High-Def Disc Battle in High Gear

This fourth quarter will see lots of fireworks on the high-def front. Studios are drawing the big guns. Walt Disney Studios Home Entertainment is adding Pirates of the Caribbean: At World's End and Sony Pictures Home Entertainment is bringing Steven Spielberg's classic Close Encounters of the Third Kind to the Blu-ray Disc lineup. Meanwhile, Warner Home Video will offer 300 on both formats, with a decided extras advantage on HD DVD. Stalwart HD DVD supporter Universal Studios Home Entertainment seems determined to take HD DVD extras to the next level with greater interactivity.

Hardware pricing has already begun to swoon, with the Blu-ray-enabled PlayStation 3 dropping by $100 (to $499) for the discontinued 60GB version, and Panasonic's $600 Blu-ray player hitting shelves. HD DVD supporter Toshiba already has dropped the price on its player to $299 (if you attended the recent Home Media Expo the HD A2 could be had for $99 with three movies). More is sure to come, with the HD DVD group determined to hit mass-market pricing. Rumors of low-priced dual-format players also are making the rounds.

The competitive forces of the home entertainment industry, the gaming industry, the consumer electronics industry and even the PC industry are focused on the battle between Blu-ray and HD DVD. Such company titans as Microsoft, Sony, Toshiba and many others have skin in the game and are showing no signs of backing down.

Retailers, too, have entered the fray with Blockbuster Inc. and Target showing support for Blu-ray while at least one high-end retailer I know of is adamantly in the HD DVD camp.

On the consumer side, I haven't seen such emotion since the days of Divx versus DVD. It seems every week I get a letter from either an ardent Blu-ray supporter or an HD DVD aficionado warning me not to show favoritism. At the recent Home Media Expo 2007, the studios courted Home Theater Forum members with freebies (including Blu-ray and HD DVD players), parties and presentations.

Yes, the fourth quarter should offer cliffhangers worthy of the most suspenseful Hollywood thriller.

This Year the Show Really Mattered

A funny thing happened at Home Media Expo 2007. After years of trying to make the show more relevant, the Entertainment Merchants Association finally succeeded — and in a big way.

Stung by criticism that the show has continued to be geared too much toward the independent video rental dealer, the EMA took two bold steps that connected studios and suppliers to the two audiences they would most like to reach: attracting consumers and big chain retailers.

As senior editor Erik Gruenwedel writes in his page-four story, the opening business session featured a panel of consumer “power users” weighing in on their home (and mobile) entertainment habits. The EMA also invited members of influential consumer group the Home Theater Forum, whose members informally advise the studios on content, special features and the like, to a series of presentations.

On the retail end, the EMA stepped up its recruitment efforts and was rewarded by high-level representation from such top-flight retailers as Target Stores, Best Buy, Circuit City, Trans World Entertainment and others.

The effect? It's purely anecdotal at this point. A senior marketing executive with a major studio's home entertainment division told a reporter her team had met with Target executives for the very first time at an EMA show. A studio president who three years ago had all but washed his hands of the show talked it up to his staff and praised the presence of “so many significant retailers.” A Blu-ray Disc party was hastily arranged for Forum members.

To be sure, the Home Media Expo still could use some serious re-engineering. To their credit, EMA executives have been most willing to experiment and try new things, but there's an inherent conflict when you're trying to please independent video rental dealers, still your core membership, on one hand, and the studios on the other.

Whether this conflict will ever — or even can ever — be resolved is up in the air. But what's important is that the EMA is trying. I sincerely hope the studios realize this.

Home Media Expo Keeps on Truckin'

It's easy to see why some in our industry feel the Entertainment Merchants Association's annual trade show, which takes place this week in Las Vegas, has lost its relevance.

Having a fellow by the name of “Crazy Legs” Conti chow down as much popcorn as he can stomach isn't exactly on a par with Steve Martin, Michael Douglas or other celebrity guests at past conventions.

But take a closer look at what's happening and you'll see that the show still has its merits, from a thoughtful opening session that puts the spotlight on the consumer, to ample networking opportunities for content suppliers and a healthy contingent of key retailers.

And I'm not talking about the independent rental dealers, those brave souls who built our industry but now are dismissed by studios as inconsequential dinosaurs (talk about biting the hand … but that's fodder for another column).

Home Media Expo 2007, contrary to widespread perception that it is an “indie retailer” show, is drawing representatives from some of the biggest video sellthrough retailers in the country, including Target Stores, Best Buy, Circuit City, Amazon.com and Costco. Also on hand are key executives from Blockbuster Inc. and Netflix, the Yin and Yang of rental, and such key chains as Borders, Toys “R” Us, Trans World Entertainment, Fry's, Giant Eagle and Kmart.

The president of one studio told me he's sending sales executives specifically to schedule private meetings with these retailers. “Wal-Mart's not there,” he said, “but everyone else seems to be.”

Home Media Expo 2007 may be a shadow of the grand and glorious trade shows of the late 1980s and early 1990s, when studios spent up to a million bucks on interactive exhibits and hauled out ‘A'-listers in an attempt to cozy up to the 10,000-plus rental dealers they couldn't otherwise reach — and upon whom their livelihood depended.

But just as the business has changed, so has the show. Retail consolidation has put power into the hands of a few, and you don't need a three-ring circus to reach a handful of retail power players.

You need a meeting room, and maybe a party or two. And that's precisely what this year's show provides.

How Much DRM is Too Much?

You don't go to a home media conference expecting a fight to almost break out. But hey, it was my first time at Digital Hollywood (June 11-14), so maybe that sort of thing happens all the time.

In one corner was the aggressive tag-team of the Motion Picture Association of America (MPAA) and the American Society of Composers, Authors and Publishers (ASCAP). In the other corner was the scrappy but outmanned Consumer Electronics Association (CEA).

The topic: digital rights management. The fight: how much DRM is too much?

Including too much DRM on software can drive consumers away and puts a serious damper on getting this entire digital-delivery thing running at full speed. Include no DRM at all, and you devalue your content, begging for everyone to effortlessly pass your product around.

The MPAA is a big fan of DRM and the use of the Digital Millennium Copyright Act to go after people who create ways around DRM. The CEA is not copasetic with either DRM or the DMCA.

Jason Oxman, VP of communications for the CEA, said DRM is anti-consumer in ways large and small, from keeping them from buying a downloaded movie from one service and using it on whatever device they want, to wondering why they can't fast-forward through the previews on their DVD.

CDs with DRM were a disaster. CDs didn't work on many players, and some DRM-enabled CDs would crash PCs. That was before the 2005 Sony BMG issue, when their DRM messed with consumers' computer security.

DVD and digital video content providers haven't had it as hard, and part of the reason is because the DRM hasn't been as burdensome on the customer.

I see both sides of this issue: As a home media industry sympathizer, I expect content providers to do whatever possible to prevent theft and unlawful use of their product. Yet as a consumer, I don't want my content weighed down because of one company or another's proprietary nonsense.

Movie Gallery Drifts on a Sea of Change

Movie Gallery, the No. 2 rentailer in the country, is in more than just financial trouble. The chain seems to have trouble changing with the times, as well.

Last week, Gallery announced it wouldn't meet the financial requirements of its lenders and may have to entertain a sale. Store closures are probably in the cards.

How did Gallery get to this point?

In addition to biting off more than it could chew with the acquisition of Hollywood Entertainment Corp. in 2005, Gallery clung to the old in-store rental model. The chain made tentative moves into video-on-demand with the MovieBeam acquisition and into kiosk rentals. But management seemed too preoccupied with whether or not the next quarter's slate of titles would pull them out of a slump to look ahead. They were thinking short-term, under pressure from a giant debt load.

Renting out store space was a good idea to boost the bottom line, but it wasn't a long-term solution to a waning core in-store rental business.

Kiosks might have been a great business for Gallery had it moved fast to combat Redbox, TNR and others that took the initiative and now are far ahead in that arena. I'm afraid it may be too late for them to catch up there.

Getting into VOD through the cheap MovieBeam acquisition may have looked like a good deal at the time, but it was tantamount to sticking your toe in the water while others were learning to swim. The chain may have been wise to sidestep the online rental market, in which Netflix and Blockbuster Inc. are in a bruising price war, but standing still while the competition innovates is not a winning strategy.

Making small bets in a fast-changing business may prove Gallery's downfall. Management will have to make some hard choices now to stay afloat. Just last year, we saw the venerable Tower Records and Video liquidated by its buyer. Let's hope Gallery at least sticks around.

Whatever happens to Gallery, the big winner likely will be Blockbuster, which is sure to benefit from having fewer brick-and-mortar stores in the game. New Blockbuster CEO James W. Keyes is getting a great office-warming gift.

Staying One Step Ahead to Keep Up

Rip Van Winkle could have just woken up after a 10-year sleep and not had a clue about what happened to home video. Ten years ago, VHS still ruled the day; studios were debating not if, but when, to implement rental pricing for this new format called DVD; and Hollywood was so concerned with Blockbuster's troubles that they rolled out a series of programs that would help Blockbuster and other rental dealers bring in plenty of the hits on the cheap to satisfy demand.

Today, rental is an afterthought to most studio executives, and VHS has been dispatched from even the most rural Wal-Mart. The hottest topic is how to manage the “supply chain” in the face of declining DVD sales and uncertainty about the looming transition to digital distribution.

The job of a studio executive has changed dramatically in the last decade. He's still doing a fair amount of schmoozing with key retailers, but technological advances have made it possible to know as early as 6 a.m. Pacific Time on street date whether you've got a hit or a miss on your hands. And the rest of the day is spent carefully tracking sales and replenishing orders here and pulling stock there to maximize that brief six-day period when more than half of sales typically occur.

I write this because we're in the middle of a particularly busy time for the home entertainment industry. We've just finished the annual Home Entertainment Summit and the Entertainment Supply Chain Academy conference, and the annual Entertainment Merchants Association convention, still our industry's biggest annual shindig, is less than three weeks away. Studio executives are stretched tighter than ever because of the flat market, which already has led to cutbacks and layoffs, as well as longer hours for the staff that remains.

The quest to make money is still first and foremost on everyone's agenda, but in this rapidly evolving business environment there's another, perhaps even more important objective: to keep up with all the changes our business has undergone, and to be prepared for even more changes in the future. Home entertainment is in the fast lane now, and if you're not up to speed, you won't just be left behind, you'll likely be run off the road.

It's Time to Roll Up Our Sleeves

The state of the DVD business is stable but open to change, as evidenced by the sixth annual Home Entertainment Summit: DVD & Beyond. The conference was produced by Home Media Magazine and DEG: The Digital Entertainment Group in cooperation with The Hollywood Reporter and the Entertainment Merchants Association.

While the two new high-def formats — HD DVD and Blu-ray Disc — as well as increasing avenues for digital delivery are opening up new vistas for studio content, the bread-and-butter business of DVD is still healthy, even though it has entered a mature phase, conference attendees said.

The highly anticipated presidents panel noted that the fourth quarter of this year should give the DVD business a boost, as big box office hits from the summer slate hit disc. The high-def panelists seemed optimistic and determined that studios and DVD producers would come up with interesting and creative ways to use the new HD formats. They likened it to the early days of DVD when the industry began to back innovative extras that brought increased value to the new format. The digital-delivery panelists also seemed ready to work toward making that segment of the business an additive rather than cannibalistic revenue stream.

In contrast with the days of double-digit growth, in which the industry was content to rest on its laurels, as well as the panic period, when studios wondered if DVD would drop off too fast, this year's crowd was more matter-of-fact in viewing the business and eager to work at growing it.

HD panelists noted that the innovative HD extras of today will surely be surpassed by innovations just months down the line. Digital panelists seemed more sure about the problems that needed to be solved to make that business take off. And the presidents panel seemed content to follow the consumer with an eye toward profitability, but without many concerns as to what it may mean for particular business segments at the studio.

All in all, the industry is focused on doing the hard work to take the home media segment into the future — whatever it may hold.

Old School vs. Next Generation

A recent event in support of the Blu-ray Disc versions of the first two “Pirates of the Caribbean” movies provided me an ample opportunity to sample the technical achievements of high-definition discs. I was impressed, but not inspired to adopt the technology just yet.

However, I was somewhat enthralled by the “Liar's Dice” game on the Blu-ray version of Pirates of the Caribbean: Dead Man's Chest. It's a fun and simple game, with smooth transitions between the different graphic elements (on PS3, anyway), unlike so many DVD games that take forever to load and longer to play.

Extras like these are the real selling points for most people to upgrade to high-def.

Upgrading from VHS to DVD was an easy sell for film fans hooked on the advantages and extras of the new format. That transition was analog to digital, but DVD to high-def is digital to digital. The leap isn't so great, and the old discs play on the new players. There aren't more than a handful of movies most fans will actually care enough about to buy again, and the extra features for the most part aren't that much better.

If I care enough about a movie to want to see behind-the-scenes footage, I don't have a problem watching it separately from the movie, as opposed to during the movie, as many high-def discs offer.

The expanded capacities of high-def discs offer great potential. Improvements in interactivity should appeal the most, such as the feature on the HD DVD of The Fast and the Furious: Tokyo Drift that lets viewers customize a car to appear in the film. Imagine being able to upload a picture to put yourself in one of your favorite scenes. Or maybe edit your own version of a film, like constructing your own special edition of The Empire Strikes Back. Or even record your own commentary.

In the end, however, the stalwarts of great cinema remain story and character, and technology has yet to improve on that.

We're Running at Full Steam

These are busy times for us here at Home Media Magazine. We have three big projects we're working on at the same time as our weekly magazine. And each is a key component in our grand plan to serve the home entertainment industry and its players to the best of our ability, even if it means venturing out of the proverbial box.

First up is the Sixth Annual Home Entertainment Summit: DVD & Beyond, an annual conference for industry executives that will be held this week in Century City, Calif. We've been producing conferences since 2002 — in partnership with DEG: The Digital Entertainment Group and The Hollywood Reporter — as a way to get our industry leaders to address hard-hitting issues and topics on a stage before other industry executives. We've got panels on next-generation discs and digital downloading, catalog DVD sales and the TV DVD business, the direct-to-video phenomenon and Internet-based marketing. Throw in some exclusive market research from such respected organizations as Screen Digest and Understanding & Solutions, as well as compelling keynoters such as Jack Kyser, the chief economist for Los Angeles, and you've got an event that's become a “must go.”

At the same time, we are working on two publications, Hollywood Goes High-Def and Agent DVD. The former is a quarterly publication we launched in January at the Consumer Electronics Show that gets inserted into Home Media Magazine as well as two hardware books, Dealerscope and CustomRetailer The goal is to show the hardware community that our industry is committed to next-generation software, crucial to growing the two high-definition disc formats.

The other is Agent DVD, a consumer magazine for San Diego Comic-Con International, an annual event that's increasingly important to the studios. To studio executives who tell us, “Help us reach the consumer,” this is our answer: a slick, glossy magazine about DVDs aimed at the comic book, sci-fi, fantasy and horror fan.

I could envision both growing beyond their current states: Hollywood Goes High-Def could be a standalone trade magazine for the entire high-definition industry, while Agent DVD could be a monthly on newsstands — or video stores — everywhere.

But first, let me get through this week's conference …

My Leap Into the High-Def Future

We finally did it. We bought a flat-screen LCD HDTV. After two years of shopping and hemming and hawing, my husband decided on a model and price.

We also took the plunge into high-def discs with the PlayStation 3, though we bought it only in part to play Blu-ray Discs. The other motivation was that my daughter wanted a “Naruto” game only available on the PlayStation systems — a PS2 game to be exact — and we previously had only an Xbox. So, in a way, we bought a PS3 to play a Ps2 game.

We also got digital cable to feed the flat-screen beast and hired an electrician to properly place the outlet and an installer (from Best Buy's Magnolia chain) to put it on the wall. My husband has downloaded some software fixes to better coordinate the PS3 and the TV. He's figured out how to connect our digital A/V receiver (which isn't HDMI-compatible) so that we have nice surround sound. He's picked up some extra speakers to create the home theater experience. He argued with the cable guy on how to fish the wires through the wall.

No wonder there's a whole new group of experts peddling their wares to consumers trying to put this whole HDTV puzzle together. Let me tell you, the process was a far cry from the good ol' days when you bought the TV, took it home and plugged it in.

But the payoff is magnificent — and a little troubling.

While high-def discs look spectacular on the new setup, DVDs don't look much worse. Our PS3 upconverts DVDs, and they look wonderful. Unless the release is a new or truly treasured favorite, I don't think I'd contemplate replacing my entire DVD library with high-def discs.

To me, that means DVD could be around for some time to come, and HD discs could prove to be more like the old laserdisc business that coexisted with VHS.

Studios and DVD producers will have to come up with next-generation extras that are truly revolutionary compared to the old DVD supplemental materials to make HD discs a format that consumers consider a must-have.