met Warren Lieberfarb in mid-1995, when DVD was still a glimmer in everyone’s eye, two rival formats were planning to come to market, and studios were slugging it out over who had the highest prebook numbers for rental cassettes. As editor in chief of Video Store Magazine, I had written a column in which I advocated rental pricing for the new disc format. Rental, I wrote, was an ingrained consumer habit that would never go away.
“I received a phone call from a harried publicist at Warner Home Video informing me that Lieberfarb wanted to meet with me, for lunch, in the studio dining room. Since Warren had been notoriously press-shy, I accepted, although I had no idea why I had been summoned.
“So I drove to Burbank on the appointed hour, and met one of the most charming and gracious men I had ever encountered — until about 15 minutes into our lunch, when all of a sudden I felt I was in the middle of a sit-down with Marlon Brando in the first Godfather film. … Warren essentially informed me that I was an idiot, and he proceeded to lay out his vision of DVD as a sellthrough-only product that would add incremental revenue to studio and retail coffers. ‘It’s not a replacement technology,’ he argued.”
Boy, was he ever right. The rental model was dying — stabbed by late fees and return trips to the video store — and Warren was convinced packaged media needed to shift gears into a purchase model if it was to survive. There would always be a large chunk of consumers who didn’t want to buy, he said, but as technology advanced they would be driven to some form of advanced pay-per-view, the only electronic delivery system in existence at the time, particularly if it was easier and cheaper.
Fast forward two years. DVD was on the market, and Warren Lieberfarb was its chief cheerleader. Columbia TriStar Home Video (now Sony Pictures Home Entertainment) president Ben Feingold also emerged as a vocal supporter of DVD, “but with four of the six majors still on the sidelines, it was rough going,” I wrote 10 years ago. “Analysts began revising sales projections downward, and Warren’s tireless championing of DVD was beginning to tick off some people. I remember asking [former] 20th Century Fox studio chief Bill Mechanic when Fox was going to start releasing movies on DVD. ‘Ask Warren Lieberfarb’ was his response.
“Warren became a bit demoralized. ‘I don't know. T.K., maybe I should just give up the whole thing,’ he mused during a private conversation we had during the July 1997 Video Software Dealers Association convention in Las Vegas. (He was walking with a cane at the time, and had followed me into the restroom, which made the whole scene even sadder.) ‘I'm trying to do something that can be very good for our entire industry, but some people just don't seem to get it.’ The trade press got it, however, and so did some of the major retailers. By the late summer of 1997, Universal Studios and Disney had announced their intent to join the DVD team, and Warner went national.
“But just as it appeared DVD was beginning to gain some momentum, another fly appeared in the ointment: Divx, a payper-play variant championed by the chief of Circuit City, one of the country's major consumer electronics retailers. Several studios immediately lined up behind it, including Fox, which had yet to come to the DVD table.
“Warren went to war. He criticized Divx as a half-baked blend of packaged media and pay-per-view that was doomed to failure, but still could wreak havoc on the fledgling DVD format by confusing consumers. I agreed with him, and unabashedly railed against Divx in my columns. And when Divx died, chiefly because the consumer electronics manufacturers failed to support it, I rejoiced with him. I also laughed my ass off when I first heard the following story, which I have never been able to verify as fact or urban legend. A reporter asked the head of a leading Japanese consumer electronics manufacturer why his company, and most other companies, would not support Divx, even though it was being championed by one of their leading retail customers. ‘We were told the most powerful man in Hollywood was against it,’ came the response. ‘Who is the most powerful man in Hollywood?’ the reporter asked. ‘Why, Warren Lieberfarb,’ the executive responded. ‘Who told you that?’ the reporter demanded. ‘Mr. Lieberfarb did,’ was the response.”
I’m going to relate one other anecdote that indicates another side of Warren Lieberfarb — a kind, generous man, a mensch, if you will.
It took place at the Consumer Electronics Show in January 1999. DVD by then was a huge hit; I had a breakfast meeting with Warren at Caesar’s and woke up with the flu, complete with high fever. Stymied by CES traffic, I opted to walk the mile and a half from the Monte Carlo. Warren knew right away I was not well, and at the conclusion of our meal, when I told him I had to hurry back because my flight left in an hour, he insisted his car and his driver take me back to my hotel room and then to the airport. “Thanks, but what will you do?” I asked him, knowing he was at the Bellagio, also a good mile away. “I’ll walk,” he said.
Are the disruptors being disrupted? That’s a good question to ask ourselves as we at Home Media Magazine present our seventh annual Digital Drivers feature, which we launched 2011 as a way to spotlight the executives behind the transition from physical media to digital distribution.
Back then, there were two views of digital distribution. One, held by the studios, was a transactional model in which consumers would buy digital copies of movies, TV shows and other filmed content over the Internet, effectively transitioning their purchase habit from physical media and providing studios with much better margins, with no manufacturing costs, minimal distribution expenses, and, best of all, no returns.
Rental, too, would migrate to the web, in the form of transactional streaming, or pay-per-view.
What studios hoped would be a smooth transition was already then being disrupted by Netflix, which had a whole other view of digital distribution: subscription streaming. Three years earlier, in 2008, Netflix jump-started its then-nascent subscription streaming service by leveraging a sub-contract with Starz that gave it access to Disney and other studio movies. That, in turn, led to the studios dealing directly with Netflix in licensing their back-catalog films and TV shows.
It was a decision Hollywood would soon come to regret, but, as they say, you can’t put the genie back into the bottle. And so it is today that the digital distribution world is dominated by streaming, and streaming is dominated by Netflix, the biggest disruptor this industry has seen since DVD 20 years ago shifted home video from a rental model to a purchase model.
And yet while Netflix and the whole over-the-top (OTT) concept certainly dominate digital distribution, Netflix and the other streamers aren’t immune to disruption, either.
New research from Parks Associates reveals that 39% of U.S. broadband households visit a video sharing site like YouTube at least once a week — and 59% of broadband households visit an online video site on a regular basis. These findings sparked a session at the NAB show in Las Vegas called "OTT Video Services: Fighting to Capture and Retain Users," with Parks Associate senior analyst Glenn Hower, in a press release, maintaining that the growing popularity of user-generated content, particularly among young people, poses a growing treat to professionally produced content. "Consumers 18-24 go to a video sharing site 13 days per month on average,” he said. “They also use a video chat app like Snapchat an average of nearly 11 days in one month. The TV is still the most-used device for watching video content, but increased usage of secondary devices and video apps is making a significant impact on how users, especially younger viewers, consume and perceive content.”
Parks Associates research also shows 26% of households participate in live-streaming activities, such as streaming video from their own device or watching video over a live-streaming platform. "Emerging content platforms are changing the way content creators tell visual stories," Hower said. "Services like YouTube have given rise to video bloggers and sketch performers, who can interact with their audiences in a way that traditional media like film and television cannot allow. In addition, live streaming on platforms like Twitter's Periscope or Facebook Live is raw and impromptu, which can come across as more 'authentic' compared to a recorded video that has been edited and perfected."
The savviest digital drivers are those who realize that disruption is no longer something that happens from time to time, but, rather, is an ongoing thing.
It’s not enough to be platform agnostic. We now have to be content agnostic, as well.
The digital revolution is not over.
The DVD, the most successful consumer electronics product launch in history, turns 20 this spring.
It was the last week in March 1997 when I received that first black box of DVDs from Warner Home Video, whose president at the time, Warren Lieberfarb, is widely considered the “father” of the format. It was Lieberfarb’s vision that saw the potential of the consumer purchase (rather than rental) model; it was Lieberfarb who got the Japanese CE guys on board and who convinced his studio counterparts to come along, with support from Sony Pictures’ Ben Feingold.
We all knew at the time our industry was on to something big, but no one at the time could have predicted how big: A sweeping transition from renting videocassettes to buying discs led to double-digit gains in consumer spending for a good eight years, and at long last gave home entertainment executives a say in greenlighting movies after that fateful moment (I believe it was in 2001) when spending on discs outpaced spending on movie tickets.
Money breeds respect, and our little industry minted tons of both.
DVD’s legacy is just as impressive. Technological advancements in the five-inch disc led to the Blu-ray Disc and, most recently, the Ultra HD Blu-ray Disc. Today, most discs are packaged in “combo packs” that transcend physical media by also including a “digital copy” consumers can watch from their hard drives or the cloud. And with Netflix eating Hollywood’s lunch, the disc’s viability — both as a standalone product and as a means to promote the concept of digital ownership — is something to be both lauded and perpetuated.
It’s funny — back in mid-1996, when I heard DVDs were finally going to come on the market, all I remember thinking was, “What took them so long?” It was, after all, 15 years after another shiny little five-inch disc, the CD, revolutionized the music industry. I was big into music at the time. Audio purists swore by the LP, but for me — and hundreds of millions of other consumers the world over — convenience trumped any audio superiority analog might have over digital. And besides, records wore down with use and, invariably, developed snaps, crackles and pops. I was more than willing to sacrifice a little audio quality if I could listen to Springsteen’s “The River” without a nasty skip right when he was reminiscing about Mary’s body “tanned and wet down by the reservoir.”
The clunky videocassette, in my view, was just as flawed, and I still recall in the early days of CD looking with disdain at my VHS library and wishing I could get movies on disc, as well.
In the early 1990s, there was briefly a product called CD-I, mostly for interactive video discs. A few movies came out on CD-I, and I was ecstatic. No matter that you had to change discs at least once, and that the color black just didn’t look right — CD-I was it. When the format crashed and burned, I mourned — but then came my first meeting with Warren Lieberfarb and I was giddy with anticipation.
I still have that first box of DVDs from Warner — and damn if those DVDs don’t still look good, even on the pricey new Ultra HD TV with HDR in our bedroom.
Long live disc!
Back in 1990, when home video — powered by the rental videocassette — was at the height of its glory days, 31-year-old Brian Roberts was given control of a $657 million cable company his father had built.
More than a quarter of a century later, Comcast Corporation is an $80.4 billion company that aside from being the country’s largest cable TV company and home Internet service provider (ISP) is one of the most important players in what we now call the home entertainment industry.
And much of the credit goes to Brian Roberts, now company chairman and CEO, who is being honored this year with Home Media Magazine’s 2017 Visionary Award.
He’s the latest in a series of honorees dating back to 2002, when Warren Lieberfarb, the father of DVD, received the same honor. Other honorees have included Sony Pictures’ Ben Feingold, Samsung’s Tim Baxter, and Walmart’s Louis Greth and Chris Nagelson
Roberts, like our other visionaries, understands the critical importance of giving consumers as many choices as possible to enjoy their entertainment, even it means breaking tradition and disrupting existing business models.
Under his direction, Comcast has spearheaded home entertainment content distribution on the Xfinity X1 platform.
Comcast in 2013 became the first pay-TV operator to sell subscribers digital movies, a move that quickly catapulted the company into the ranks of top
electronic sellthrough (EST) platforms, alongside iTunes and Amazon Instant.
As Michael Bonner, EVP of digital distribution for Universal Pictures Home Entertainment told Home Media Magazine, “Comcast’s 2013 entrée into EST was an unequivocal game changer for the digital sellthrough market. Overnight, Comcast took its place among the industry’s top digital retailers.”
Comcast added access to Disney Movies Anywhere in 2016, strengthening its position in the EST market even further.
Late last year, Comcast and four studios announced the launch of enhanced, mutable movie extras on electronic sellthrough titles on X1 — a key step in
improving the consumer offering for EST titles.
The company has also embraced direct access to streaming kingpin Netflix, regarded by most cablers as Enemy No. 1. “We got off the rails in the Time
Warner deal,” Roberts told Philly.com in November 2016. “I wanted [Netflix chief Reed Hastings] to know that we believed Netflix was important to the ecosystem. I asked him what it would take to hit the reset button.”
The reset button was officially hit on Nov. 4, when Netflix launched on Comcast’s X1 cable set-top box. As Philly.com observed, “The new service broadens consumer appeal for their respective services and helps Comcast with federal regulators who say that pay-TV
companies should integrate traditional TV and streaming services on set-top boxes.”
It’s that openness to unconventional ideas, that willingness to take risks and shake up the status quo, that has played a key role in Comcast’s success, not just with home entertainment, but overall.
It’s also why Home Media Magazine is honoring Roberts as the 2017 Home Entertainment Visionary.
A changing of the guard often indicates further changes are ahead — and, invariably, we’re not talking minor tweaks but, rather, dramatic transformations of existing business models.
Three of the six major studios have recently undergone leadership changes, most recently Paramount Pictures, where Brad Grey’s 12-year run as chairman and CEO is over. Replacing him, at least on an interim basis, is a committee of executives that includes Amy Powell, president of TV and digital.
The new studio heads will likely be more open to change, and less averse to risk, than their predecessors — particularly if more studios wind up being owned by digital networks, like Comcast’s NBC Universal and, soon, AT&T’s Warner Bros. And all signs point to a dramatic shift in Hollywood’s venerated business model, which has always been “theatrical first.”
The validity, and continued viability, of a system in which movie theaters are at the top of the food chain has been questioned for some time. The advent of home video showed us plenty of consumers preferred to watch movies at home, and the rise of Netflix made it even clearer that home truly is where the heart is. The streaming service now generates nearly as much consumer spending as disc and digital sales of movies and TV shows combined — all without the benefit of recently released theatrical movies.
It’s no wonder, then, that for several years now the big talk in Hollywood has been significantly shortening the window between a film’s theatrical and home release — or even erasing it altogether (see page 11). In the not-so-distant past, such talk would have been seen as blasphemous, an affront to the all-powerful exhibitors.
But the old-school studio chiefs are pretty much gone, and their replacements are a lot more pragmatic. Kevin Tsujihara, whose selection as Warner Bros.’ studio chief four years ago stunned observers, given his home entertainment background, has been clamoring for years for a shakeup. Just this past November, Tsujihara at Credit Suisse’s Technology, Media & Telecom Conference said he considers it “imperative … to offer consumers more choices earlier.” And James Murdoch, who less than two years ago replaced his dad at the helm of Fox, ticked off the National Association of Theatre Owners last September when he blasted the “crazy holdbacks that theater owners put in place,” referring to the traditional 90-day window between a film’s theatrical debut and its first after-market appearance.
So far, however, there’s been lots of talk, but little action. It’s been sort of like a Cold War between the studios and the exhibitors.
But just like the real Cold War more or less ended with the toppling of the Berlin Wall, there’s going to have to be a break, and soon. Consumers have grown accustomed to being in control of their entertainment, of watching movies on their own schedule, in their own environment — and there’s no telling how much money is being left on the proverbial table because of this silly 90-day window. Each year, fewer people are going out to the movies. Never before have we had so many different choices, so many different platforms — from Netflix to YouTube, from iTunes to Google Play, from elaborate home theater setups to iPads and smartphones. And if first-run movies aren’t available, guess what? There’s lots of other stuff to watch.
By continuing to cater to exhibitors, studio executives are only shooting themselves in the foot. It’s time to not just shake up the existing business model, but also turn it upside down, inside out. It is imperative that Hollywood offer in-home delivery of movies (at a premium price, of course) during the so-called theatrical window — and, perhaps, not just one month out, or even one week out, but same day.
Will it happen? You can count on it. It’s not a question of if, but when.