A Peek Into the Digital Future?

The issue of Netflix wanting to run their fleet of 18 wheelers roughshod over Verizon’s roads without paying extra taxes to maintain them got me thinking about how this plays out over the long haul. I thought about a few potential scenarios, some more possible than others:

■ Someone new (Google?) comes into the picture as a new mega-ISP, flush with massive bandwidth from all the dark fiber they have been quietly buying up around the country. They serve as both content provider and distributor, cornering the market on lightning-fast downloads and streaming for an incredibly cheap price subsidized by its other businesses. To compete, Verizon buys Netflix, and other companies partner up with equally synchronistic bedfellows. Within three years all ventures collapse since nobody understands the other side(s) of the business and they eat each other from within. Somewhere, the ghost of Blockbuster says, “Heeeyyyy … that’s my jam!”



■ Fiber? Cable? DSL? It’s all obsolete as everything goes wireless. After quietly building wireless bandwidth to a level where it can support the traffic, the cell phone companies drop their data limits and embrace streaming big time, adding set-top boxes that are basically cell phones you can operate with your cell phone. (After the Big One finally hits SoCal, their spinner powered STB is the only game in town.) Soon, the cable and fiber companies are begging Netflix to use their roads at a discount. The new super ISP, T-Mob-Verizo-Flix, just laughs and has the former CEO of Redbox peel them another grape.

■  The whole issue becomes moot as the last person in America to learn how to use BitTorrent (93-year-old Marjorie Henspittle of Appalachia, Tenn.) logs on to The Pirate Bay and successfully downloads season 12 of “Game of Thrones” — the one where Tommen hooks up with Deanery’s daughter (Honey Boo Boo Stormborn) and they rule Westeros with an iron fist, a velvet glove and dragons. Nobody in Hollywood gets paid for anything anymore, but they still continue to create programming simply to qualify for awards shows.

■ Once every physical dollar has completely been replaced with a digital penny, the studios find that they can only afford to create Vines and superhero movies with sock puppets. No problem, though, since the average Mac user can make an effects-laden comic book movie in their backyard using a 4K camera for less than $500. Soon the world runs out of comic book heroes so we have to import them from the Third World. (Look! Up in the sky! It’s Súper Poderoso Hombre Asombroso Fantástico!) Nobody is getting paid (still!), but since network TV is now 97% awards shows (and “CSI”), the content flows and flows.  



■ YouTube is allowed to place remote wireless cameras everywhere, and just by being born you are automatically signing a release allowing them to broadcast webcam footage of you getting hit by a car, robbing a liquor store or whatever shows up on their cameras. But the most popular YouTube channel, now in its 15th year, is the Sneezing Panda Channel (SPC), responsible for 73% of all traffic on fiber and cable. (In second place, the Getting Hit by a Car channel, which mostly is people throwing themselves in front of cars in an attempt to win something at the YouTube Award Show.) 



It’s gonna be a brave new world! How’s your bandwidth?

Netflix a Conquering Army

The impact of Netflix on how we watch movies and other filmed content is astounding. There are those who say the company’s subscription streaming service is decimating the disc sales business, while others scoff at this intimation and insist the real victim is broadcast TV.

Those who hold the latter point of view note that Netflix viewing options, at least at this point, are limited to old movies and recent duds, and that as long as the window between Netflix and Blu-ray Disc/DVD is maintained, we have nothing to worry about.

Oh, sure, there’s a definite impact from all the eyeballs watching White Chicks or “Supernatural” on Netflix instead of hot new releases on Blu-ray Disc or DVD, but the debate centers on whether those eyeballs belong to people who would, indeed, be buying new discs if Netflix wasn’t available, or if their owners are sluggish couch potatoes who’d otherwise be watching broadcast or cable television.

But there’s no question that the Netflix juggernaut keeps rolling and amassing power — with the ultimate goal, of course, of offering first-run movies and TV shows at the same exact moment they come out on disc — a move that will, of course, kill the disc business and probably a lot of other businesses alongside it, including pay-TV.

Never going to happen, you say? If the money’s right, of course it will — and if there’s one thing I’ve learned in more than 25 years of covering the home entertainment business, it’s to never, ever, say never.

As Home Media reported July 17, Netflix and The Walt Disney Co. have cut a deal in which Netflix gets exclusive pay-TV access to first-run movies in Canada beginning in 2015. A similar deal is in place here in the United States, although it’s not scheduled to start until 2016.

Netflix in Canada also gets first-run pay-TV films from Paramount, DreamWorks Animation and 20th Century Fox.

If things continue to be heading in this direction, pay-TV will crumble and fall to Netflix’s domination — and after that, there’s really only one more market left to conquer, the disc business.

Studios won’t give it up without a fight — but the more powerful Netflix becomes and the more the disc business falters, the harder it’s going to be to resist a reasonable offer. And if Netflix can somehow figure out how to make the numbers work, offering unlimited access to new-release movies and original TV shows for $9 a month, what began as a disc-by-mail rental service challenging Blockbuster and traditional rental will truly become the pre-breakup AT&T of home entertainment.

Netflix Heading for Global Domination?

You’ve got to hand it to Netflix’s Reed Hastings. He certainly has a vision and follows it. In spite of a misstep a few years ago in which Netflix disc renters balked at his plans for a brave new digital world, Hastings is sticking to his roadmap of creating original programming for his streaming service, expanding streaming internationally and slowly phasing out disc.

Witness just a few of the recent events involving Netflix:

• Netflix original shows “Orange Is the New Black” and “House of Cards” picked up multiple Emmy nominations, prompting observers to lump in the online pioneer with the cable companies that are eclipsing broadcasters at the annual awards show.

• Netflix and The Walt Disney Co. July 17 announced an agreement giving the subscription streaming pioneer exclusive pay-TV access to first-run Disney movies in Canada beginning in 2015.

• According to new data from IHS, sales of DVD and Blu-ray Disc movies in Norway and Denmark have fallen more than 50% over the past few years — the fastest rate of decline anywhere in the world — in part because of the rapid growth of Netflix.

• Even though it created the by-mail disc-rental business, Netflix stopped processing disc shipments on Saturdays in June.

Netflix executives’ laser focus on the company’s three key objectives is yielding undeniable results, and any observer certainly has to credit Hastings and his executive team for their determination and success.

Where that leads the industry at large is another question. The shrinking disc business, in part hastened by Netflix’s streaming service, has been a blow to studios, and Netflix’s cord-cutting customers have shaken up the cable and broadcast businesses in the TV sphere, which may eventually result in lower income for TV content producers. Netflix has shown a willingness to fund content — Emmy-lauded content — but is that enough to make up for the loss of income to other content creators who have built our entertainment industry into the envy of the world?

Will struggling content companies merge to save costs, putting the control of media into even fewer hands? Fox’s bid for Time Warner this month is an ominous sign.

Netflix’s quest for global domination is off to a good start. I hope its disruptive business model increases strong content, rather than shrinks it.
 

Perfecting the Digital Supply Chain: It's Not Sexy, But It's Important

Mentioning “supply chain” to most people in the industry is a sure way to end a conversation. It’s not that people don’t recognize its importance, it’s just not a sexy topic. We’d rather talk content or technology or business models — anything but supply chain!

But getting content from the suppliers through retail/distribution and, ultimately, to consumers efficiently and without quality issues is essential. In the digital environment, supply chain challenges are enormous. Getting a video online for consumers is much more complicated than getting DVDs or Blu-ray Discs in their hands. Content owners must ensure the online video plays seamlessly on a multitude of platforms and devices, that it is offered only in those territories in which it is authorized and that it is available only within the designated window, among a host of other issues.

And in this nascent industry with a multitude of start-ups, digital supply chain work processes were invented as they went along. Everybody was doing the same thing, but in different ways.

An example I often cite is the Content Availability Metadata, commonly called “avails.” These are the communications from content providers to retailers about when a video will be available online and in which territories, the title, language, run-time, HD or SD, EST or VOD, etc.

The avails were communicated in a variety of different formats, depending on the preferences of the content providers and the requirements of the retailers. Some were on spreadsheets, others in the bodies of emails, still others in PDFs, and I even heard about them being communicated via JPEGs.

As a result, this important data — which is necessary for licensing compliance as well as retailer workflows — had to be manually inputted into the retailers’ systems. This was incredibly time-consuming. One retailer told me it took them 50 person-hours to ingest 1,000 avails. And the system introduced the opportunity for error. Errors in transcribing avails can result in violations of licensing contracts if, as a result, a title is released early or not removed at the end of the license term.

A few years ago, online video retailers asked the Entertainment Merchants Association (EMA) for help promoting supply chain efficiencies in the digital marketplace. They recognized that common practices would ensure that more product could get to consumers quicker and with fewer technical glitches. They also saw there was no competitive advantage to be gained in insisting on proprietary methods in all aspects of the digital supply chain.

The first thing we facilitated was the development of a glossary for online video, as we found that different companies called things by different names.

When the glossary was completed, we identified five areas most in need of consistency: metadata, mezzanine files, image files, closed captions and avails. We put together working groups for each, and populated them with representatives from major online retailers, plus experts from content providers. Amazon, Google and Netflix were particularly active participants. The working groups have developed or are in the process of finalizing best practices, specifications and/or standards for each of these five supply chain areas.

We take the final work product and share it with a representative group of content providers and service and technology companies to ensure the process works for them as well.

Our first project was metadata standardization. Metadata is the information that identifies and describes the contents of a medium. This can include descriptive information such as title, artist, production company, seasonal/episodic description and original release date. It can also include technical information such as file types and codecs, as well as business-related information such as pricing and availability. Metadata for digital video distribution is too often communicated manually and in a variety of inconsistent structures and formats. Missing metadata or bad metadata that is translated to retailer sites can cause lost sales. In addition, delays entering the metadata into the retailer’s system can bottleneck the supply chain and impede product availability.

With DEG: The Digital Entertainment Group, Digital Entertainment Content Ecosystem, Entertainment ID Registry and MovieLabs, we created the Media Entertainment Core Metadata. The schema includes approximately 60 fields that provide the essential basic information about the content — such as title, run-time and cast — and information about the digital asset.

Another aspect of the digital supply chain that needed standardization was the mezzanine file. This online video master file is used to create manageable files for streaming or downloading. Content providers and post-houses are currently generating this film in numerous formats for various customers, which causes unnecessary costs and delays in the supply chain and constrains the flow of new content.

EMA’s “Mezzanine File Creation Specification and Best Practices” seeks to reduce duplicate work and provide optimal quality with a reasonable file size to enable rapid transmission. It addresses video preparation, video and audio encoding, and containers.

Image files have been a pain point in the supply chain because, at the request of retailers, content providers have been creating image files unique to each. Additionally, sometimes retailers will edit and adapt the image files they receive, which requires approval from the content provider. All this imposes costs and results in delays.

A working group developed image artwork best practices and specifications for both movie and TV properties. The spec establishes a set of consistent sizes, file formats, colors, naming and the like for image artwork. One retailer told me this spec will likely save them two person-years annually.

EMA’s closed captions working group is focused on ensuring compliance with the legal requirements for captioning online video. This group is finalizing best practices for identification of when closed captions are not legally required (and why), closed caption file formats and frame rates.

Finally, there is the avails group, which developed “Best Practices & Standards for the Delivery of Avails.” This consists of approximately 40 standardized fields that provide all the information a retailer needs to schedule an online video offering. The avails can be communicated in either Excel or XML, with the eventual goal of solely using XML.

And the retailer that required 50 person-hours to ingest 1,000 avails has implemented the EMA avails spec and can now ingest 1,000 titles in less than 30 minutes, with a 0% error rate!

EMA’s digital supply chain initiatives demonstrate how by working cooperatively to solve common problems it is possible to create efficiencies that improve the consumer experience and drive unnecessary costs out of the supply chain.

I encourage all participants in the online video market to take a look at these best practices, specifications and standards (available at DigitalEMA.org) and incorporate them into their workflows, where appropriate.

As I said, it may not be sexy, but it is essential.

Finding That Personal Touch

I recently watched First Run Features’ documentary Anita, and I actually sat through an entire lecture by professor Hill that was among the extras. I’m kind of a nerd, so my viewing habits aren’t all that surprising, but I’m always shocked — in this media saturated world with all of its distractions — that my kids like to view disc extras.

Recently, we watched the Blu-ray Disc of Warner Home Video’s The Lego Movie. Believe it or not, as they always do, my kids ran through all of the extras on the disc.  Their favorite bonus wasn’t the commentary or other standards. What they most liked was the section on Lego shorts produced by amateur fans.

When I thought about it, their preference was not surprising. Amateur online entertainment often dominates their attention, rather than the slick productions on television or in movie theaters. While my generation preferred to sit in front of the TV, my kids spend hours watching YouTube stars on tablets, cell phones or computers. In addition to a variety that even dozens of cable channels can’t supply, it’s the personal touch, my kids say, that draws them to the Web. They feel as if they know online performers, who answer fans’ questions, often give their fans a nickname and talk directly to the camera like a friend.

Having grown up in a media world full of digital effects and retouching, kids, perhaps not surprisingly, seem to crave authenticity — unexpected and spontaneous entertainment. While they certainly like those popcorn flicks filling theaters, the younger generation has a unique relationship with the media they consume. Media is more personal. Heck, whole friendships are cemented online rather than by talking on the phone or in person, as with my generation. Marketers who hope to appeal to the younger set may hit their target if they emphasize a closer, more authentic relationship with the movies or television shows they are promoting.

In addition to that blockbuster saturated with digital effects, kids may respond to homemade, interactive elements that don’t have all of the rough edges smoothed; extras with a personal touch.

 

Don’t Forget Main Street

For several years now, in the political realm, we’ve been hearing that to really measure the state of the economy we need to focus not on Wall Street but on Main Street.

The same can be said in our industry: We need to focus less on Hollywood, California, and more on Hollywood, Florida.

Our industry has been too quick to give up on formats and technologies simply because they are no longer cool or hip — and in the process we’ve left a lot of people out there in a proverbial lurch, wondering why they can’t get their favorite movie on the format they like and are familiar with.

We’ve also been so dazzled by technology that we forget the formula for success in any field that French philosopher of education Jacques Barzun happened to apply to a book on the craft of writing: Simple and direct.

When DVD came around, it took a while for the format to take hold, but after Walmart jumped aboard about two years after launch the studios couldn’t get rid of VHS fast enough. Studio executives all had DVD players and so did their neighbors, so why bother even making those clunky videocassettes anymore?

What they failed to realize was that those clunky videocassettes were not only immensely popular in America’s heartland, but they also were keeping video rental stores alive — rental stores that indirectly helped feed the DVD juggernaut by easing people into the new format. Ma and Pa Kettle in Jasper, Ala., could keep renting movies they liked, and gradually warm up to DVD — and the concept of out-of-the-gate ownership — at their own pace. It’s human nature to be more open to something new if we can approach it on our own terms, instead of having it forced on us.

Sure, ultimately DVD became the biggest success story the consumer electronics industry has ever seen, but I can’t help but wonder how much money was left behind by the premature death of VHS. I believe the two formats could have co-existed peacefully for a lot longer than they did, and the industry as a whole would have seen a much slower decline in rental spending — and a much less dramatic death march by independent retailers.

When Blu-ray Disc launched, our industry once again was lulled by looking inside, at our own close circle, instead of at the mainstream consumer. We replaced our movie libraries, so we assumed everyone else would, too — failing to realize that at the time Blu-ray launched much of America was still in the process of building up their DVD libraries. A new format, mired in a brutal format war, no less, must have confused the hell out of the average American who doesn’t live and breathe entertainment.

We further complicated matters by touting different “versions” of Blu-ray, as well as high-tech features such as BD-Live — this at a time when not a single studio president I talked to even owned a connected Blu-ray player.

All the while, we should have focused on one thing: a vast improvement in the viewing experience, with a true high-def picture and the best-ever sound.

Simple and direct. That’s what resonates across America.

Fritz Friedman: A True Class Act

This month’s news that longtime Sony Pictures publicist Fritz Friedman would be leaving the company at the end of the summer called to mind how many times I have depended on Fritz’s unerring class and expertise in this industry.

One of my first contacts when I joined the magazine 20 years ago, Fritz helped me navigate the changing home entertainment landscape with sage advice, praise, and polite, constructive criticism — always delivered with the utmost poise. While publicists and journalists don’t always see eye to eye, I could always count on Fritz to treat me with respect and kindness, both personally and professionally.

During his 34-year career at the studio (which spans most of this 35-year-old magazine’s existence — and indeed the home entertainment industry’s), Fritz has been a welcome fixture as the business changed. Whenever I attended an industry event, I looked for his familiar presence. He was always dapperly dressed and often had a gleeful smile on his face; it was apparent he loved this industry and the people in it. Whether at the yearly VSDA show (since transformed into the Los Angeles Entertainment Summit), the annual Wine & Wisdom event, the Hall of Fame, San Diego Comic-Con International or any of the many expertly choreographed Sony events, I relished catching up with Fritz and getting his take on the happenings in the industry.

I’ve often referred to the home entertainment industry as a small town in which everyone knows each other very well. Expanding on that metaphor, I would say that Fritz is one of our honorary mayors. The students at the University of Southern California, where he is a lecturer, couldn’t ask for a better guide to publicity and Hollywood. I can attest that he is a great teacher. His instruction has been invaluable in my career as an entertainment journalist.

If the home entertainment industry were to have a town meeting, I’m sure we would bestow upon him some sort of honorarium or medal.  Thank you Fritz. You are a true class act.

Fritz Friedman: He Did It His Way

Twenty-five years ago, I was preparing for my very first home video convention, taking place in Las Vegas under the direction of the Video Software Dealers Association.

At the time, I was freelancing for a thick monthly trade magazine called Video Store Magazine, and I remember the editor, Frank Moldstad, giving me the rundown on the various publicists for the studios I would likely be dealing with. There was Steve Feldstein over at Disney, a big man with an even bigger personality who one fellow reporter confided to me was “the smartest guy in this whole business.” There was Maria LaMagra at MCA Universal, a gregarious charmer who ran her department like Margaret Thatcher ran England. There was Nina Stern at Paramount, the most human publicist in Hollywood.

And then there was Fritz Friedman at RCA/Columbia, who Moldstad told me “is in a class by himself,” as all the other reporters nodded in agreement.

I soon learned for myself what they meant. Fritz had along ago broken out of the bounds of standard studio publicity and had emerged as a true public relations strategist. Like the finest craftsmen, he saw publicity as both a science and an art, grounded in developing close relationships with the press built around mutual respect. If Fritz wanted a story, you ran with that story — not because he begged and pleaded, but because it made sense. Fritz never gave reporters a hard sell because he didn’t have to.

Fritz was also a pioneer in bringing event marketing to home entertainment; one of my first-ever Hollywood parties, in fact, was a bash he threw on the studio lot for Boyz n the Hood.  He worked the room like a politician, and drummed up so much publicity for a home video release that event marketing soon became a mainstay on the home entertainment circuit, particularly after the transition from VHS to DVD lifted the business into Hollywood’s single-biggest revenue source. He was the first publicist to bring a major star (Jimmy Stewart) to the VSDA convention; in 1996, when the convention came to L.A., he threw the biggest party in town, an elegant bash for 7,000 people on the studio lot featuring entertainment by Riverdance. More than a decade later, he orchestrated Spider-Man ringing the closing bell at the New York Stock Exchange — not once, but twice.

You hear stories about people who are consumed by their jobs; in Fritz’s case, it’s more like the job was consumed by him. He liked what he did, and he was damn good at it — which is why as word broke that after 34 years of running publicity at what is now Sony Pictures Home Entertainment (and, in recent years, the studio’s acquisition program), Fritz had decided to retire, I didn’t feel bad for him one little bit because I knew that if he was leaving, he was leaving because he wanted to, because he felt it was time.

He’s certainly got enough to keep two or three Fritzes quite busy. He’s an adjunct faculty member at the prestigious Annenberg School of Communications and Journalism. He’s been appointed to the Cal Humanities Board by Gov. Jerry Brown, an agency that since its founding in 1975 has awarded nearly $22 million in grants to organizations and projects within the Golden State, including dozens of Sundance, Emmy, and Academy Award-winning and nominated documentary films.

And he’s involved in all sorts of activities in the Filipino community. He lobbied Congress to give benefits to Filipino veterans of World War II (with Lou Diamond Phillips). He served as Chair and President Emeritus of the Filipino-American Library in Los Angeles. And he co-founded the Coalition of Asian Pacifics in Entertainment (CAPE), which with more than 3,000 members is the largest entertainment networking platform for Asian-Americans.

 

Online Giants Quietly Flexing Their Muscle, Using Consumers

One spat started with a warning that Verizon consumers allegedly got while trying to stream Netflix video: “The Verizon network is crowded right now. Adjusting video for easier playback.”

Another came to light when an anime fan, who couldn’t preorder disc titles on Amazon, complained online to supplier Viz Media and got this response: “Our products are distributed by Warner Brothers, and currently they’re in contract negotiations with Amazon. Preorders are disabled while that goes on, but we’re hoping it will be resolved soon.”

Netflix and Amazon, twin online Goliaths of the home entertainment business, are using their enormous customer bases to put the squeeze on companies that supply them with bandwidth and product.

In the middle are consumers, who have so far benefitted from the low prices provided by Amazon and Netflix — some say gained unfairly by pushing the costs of doing business onto other companies. While consumers who bought items from Walmart, the top brick-and-mortar disc retailer, had to pay state sales taxes, consumers buying from Amazon were exempted from those taxes for much of its life as a company. That, many belief, allowed Amazon to offer lower prices and build itself into a behemoth that controls a good part of the retail business that chains such as Walmart used to dominate. Netflix used infrastructure built by Verizon and other companies to deliver streaming to its customers without paying for the online streaming company’s — some say — outsized domination of that bandwidth.

Netflix and Amazon will contend that they are merely part of a long line of disruptive technologies that change the world for the better. Those on the losing side of this change say they are freeloaders or monopolists that exploit unfair competition.

While some of these issues may end up before government agencies, legislatures or in court (Verizon sent a cease-and-desist letter to Netflix, for instance), these new online behemoths are quietly trying to gain an advantage in the court of public opinion — by upsetting their customers. It may be a risky strategy.

 

Home Entertainment's Mid-Life Crisis

It’s a tough business. That’s what I’m hearing all around from studio executives and retailers as the home entertainment business adjusts to life as a middle ager (which the U.S. Census says starts at 35).

“This job is no fun anymore,” one high-ranking studio executive recently told me. “Every week, it’s all about cutting — taking out costs to save the bottom line.”

Traditionally, when businesses find themselves in a mid-life crisis, they focus on reinventing themselves and hopefully reinvigorating their revenue streams. The defense industry is a perfect case in point: whenever there’s another cycle of downsizing, defense contractors figure out some other business to get into. In 2012, a company called RTI Internationals, which had built its business largely on selling titanium to the U.S. defense industry, bought a medical-device business focused on spinal implants and other products for the nation's growing number of senior citizens.

Our business is a little different: We’re not suffering a cyclical downturn, but, rather, a transformation from one method of distribution (physical) to the next (digital). Americans haven’t slashed their home entertainment budgets; they’re just spending it in different ways, such as Netflix subscriptions.

We also have a clear eye toward the future: If digital distribution is the new way consumers will get movies and other content into their homes and onto their personal devices, then we need to transition the most profitable aspect of our current business — the consumer purchase model — into the digital realm, which studios are doing through Digital HD and, to spur sales, early release windows.

The problem is that the transition isn’t happening smoothly. It’s a bumpy road, with the biggest obstacle being subscription streaming services and video-on-demand.

And while we all still hope that one day these obstacles will be overcome, it’s managing the interim that’s proving to be problematic. With declining revenue from discs, it’s hard to maintain staff and marketing dollars that may well be needed in the fight to get consumers to buy downloads.

Compounding the problem is that the proverbial light at the end of the tunnel isn’t as bright as many of us had hoped. Sales of downloads may never approach the peak of Blu-ray Disc, much less DVD, simply because the joys of ownership have traditionally been centered on a material object you can look at and hold and file away and show off to your friends.

I most certainly want to own The Wizard of Oz, for example — but if there was no such thing as disc, I’m not sure I would fork over $10 or $20 for a download that lives on my hard drive — or a “license” to access the film in the cloud.

Ah, the joys of  middle age.