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Those Weinsteins!

24 Aug, 2009 By: Thomas K. Arnold

If you believe the mainstream media, you'd think declining DVD sales were to blame for global warming, California's budget crisis and the apparent failure of President Obama's health care reforms. Virtually every day, some big newspaper or magazine, from the Los Angeles Times to the Wall Street Journal, runs a story in which something or other gets blamed on grim DVD sales.

The latest is a story in the Wall Street Journal on the Weinstein Co.'s continued financial struggles (to read the piece, click here). Brothers Bob and Harvey finally scored another box office hit with Questin Tarantino's campy Inglourious Basterds, but as the Journal points out "that still may not be enough to give the studio the boost it needs to climb out of its current financial troubles." The story goes on to note that after a string of theatrical flops the Weinstein Co. is struggling to stay afloat "in a harsh Hollywood climate where financing has dried up and home video sales have sunk."

Ironically, the Journal's assessment in blaming video rings more true here than in most instances. The house that Bob and Harvey built, after all, was funded largely on the premise that they would invest in a video company (Genius Products), that DVD sales would continue to soar as they did in the early 2000s, and that the result would be a huge influx of cash that would allow the Weinsteins to do what they've really always wanted to do: make movies, and make lots of them.

What everyone failed to note here, though, is that DVD sales of theatrical movies rely heavily on the box office success of these movies. If a movie flops theatrically, it's not going to be a No. 1 smash on home video, even in the glory days when consumer spending on DVD purchases was posting double-digit gains each year. And if your slate of theatrical DVDs aren't selling as well as you had hoped they would, you can't count on the rest--all the other lines and titles Genius picked up in the years the company was majority-owned by the brothers--to make up the difference.

You can have a wealth of secondary product you're bringing to market, but ultimately it's still your theatrical slate that carries the day, regardless of the state the economy's in.

That said, how do we get the media to stop saying such nasty things about our business? Why are we getting blamed for sinking all of Hollywood? Has anyone stopped to think of the idiocy of statements that blame DVD sales for creating a "harsh Hollywood climate?" At their very worst, sales of DVDs are down about 15% so far this year. Actual consumer spending on home entertainment is down maybe half that amount, when you factor in Blu-ray Disc--which is having a phenomenal year, despite the bad economy--and DVD rentals, which the studios don't like because for the most part they don't get a share of the action.

But even 15% isn't that bad when you look at most industries, from the automotive industry (auto sales are down by more than 30%) to tourism (hotel occupancy in the onetime tourist mecca of New Orleans was just 49.8% in the week ending August 15, a 22.8% drop from the same week last year, according to hospitality industry tracker STR) and publishing (don't ask!). And realistically speaking, you do have to factor in Blu-ray Disc sales and DVD rentals, as well as electronic delivery. Only then can you paint an accurate picture of how much consumers are really spending to bring movies, TV shows and other programming into their homes. And when you factor in all those things, hey, we're not that bad off.

Really, we're not.

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