Good News About Great TV

There’s a scene in the classic film All About Eve in which Marilyn Monroe, playing a young actress who’s just flubbed a Broadway audition, is advised by her mentor to try television, implying that the talent threshold for the small screen is much lower. That joke doesn’t pack as much of a punch in the current entertainment environment. It’s been widely acknowledged that the quality of TV content is often on par with, or superior to, feature films. Episodic TV is attracting top talent that used to be seen exclusively at the movies.

Many factors have created the new rise of TV, not the least of which is binge watching that began with TV DVD and continues on such streaming services as Netflix. The bad news for the home entertainment business is that consumers who watch episodic TV on Netflix aren’t buying as many movies on disc and funneling money into the sellthrough business, which is more lucrative for the studios. But the good news, I think, is that many of the new episodic series feature continuing storylines and play almost as if they are extended, gripping feature films as analyst Richard Greenfield has pointed out — and that makes them highly collectible.

While home entertainment executives at the studios may be bemoaning a poor summer box office, the bright spot is the enormous amount of collectible quality content coming from the small screen. The fact that The Wizard of Oz or the “Star Wars” films pop up on TV on a regular basis does not hurt their collectibility, and I don’t think that streaming on Netflix does as much damage to the sale of truly collectible TV content as we think. Fans of “Breaking Bad” or “Game of Thrones” want to collect those series, and that makes them a vital addition to the sellthrough business. When the hot series of the moment cycles off of Netflix or Amazon Prime to make way for newer content, fans will want to own their favorite series either digitally or on disc in the highest possible quality.

The Five Forms of 'Defenders' Rallying Behind Disc

I’ll call them the disc defenders.

Lately, I’ve been running into people who are talking up the benefits of physical media — Blu-ray Disc as well as DVD — to anyone who will listen, often citing their own disappointing experiences with digital delivery.

And the more I listen, the easier it is to categorize these disc defenders into groups — groups that appear solidly committed to discs for some very valid and logical reasons.

The first group is made up of diehard Blu-ray Disc fans. They never cut back on buying discs, and they’re the ones most likely to ultimately replace the bulk of their DVD libraries with high-definition discs, even if half those old DVDs are still shrink-wrapped. They are driven chiefly by the quality of the picture and sound and more than likely have invested big bucks in elaborate home theater systems that really show off what high-definition discs are capable of. Despite advances in digital technology, they say, the fact remains that for the optimum high-definition viewing experience nothing can match Blu-ray Disc.

The second group is the gift-buying market. They love to give — and receive, for that matter — movies as gifts, which they later trade among family and friends. They’re the ones at Best Buy or Walmart or Target on Black Friday with a shopping cart full of discs; they use the cheap ones as stocking stuffers and the heavily discounted movie collections, new releases or TV series as gifts. Giving someone a digital download, often through an email notification, simply isn’t the same as giving someone a neatly gift-wrapped box with a movie or two inside, they say.

The third group is the collector. Yes, even though everything’s now on the Web or in the cloud, these people still like to collect physical things. They have their photos printed out and put into albums; they still have a rack of CDs in the family room, by the stereo; some of the rooms in their houses, by God, even have bookshelves filled with books with actual paper pages. And while I can’t swear to it, I’ve heard some members of this group also collect Franklin Mint plates.

The fourth group is the shell-shocked downloaders who due to a hard drive failure have lost their entire music or movie collection, generally back in the days before everything could be backed up into the cloud. They’ve never gotten over their loss, and they’re not about to be burned again.

The fifth and last group is what I’ll call the disenfranchised Netflixer. Like so many of us, they jumped at joining Netflix for subscription streaming. But after a while, the novelty wore off. Maybe it was the lack of current product — you can only watch so many ‘B’ movies from 2005 or long-canceled TV series. Maybe it was the incessant buffering problems. But whatever the case, the honeymoon’s over and the old Blu-ray player’s being fired up, once again.

The disc is dead. Long live the disc!

Fighting for a Piece of a 24-Hour Pie

Traditional entertainment has taken a hit recently. First-half numbers for home entertainment were down slightly. TV ad “upfronts” (prebooked ad buys) were down. The box office take year-to-date is down. About the only thing going up is Netflix’s stock price.

It’s not as if consumers have stopped craving entertainment. It’s that during that 24 hours in a day, in which they must fit work, sleep, etc., there is only so much time for entertainment — and there are ever more and cheaper ways to spend that time, including viewing streaming on Netflix and other sites, as well as the antics of web stars that garner more and more of the younger set’s attention (see my last column). In this kind of competitive environment, marketers must keep on their toes to attract consumers’ attention.

Home entertainment marketers, both at the studios and at retail, are rising to the occasion. One tactic is tying in discs with theatrical marketing. Studios and retailers are increasingly preselling titles on disc around their theatrical bow. And conversely, in a longstanding tactic, discs of previous installments in a series are including discounts on theatrical tickets to the sequels. It’s a way to maximize both theatrical and home entertainment marketing muscle for a bigger punch with the consumer.

One prominent studio marketer noted that these tactics are “tapping into the consumer awareness from the theatrical campaign and converting that awareness into early sales of the Blu-ray, DVD or digital HD.” Conversely, the tie-ins also help the theatrical marketing team build consumer awareness for theatrical releases at retail, she noted.

Anything studio and retail executives can do to build a bigger bullhorn for traditional entertainment is welcome. Exploiting and promoting partnerships with retailers and other studio divisions must grow if content owners want to take a piece of consumers’ limited leisure time. There is an exploding list of hungry competitors looking to take a bite of that 24-hour pie.

Best Buy's Final Destination

Best Buy’s amazing slide to a 45% drop in income in the second quarter of this year, and ominous warnings of further drops to come in quarters three and four, can’t be attributed solely to the lack of new smartphones and the continued migration of shoppers online.

The electronics chain’s makeover, putting discs, CDs and other software in a corner in the back and reserving its prime floor space for tablets and smartphones, has destroyed its character and made it a lot less fun to shop there. You’d think management would have learned a lesson from Radio Shack, whose death march began when it brought in the iPhone. Sales initially surged, but margins plummeted — and before long everyone was carrying the iPhone and Radio Shack had painted itself into a corner.

Best Buy not only followed the same strategy, but also mangled a great idea last fall through its “showrooming” counterattack. Stung by consumers checking out products at Best Buy but then buying online, the company commissioned a series of 11 ads under the "Your Ultimate Holiday Showroom" theme, touting its low-price guarantee and the ability to order online and pick up in store.

The trouble was, the campaign focused more on outdoing Amazon than it did on highlighting the benefits of shopping in-store at Best Buy — although, in retrospect, maybe that’s because those benefits simply aren’t all that pronounced.

It all goes back to how fun it used to be to shop at Best Buy, before the chain transformed itself into a physical portal for tablets and smartphones. And there’s the essence of what Best Buy needs to do if it is to survive, much less thrive, in this increasingly challenging environment.

The stores need to become destinations again. I agree with Jehan Hamedi, global market development manager at Crimson Hexagon, a social-media analytics company that analyzed Twitter and Facebook dialog on Best Buy’s ad campaign. He told Ad Age Best Buy should make the stores more of a "playground" destination with fun in-store events, group discounts and refer-a-friend programs. "There's such a huge opportunity for them to link their product showroom appeal with a social experience," he told Ad Age. “We found that the largest, the prime [consumer] expectations, had nothing to do with what I might expect, like touching or sampling the product. It's more about social gratification — having fun. You go with your friends and they are your pre-purchasing sounding boards. It's a destination.”

My last visit to Best Buy was not a fun experience. The local store is situated in a large strip mall, right next to Walmart. I got there at a quarter to 10 on Sunday, wanting to pick up some discs as a gift for a birthday party my youngest son was going to, but Best Buy didn’t open until 10 and even though there were more than a dozen people outside waiting to get in those doors didn’t open until exactly 10, on the minute. I went to Walmart instead, and that was a lost sale Best Buy could have had if there was some flexibility and awareness of the store’s retail surroundings.
After my purchase at Walmart, I went to Best Buy to check into getting a protective screen around my middle son’s new school-issued iPad. It took me 10 minutes to find an available clerk, and I found the screen protector before he did. It was also I who suggested the Geek Squad put it on, not him.

As I was walking out, I saw a refrigerator I had purchased on sale on the Fourth of July holiday for $1,799 was back up to $3,265 — “10% off the regular price, just in time for Labor Day.” I understand price fluctuations, but come on! It’s episodes such as this that build consumer distrust — and at this point that’s the last thing Best Buy needs.

Home Entertainment’s 'Blu' Summer

At a time when subscription streaming and over-the-top video dominate the narrative in home entertainment, Blu-ray Disc remains an enduring format — despite media companies’ misguided efforts to embrace SVOD’s Trojan Horse.

Trans World Entertainment, which operates the 328-store f.y.e. retail chain nationwide, said double-digit sales increases of Blu-ray titles helped keep same-store sales declines to 1% in its most-recent fiscal quarter.

Hastings Entertainment, which operates 126 stores throughout the Southwest, saw revenue from new Blu-ray and DVD title sales increase 2% to 23% ($100 million) of total sales in 2013 from the same period in 2011, according to an April regulatory filing.

Industry wide, through the first half of the year, Blu-ray sales rose 10% in the second quarter alone, suggesting continued viability in a disc business many in the mainstream media have given up for dead. In fact, electronic sales of new releases — the format “du jour” — were less than 20% of total packaged-media sales in the quarter, according to DEG: The Digital Entertainment Group.

Alas, the DVD death spiral perception — perpetuated for years by the media — has now been embraced by media executives, many of whom openly gloat about the incremental revenue generated licensing content to SVOD stalwarts such as Netflix, Amazon Prime Instant Video and Hulu Plus.

Capitulation to streaming reached its zenith earlier this month when Time Warner CEO Jeff Bewkes — a perennial critic of SVOD — unabashedly lauded digital distribution.

“We're going to be up solid double-digits [this year]. And by that I don't mean 10% to 20%, I mean more,” Bewkes said.

Warner Bros. said it could expect to see a significant increase in the $400 million it generated in 2013 from licensing content to subscription streaming services. Nevermind that incremental revenue is dwarfed by the more than $1.1 billion the studio generated through June 30 this year selling movies and TV shows on disc, and to a lesser extent, digital platforms.

In the United Kingdom, a durable packaged-media market slowly but surely undermined by SVOD, Netflix now has more than 3 million subs. I have friends in Germany — a country with a strong economy that continues to support disc sales — who routinely ask about the latest American TV shows to buy on disc. Recent recommendation “Breaking Bad” was big hit. Now, its “Homeland.” I didn’t have the heart to tell them Netflix will open for business there next month.

To be sure, SVOD is a win for consumers, but it’s a loss to content holders and the home entertainment industry. Who makes a profit selling unlimited access for $9 a month? Just Netflix. Which is why its stock is in the stratosphere — valued nine times more than Microsoft; five times more than Walmart and Time Warner.

Lost among Wall Street’s brazen Netflix lovefest is the reality the service ended its most-recent fiscal period with $7.7 billion (!) in content liabilities, which some industry observers actually believe the SVOD service may outrun if it keeps adding subscribers.

Ever wonder why Netflix CEO Reed Hastings has that sheepish smile in photos? He’s laughing all the way to the bank.

Sí Se Puede

One of the biggest movies this year for Mexican-Americans was Cesar Chavez.

Starring Michael Peña, America Ferrera and Rosario Dawson, the film tells the story of civil rights activist and American farm worker Cesar Chavez and his rise as a labor leader. The film is available on DVD and Blu-ray from Lionsgate for about $20.

I won’t deny that the film failed to accurately portray many elements of the complex history of the United Farm Workers movement. I also won’t disagree all that much with the less-than-stellar reviews from critics and audiences alike.

However, I think it’s important to point out that Cesar Chavez is still a solid movie with a great message for filmmakers to make in highlighting an important Mexican-American leader AND portraying him by a talented Mexican-American actor. As with many biopics or historical movies, I hope that the movie encourages audiences to go out and research the real people and the real stories. In this Google age, a lot of information is easily accessible with a few keyboard strokes.

Of course, it would have been even easier if the home video releases included some sort of documentary or even a few featurettes about the real Cesar Chavez and Dolores Huerta.

But I do have to commend distributors Lionsgate and Pantelion and production house Participant Media for the socially conscious efforts to support Chavez’s cause, which sadly is still a struggle for farm workers.

As reported earlier in an article by my colleague Chris Tribbey, Participant Media and the Equitable Food Initiative (EFI) launched a new food label trust-mark that certifies produce is “responsibly grown and farmworker assured.” This will help shoppers identify, and hopefully purchase, equitably sourced food.

During the film’s theatrical run, Participant also gathered more than 30,000 signatures on in support of EFI’s efforts to provide training and fair wages to farmworkers and implement safe food practices. And among the trailers on the DVD is a PSA for farm worker safety standards and supporting the cause at Takepart.com/chavez. The TakePart petition is now at 34,016 of its 60,000 goal. I encourage you to visit the site and learn more about how you can take action and learn about the Chavez’s work, which is still being carried on today.
 

A New Generation of Stars

As I’ve noted before, my two daughters, 16 and 12, spend more time on devices such as tablets and cell phones watching amateur entertainers on YouTube than they do watching television or other professionally produced entertainment. And now a survey of teens ages 13 to 18 commissioned by Variety confirms the trend.

Well-known stars didn’t even make the top five in the survey that asked teens about the overall influence of well-known personalities. The top “celebrities” in the survey were the online comedy team Smosh, No. 2 The Fine Bros., No. 3 PewDiePie (my daughters’ particular favorite), No. 4 KSI and No. 5 Ryan Higa — all online stars. Among the top 10 celebrities on the list that most parents may recognize are Paul Walker at No. 6, the star of the “Fast & Furious” series who tragically died in a car accident last year; No. 7 Jennifer Lawrence; No. 8 singer Katy Perry; and No. 10 Steve Carell.

My first clue that my kids were watching more than mainstream programming (their mother’s entertainment) was their interest in the phenomenon “Fred,” an online nerdy character created and played by Lucas Cruikshank, who talked in a squeaky, childlike voice about life in the suburbs in short sketches. The YouTube channel spawned a feature based on the character that came out on disc after airing on Nickelodeon. “Fred” turned out to be a short-lived fad in my house, proving Andy Warhol’s 15 minutes of fame axiom, but not before “Fred” sold lots of DVDs.

Those same kids that propelled “Fred” into the limelight are making famous online performers such as PewDiePie. I don’t know if these new online stars are fads that, like “Fred,” will fade quickly as kids turn to someone new (Cruikshank, by the way, has moved on to a new channel sans “Fred”). Nevertheless, it looks as if Hollywood is starting to take notice. Fox’s Teen Choice Awards this year greatly expanded its Web categories to a total of 13 digital awards, including top male and female Web star. These stars even have their own version of Comic-Con, Vidcon, which recently attracted nearly 20,000 attendees to the Anaheim Convention Center and included an “industry track” featuring DreamWorks CEO Jeffrey Katzenberg.

Whether these online stars represent a promotional opportunity or will spawn a whole new home entertainment business seems to be a looming question for the industry.

Bullying the Studios

The pricing dispute between Amazon and Walt Disney Studios is merely the latest skirmish in a 35-year battle between studios, who own the content, and retailers, who distribute it.

It also serves as an indictment of Amazon’s business tactics and, as the Washington Post observes, “power over the retail and media economy.”

Simply put, Amazon is putting pressure on Disney — as it did earlier with Warner Bros. — to get a better deal on Blu-ray Discs and DVDs. In a story Home Media Magazine broke, the giant online retailer is blocking preorders of several Disney titles such as Captain America: The Winter Soldier and Maleficent as a negotiating tactic for better pricing.

Amazon certainly has a big muscle to flex: Preorders typically account for up to 30% of “first day” sales, and Amazon is the biggest pre-seller in the business.

Amazon also happens to be one of the biggest retailers of filmed content, period, and also is poised to be a leader in digital distribution.

But as a matter of principle, what Amazon is doing, quite frankly, stinks. It also exposes one of the online retailer’s weaknesses and rare disadvantages to traditional brick-and-mortar retailers such as Walmart, Costco, Target and Best Buy.

To move huge quantities of discs, Amazon has to sell new releases at the same price as Walmart and the other physical retailers. But Walmart and crew can afford to lowball the price, even selling below their own costs, because they use discs as loss-leaders to drive traffic into their stores.

Amazon hasn’t yet figured out how to get those impulse sales in the digital world — but they have to be competitive, so now they are using their clout to beat up the studios in an attempt to get better margins.

My take, to Amazon: Stop being a bully and, instead, focus all of that misspent energy on figuring out how to snag impulse buyers online. Amazon’s efforts in that regard have been half-hearted and only moderately successful — otherwise, there’d be no squawking over price.

If Amazon could come up with a way to really captivate consumers and, say, through each Blu-ray Disc or DVD purchase, get them to buy a ton of other things, they'd rule the world.

But they’d have to match the disc sales price of Walmart and other brick-and-mortar retailers on their own, without any studio subsidy, even if it meant taking a loss — which, in reality, would be an investment. And Amazon just doesn’t want to do that.

It’s much easier, I suppose, to block studio product and try to get the studios to blink first.
 

Transaction vs.Subscription: The Next Battle Royale?

Remember that old line about how the more things change, the more they stay the same? From the very beginning of the home entertainment industry, the studios — who control the content, which of course is the single most important factor in the whole equation — have consistently done battle with various enemies, real or perceived.

In the early days of the business, they tried to crack down on the proliferating video retailers who were renting their videocassettes and pocketing the money. They ultimately lost in court and wound up toying with all sorts of strategies to share in the revenue.

When DVD came around and consumer habits shifted from renting to buying movies and other content, the studios found a new nemesis: deep discounting mass merchants who, in Hollywood’s view, devalued the product. Once again, the studios came up with various strategies to preserve their margins. On the catalog end, they worked with key retailers to agree on tiered pricing, so that the “race to the bottom” wasn’t a straight, head-first plunge. On the new release front, they began issuing two different versions of new releases, a bare-bones DVD the mass merchants could sell for peanuts and a more expensive version, packed with extras, that could fetch a significantly higher price.

A decade later, when the sellthrough business began to level off, studios went after Netflix and Redbox, which through their subscription and kiosk rental models, the studios felt, were cannibalizing sales. A bitter fight ensued, with studios refusing to sell Netflix and Redbox their product. The rental services figured out all sorts of work-arounds, including sending teams into Walmart to buy huge quantities of new releases. Several studios went to court, but ultimately, in 2010, everything was settled at the negotiating table, with three studios now holding back new releases from Netflix and Redbox for 28 days and, in return, extending the rental services better pricing.

Moving into the digital realm, the studios are now pushing Digital HD, or “electronic sellthrough,” which essentially consists of selling downloads to consumers. But despite early release windows the business remains on a slow roll, with consumers by far preferring to stream movies — the electronic equivalent of video rental.

This, in turn, now promises to evolve into the next big battle: transaction versus subscription. If you thought the studios hated video rental, that’s nothing compared to how they feel about subscription, which not only takes them out of the revenue loop but puts all content on a level playing field. So far the studios have been able to keep hot new releases from being included, but there’s already so much other stuff available for around 10 bucks a month that new-release sales are bound to suffer.

How do the studios keep the transactional part of the business alive? That’s a very, very good question — and one that ultimately will be decided not by Hollywood, but by the consumer.

A Whole New Virtual World at Comic-Con

Among all the ubergeek hoopla, cosplayers, stars and Hollywood marketing events at this year’s San Diego Comic-Con International was a virtual player that could prove revolutionary for the entertainment business.

Oculus VR, recently acquired by Facebook, powered several virtual reality exhibits both on and off the show floor, resulting in long lines and quickly maxed-out showings. HBO’s “Game of Thrones” exhibit across the street from the convention center featured a harrowing, but exciting, virtual reality ride up an elevator to the top of The Wall. As my virtual trip had me cresting The Wall and falling I grabbed the sides of the booth cage in anticipation of a drop, a testament to the effectiveness of the product. Other properties using the virtual reality device as promotion at Comic-Con were “Sleepy Hollow,” Pacific Rim, Into the Storm and X-Men: Days of Future Past, which provided a virtual reality experience on the show floor in which you are Professor X heading into Cerebro and looking for mutants.

Each of the virtual reality experiences was short, and you did have to wear a rather cumbersome headset that I confess I didn’t have time to adjust properly. I don’t know whether longer-form virtual reality entertainment will take off anytime soon. (Witness the disappointing falloff of 3D, in part due to the need for glasses.) But I didn’t get sick looking around in the virtual world for the few moments I was there, which makes this entertainment consumer and observer eager to see more.

Getting physical for a moment, I also noticed the many booths selling discs at Comic-Con. Fox created elaborate and exclusive disc sets for the Comic-Con crowd, and even a booth in the anime biz, which has gone more digital than other parts of the industry, featured disc sets that fans were eagerly picking over. The collector seemed alive and well at the Con.