Kevin Tsujihara: A Wise Choice for Warner CEO

Kevin Tsujihara’s selection as the next CEO of Warner Bros. didn’t surprise me in the least. As the studio’s longtime head of home entertainment, he’s proven that he knows how to make money. Home entertainment is still the biggest source of revenues to the studios, and Warner Bros. has been tops in market share since even before I began writing about home entertainment more than two decades ago.

But Tsujihara’s selection was not just a matter of dollars and cents — not by a long shot. In a Hollywood ecosystem where imitation is not just the sincerest form of flattery, but a way of life, Tsujihara has always been a maverick. He’s not only stood out from the home entertainment pack, he’s inevitably stood out ahead of it. He’s earned a reputation as a deliberate disruptor who’s never been afraid to try new things and if they don’t always work out the way he had hoped, well, that’s OK, let’s move on to something else.

And yet he’s not so much a gambler, a risk taker, as he is a shrewd and savvy entrepreneur — albeit one who has learned to operate in a corporate environment. He’s a leader of the pack who also happens to work and play well with others.

Tsujihara doesn’t so much roll the dice on emerging and even future technologies as he plays the field, carefully picking and choosing what he considers to have the best chance at success. He’s not looking to transform the business so much as he is out to reinvent it, rebuild it — in a sustainable way. And if one accepts sustainability as Hollywood’s true holy grail, then Tsujihara’s real trump card is twofold: He’s got the vision to see what lies ahead, and the courage, guts and acumen to follow through and get us there, in some way or another.

Tsujihara pioneered the concept of day-and-date video-on-demand. He was one of the first to recognize the power and potency of social media by first selling movies on Facebook and then spearheading the acquisition of social movie fan site Flixster. His latest triumph is still a work in progress: leading the industry charge to UltraViolet, a critically important next step in the ongoing evolution of home entertainment that allows customers to acces digital versions of their purchased content from the cloud.

UltraViolet at once future proofs physical media and creates a whole new business model for electronic sellthrough, which has been a slow go for the Hollywood studios.

Many observers have already said that in choosing Tsujihara as their next CEO, Warner Bros. board members made the best choice. In truth, they made the only choice if their studio — and others like it — are to survive, and even thrive, in the digital era.

Final 'Potter' Collection Goes Wide Nov. 13

Warner Home Video is making the final “Harry Potter” Ultimate Collector’s Edition boxed set widely available Nov. 13 (order date Oct. 16). The $64.99 Year 7 set, which includes both Harry Potter and the Deathly Hallows — Part 1 and Part 2, is currently available exclusively at Target.

Warner began releasing the “Harry Potter” films as deluxe Ultimate Collector’s Editions on DVD and Blu-ray in 2009, containing a multitude of photo cards, a souvenir book and part of a larger documentary about the making of the saga. Fans who had eschewed the mega Wizard’s Collection of all eight films in favor of the UCEs can now complete their sets.

The Year 7 set includes both films on DVD and Blu-ray, making it the first combo pack in the collection. Previous sets were released as either DVD or Blu-ray editions. With no separate format releases of Year 7 slated, this box serves to complete both the previously released DVD and Blu-ray collections.

The set also includes access to UltraViolet copies of the two films. Extras include the final two chapters of the Creating the World of Harry Potter documentary: “Story” and “Growing Up,” as well as deleted scenes, a slew of behind-the-scenes featurettes, and the extended cut of “A Conversation With JK Rowling and Daniel Radcliffe.”

UCEs of the previous films are offered at $39.92 for DVD and $49.99 for Blu-ray.

Warner Immortalized on Disc

While there are many historic and legendary spots in Hollywood, the Warner lot is one of the most iconic. As Warner Bros. sets out to celebrate its 90th anniversary next year, which will occur on April 4, 2013, studio executives last week chronicled the studio’s long history — from its visionaries, the four Warner brothers, to its groundbreaking launch of sound pictures, to its longstanding relationships with and championing of talent such as Clint Eastwood.

The unveiling of the anniversary plans occurred on a studio lot where such legends as Bette Davis once strolled. While film was the original medium that made the Warner lot what it is today, it is mostly likely on disc that many younger fans learned to appreciate the work of Davis, the Warner brothers and numerous other filmmakers, technicians and stars that graced its avenues.

Thus, it is fitting that Warner’s celebration will include the release of numerous — some truly gigantic — disc collections. From The Jazz Singer, which helped launch sound pictures and is being released for the first time on Blu-ray, to James Dean and Best Picture Oscar collections, among other gems, the home entertainment team at Warner will unveil a feast of films on disc in 2013.

In an environment in which “going digital” is pervasive, disc still is the best medium consumers have to own a studio’s memories in permanent, collectible form.

A few years ago at the Consumer Electronics Show in Las Vegas, director Oliver Stone lamented the fact that many consumers are watching films digitally on small screens, in low quality, calling it “depressing” to filmmakers. He urged the audience to watch films on disc. “Go against the grain — collect!” he said.

Luckily, Warner Bros. Home Entertainment Group is making collecting films from its studio library more enticing than ever. The studio has been known for spending millions to restore its library, and has continued to enhance the value of its classic content in preparation for the 90th. Film aficionados no doubt will appreciate the effort and care studio executives have taken for the 90th anniversary for years to come.

Possible New Warner Window Could Change the Sellthrough Game

I ran across an interesting statistic the other day. Netflix accounts for about 25% of total consumer spending on home entertainment — figuring rental is half the market, and Netflix is half the rental business. And yet if you talk to any studio president, you’ll hear that Netflix, at best, accounts for only 5% of the average studio’s total home entertainment sales.

That’s clear evidence of just how much money the studios left on the proverbial table when all of Hollywood was touting the rapid rise of sellthrough in the late 1990s and early 2000s while completely ignoring the rental transactional end of the business. Left on the sidelines in our collective glee over escalating buy rates and what we mistook for a dramatic change in consumer behavior, the rental business mutated and evolved with nary a notice from Hollywood, which is why a smart guy like Reed Hastings was able to come in and in a few short years virtually “own” the business, hastening Blockbuster’s demise and, years later, putting a crimp in sellthrough now that the novelty of owning movies is over and consumers are a lot more selective in what they choose to buy.

The 28-day window three, and sometimes four, studios imposed on Netflix and its fellow rental renegade, Redbox, in an attempt to spur sales, hasn’t really been working all that well, my sources tell me. Back in the gaga days of DVD, when up to 60% of inventory sold through within a week and everyone rushed out to buy the week’s hottest new releases bright and early on Tuesday morning, 28 days was a lifetime. But as the business matured, that sense of urgency gradually went away, to the point where first-week sales are way down. People don’t mind waiting a few weeks to rent a movie from Netflix or Redbox, particularly at a time when the economy is still shaky and entertainment options are at an all-time high. There’s plenty to do in those weeks before a movie hits the Netflix queue, from updating Facebook to beating your kid at Angry Birds.

But after four weeks people are going to start getting a little antsy, which is why all eyes right now are on Warner Home Video and its still-unconfirmed intent to lengthen the window from 28 to 60 days — and perhaps include all classes of rental trade, including brick-and-mortar. If Warner’s new window is, indeed, the tipping point, the right amount of time for consumers to say something along the lines of, “Screw it, I’m tired of waiting, I’ll just buy the damn movie,” you can bet your state-of-the-art 3D Blu-ray player that other studios are going to follow suit.

And while the obvious goal is to boost sales, the other is to put the brakes on the Netflix phenomenon (although Reed Hastings has been doing a pretty good job of that himself). You can’t blame the studios for that: when 25% of consumer dollars flow into a business that only gives you 5% back, you’ve got to do something, anything, to at least even the score.
 

Creativity a Tool to Revive Catalog Business

Studio marketers have a difficult challenge ahead of them. They need to push Blu-ray Disc sales to make up for continued consumer disinterest in standard DVD. And yet at the same time they have to figure out ways to make DVD, as mature a format as it is, appealing to consumers again, at least until Blu-ray Disc truly becomes a mass-market item.

With new releases the strategy is pretty simple — and the results, increasingly hit or miss. Promote the title as much as you can, both among the masses and among specific niches. Tie it in with anything that makes sense, and don't let up until several weeks after release. Week one simply isn't as critical as it once was.

For theatrical catalog, the most common strategy is simply to slap an anniversary tag on the package and lower the price — with steadily diminishing returns. Consumers will only buy the same movie over and over again to a point — then they throw up their hands and cry, “Enough.” Why isn't the 25th anniversary edition of Movie X selling? Maybe because the film's fan base already has bought the initial DVD release, the 15th anniversary edition, the director's cut, the ultimate edition and the 20th anniversary edition. In the meantime, consumers have amassed hundreds of other DVDs as well, so many that there's simply no more room in their homes for more.

And yet as any good marketer knows, consumers will buy that 25th anniversary edition if there is a compelling reason for them to do so. And price just isn't one of those reasons.

The folks at Warner Home Video's theatrical catalog department are fully aware of the need to create a compelling reason for consumers to buy their library titles. That's why the division, under the direction of Jeff Baker and George Feltenstein, has created an incredible product line with its Ultimate Collector's Editions — lavish boxed sets that command premium price tags and come with all sorts of extra content and additional goodies, like books, postcards, reproductions of programs and, in the case of The Wizard of Oz, even a watch.

MGM Home Entertainment, under the guidance of veteran executive Eric Doctorow, also deserves a callout here. MGM's is mostly a catalog business, and time and time again, the studio has come up with truly captivating packages or programs to remarket old movies. Celebrity gift sets, each with four movies in collector-quality packaging, are breathing new life, and respectable sales, into deep-catalog movies that on their own wouldn't attract much attention. The Decades Collection, with iconic films from a specific decade packaged with a nostalgic booklet and CD with eight hit songs, is another remarkably clever marketing tool. And let's not discount the United Artists brand's 90th anniversary campaign, with a flagship collection of 90 UA films and a series of successful retail-driven anniversary events.

I should mention that both Warner and MGM also were pioneers in MOD (manufacturing on demand), a creative new business model that provides studios with a viable way to exploit titles that otherwise would not be available to consumers through regular retail channels.

By developing these and other clever initiatives to drive catalog sales, both Warner and MGM have kept their market shares relatively stable over the last four years even as the overall theatrical catalog business has tanked.

There's a lesson here, my friends ...

Warner Also Puts Redbox on Window Alert

As expected, Warner Home Video has chimed in with the "fight club" of studios that don't want Redbox renting their new releases for a buck the day they come out.

A day after the kiosk company fiiled suit against 20th Century Fox over imposing a 30-day delay, Warner Home Video has informed Redbox of a 28-day window before making titles available to kiosks. But while Fox's window was imposed through third-party distributors, Warner's announcement was coupled with word that it is eliminating whoilesalers and, come October, will sell direct to both kiosks and mail-order subscription rental programs (Netflix and the various Netflix wannabes).

Interesting tactic. Warner's line is that if it deals direct with different classes of vendors, it can impose different "business options," including windows (for kiosks) and revenue-sharing (for subscription rentals). We shall see if that reasoning will keep Warner from the legal line of fire Redbox already has aimed at Fox and, previously, Universal Studios, the first studio to just say "no" to Redbox last year with its 45-day window rule.

Here is the Warner press release, in its entirety:

Burbank, Calif., August 13, 2009 – Warner Home Video (WHV) today informed its wholesalers that beginning in October, WHV will engage solely in direct relationships with kiosk and mail-order subscription vendors.

Through a direct relationship, WHV can ensure that its titles are available through a variety of distribution models to serve all types of consumer preferences. WHV will be in discussions with both kiosk and mail-order subscription vendors, offering business options that will allow all parties to grow their respective businesses. The options offered to kiosk vendors will include a 28-day window, while mail-order subscription customers will also have a day-and-date revenue sharing option. Additionally, WHV has revised their wholesaler terms to prohibit the purchase and sale of WHV previously viewed product.

Say It Ain’t So

My excitement over Watchmen has only grown with each new screenshot, trailer and video released for the film, not to mention experiencing the fandom for Alan Moore’s graphic novel masterpiece at this year’s San Diego Comic-Con International. In an era in which The Dark Knight has routinely wound up near the top of year-end movie lists, Watchmen looks like it could be the next superhero classic (even if it ends up not quite living up to its hype).

So it’s with great displeasure that I learned the court held that Warner Bros. violated distribution rights for Watchmen held by 20th Century Fox. Not that I have anything against Fox, mind you; I’m sure they have a perfectly legitimate case. It’s just that I was excited to have the film finally come out in March. Now no one’s sure when that will happen, even if Warner maintains the film will come out as planned.

In the wake of this news and , I hope studios don’t start turning away from long-underrated comic book, comic strip and graphic novel writing for film material (fat chance, with the success of that other Warner superhero film). Hopefully everything is resolved in due time.

Just watch and take a look at the care being put into the sets alone in this video, the first of 12 videos set to debut every month up to the film’s release. Hopefully the video countdown isn’t its own Doomsday Clock to a movie that doesn’t come out.

 

‘Dark Knight’ Retail Exclusives? Flip a Coin

Retailers are nothing if not predictable. Their lineup of home video exclusives for the No. 1 movie of the year, Warner Home Video’s The Dark Knight, is nearly identical to versions offered for Paramount’s Iron Man a few months ago.

No need to bore you with the list and prices; for that you can visit here:

It’s the usual array. Best Buy has little mask replicas (like Iron Man and Indiana Jones and the Kingdom of the Crystal Skull had). Target has a Batman mask case (like Iron Man and Transformers).

But my favorite is probably Wal-Mart’s exclusive. It offers a mini-comic containing reprints of the first Joker and Two-Face stories from the 1940s, as well as a nifty replica of Two-Face’s coin from the film. The only drawback is it comes with the bare-bones version of the DVD.

Of course, real fans will want the Blu-ray Disc version anyway.
 

Home Theater Forum Goes to Hollywood: Warner

BURBANK, Calif. — Closing out their whirlwind, week-long tour of every major studio, members of the Home Theater Forum Oct. 24 received a behind-the-scenes tour of Warner Bros. Studios, and were privy to the studios Blu-ray Disc plans for some of the biggest movies ever.

Both Gone With the Wind and The Wizard of Oz will see Blu-ray releases for their 70th anniversaries in 2009, said George Feltenstein, SVP of Warner Home Video’s classic catalogue, telling Forum members, “I think you will be very, very pleased.”

Estimating that he’s been a part of 17 marketing campaigns for The Wizard of Oz, Feltenstein promised an impressive release of the film on high-def.

“We have a big initiative behind [it]. We planned on releasing The Wizard of Oz right at the beginning [of high-def],” he said, but the studio changed its mind, holding off for the anniversary. “It will knock your socks off,” he promised.

BD Live will help Warner Bros. offer whatever content the studio can’t fit on the disc, he added.

Forum members were shown before-and-after video of An American in Paris and A Star is Born, both being cleaned up for Blu-ray releases.

“At the time we pretty much thought that was the bee’s knees,” Feltenstein said of the An American in Paris DVD transfer. “As you can see, it’s improved.”

Responding to questions about when other, older films might exit the vault for Blu-ray, Feltenstein responded: “I basically won’t rest until everything is available. In other words, I probably won’t get much sleep.”

Lastly, Feltenstein hinted that The Lord of the Rings trilogy could see a Blu-ray release “in the near future.”

Earlier in the day, Forum members were treated to a tour of Warner Bros. Motion Picture Imaging (MPI), something the general public can’t do. Bob Bailey, VP of sales for MPI, showed off the studios massive vault and a step-by-step clean up of North by Northwest. That impressed Forum Administrator Adam Gregorich.

“Just the chance to go in and see the shows you grew up with, they’re right there! And the different steps they take to scan a film was impressive,” he said.

Bailey said, “We’ve never had that many people in here at one time.”