As the Entertainment Kaleidoscope Turns

The Merriam-Webster dictionary defines a kaleidoscope as a tube that has mirrors and loose pieces of colored glass or plastic inside at one end so that you see many different patterns when you turn the tube while looking in through the other end; a changing pattern or scene; or a mixture of many different things.

What an apt definition for the state of entertainment!

The different pieces of glass or plastic through which viewers can find entertainment have become an ever more complex kaleidoscope, offering different patterns of entertainment not previously available. Entertainment these days is indeed “a mixture of many different things.”

It’s a complex business our women in home entertainment must navigate. They are looking at an entertainment landscape that is fracturing and shifting with ever more devices and services delivering content. These top women recognize the challenge and are looking for mutually beneficial partnerships. It’s an august group that I’m confident is up to the challenge.

While discussing kaleidoscopes, I must acknowledge the apparent end of Kaleidescape, an innovative company that attempted to bridge the gap between physical and digital entertainment. The manufacturer of high-end premium movie players and servers reportedly is ceasing operations and looking to sell its technology. Founder and CEO Cheena Srinivasan disclosed the situation in an interview with CEPro.com, attributing the decision to finances. The company has been pushing boundaries for 16 years. Kaleidescape cut its teeth selling $14,000 hard drives and servers that allowed users to digitally copy store-bought DVDs. This process ran afoul of studio legal teams, but the company eventually made peace with content owners and, in the end, had distribution agreements with five major studios. Kaleidescape also made the transition to digital.

Kaleidescape may have hit a dead end — or is it a new beginning. As the kaleidoscope of entertainment turns …

 

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Future Shock — Again

The annual Los Angeles Entertainment Summit took place July 18-20, and as usual it helped us all unpack the constant change in the industry. While we heard some disappointing news about physical disc sales, there were bright spots in 4K Ultra HD Blu-ray sales and hits such as Deadpool. Executives from the Entertainment Merchants Association, which puts on the event that also benefits the Cystic Fibrosis Foundation, told the crowd about the trade group’s continued work in creating standards for digital distribution — the future of the industry.

The Tech Tour and a panel explored virtual reality. Attendees at the Tech Tour could play catch with a virtual dog (and stick) and shoot virtual space invaders. It was an eerie contrast with the 1980s-themed arcade games at the Paramount lot — which included the classic Space Invaders game with which those of us of a certain age grew up. Meanwhile, famous DJ Richard Blade mixed tracks from the 1980s with more recent hits. It’s perhaps fitting that the theme of the Paramount lot party was “Star Trek,” a franchise that has spanned the decades.

While we were all contemplating virtual reality, another new form of entertainment, augmented reality, was taking the country by storm. A certain day in July, I heard a shriek from my teenaged daughter’s room. Was she injured? Did something horrible happen with a friend or boyfriend? No. She lamented the fact that the Pokémon Go servers were down. A new form of entertainment had emerged, and it was consuming her entertainment time — and causing her to yell in frustration.

But was it really new? The concept of Pokémon Go is based on an older franchise, one that my daughter grew up with and is nostalgic about. It was the connection to her past — and to content that she loved — that drew her into this futuristic world of augmented reality.

Augmented reality is yet another format to connect viewers to content — something we in the home entertainment business have seen and navigated numerous times. Recently, we’ve focused on 4K Ultra HD with HDR, offering a better, more realistic picture for home entertainment viewers. Whether we bring the consumer along with us depends on how compelling our content is, whether new or old.
 

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In Praise of 'Casting'

Recently, I’ve abandoned TV and have been watching streamed content.

It’s been a gradual process. My teenaged daughters have been doing it all along. While my youth consisted of watching “The Tube” and putting up with commercials, my kids have been watching YouTube without the ad breaks almost their whole lives.

It was hard for me to let go of traditional TV content, but the allure of on-demand, no-commercial entertainment finally drew me in.

For me it started with an interest in the latest “The Nightly Show,” “The Daily Show,” “Last Week  Tonight,” Bill Maher and “Full Frontal” comedy news episodes. After I got comfortable Chromecasting episodes from my phone to my TV, I was hooked. That connection from the Internet to the TV was the beginning of an obsession.

I would turn on the tube and yearn for something more compelling, something I could “cast” — without those ridiculously long and growing advertising breaks. Why not turn off “The Tube” and find something I chose to watch without those annoying commercial breaks?

When watching snippets of something fed to me, I would yearn to “cast” the rest of the show I missed in making dinner or picking up the kids.

I wanted more control.

Recently, ESPN conducted an experiment that seemed aimed right at me. They made “OJ: Made in America” available on the cable channel as well as via a streaming app. I’d watch 40 minutes of an episode of the series on cable, and yearn to see the rest on my own timetable.  Eventually, I figured out how to “cast” the episodes to my TV, like I had other YouTube channels.

I could watch this amazing series, on demand, on my own time. It’s a very long series, and I’m still not finished, but I will finish it — when I have the time.

 

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Will High Dynamic Range Attract Film Fans?

I’ve been in this business long enough to see many iterations of increased home entertainment quality (as in more visually and audibly stunning) content trotted out by the content owners. DVD was a revelation. Then Blu-ray Disc upped the ante. Dolby and DTS added to the effect, as did better and better TV screens and 3D viewing.

I’ve never, however, been able to discern quite so clearly the difference that I have seen between an HD presentation and an Ultra HD presentation with high dynamic range. When you see the two side-by-side it is truly a leap ahead. Obviously, 3D was a great leap forward, but it required glasses and (sometimes) gave viewers a headache. HDR is different. As colorist Tim Stippen on the Deadpool 4K Ultra HD Blu-ray (with HDR) put it, “I think this is the wave of the future because you’re seeing more of what the camera captured.”

Seeing more of what the camera captured is putting home entertainment quality on the right track in my book. That puts the viewer in the shoes of the director, cinematographer, actors and other filmmakers. It brings the viewer closer to the content.

“I truly thought it was the best-looking version of the movie by far,” Deadpool director Tim Miller said at the presentation on the Fox lot in May.

And that’s what the home entertainment business has been striving for, at least in recent years — the best-looking version — for home entertainment libraries, and for posterity.

I was once at an event at CES in which director Oliver Stone exhorted movie fans to collect hard copies (discs) of their favorite movies because those copies will become rare in the digital future and will be of the best quality.

The best quality version of content is, and will always be, what defines home entertainment collections. And I think 4K Ultra HD Blu-ray Disc with HDR fits that bill.

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Are Netflix and Amazon in an SVOD War?

With Netflix struggling to satisfy stratospheric subscriber expectations, competitor Amazon has made a new move. Amazon is offering for the first time a standalone subscription service not bundled with its popular shipping plan.

Amazon is making its Prime Video subscription streaming service available as a standalone option for $8.99 a month — the same price as Netflix’s entry-level plan. In contrast, the bundled Prime service offers free two-day shipping on myriad purchases with Prime Video and Prime Music included as free value-added perks for about $100 a year.

The fact that Amazon decided to separate out its video service from the bundled plan is a testament to the service’s appeal — and indeed to the SVOD marketplace at large. Amazon now doesn’t just see video as a value-added perk to free shipping, but as a valuable service on its own — on par with Netflix.

Reed Hastings has often said that competition is flattering and good for the SVOD marketplace, and Amazon’s move seems to acknowledge that SVOD services are a viable and important business on their own. As Hastings contends, Amazon’s move ostensibly validates and supports Netflix and its business plan.

There is plenty of room for multiple SVOD services, especially if they feature unique and exclusive content. Many consumers will likely buy into these services (or not) based on the exclusive content they offer. But Amazon has thrown down the gauntlet as well.

“While we don’t think that Amazon will attract many current Netflix customers, we think it is foolish to assume that potential SVOD customers will favor Netflix over Amazon every time,” wrote Wedbush Securities analyst Michael Pachter. “We acknowledge that Netflix has the much more powerful brand for SVOD, but we are confident that once it announced a standalone service, Amazon declared war on Netflix, and intends to back up its new offering with a branding strategy of its own.”

Jonathan Rettinger, president of TechnoBuffalo, told CNBC Netflix has a lot to worry about over the next few months. "Netflix has had an incredible rise, but they need to be looking over their shoulder because there is an onslaught coming led by Amazon," Rettinger said.

For a long time, Netflix has had the SVOD market cornered, but with Amazon moving more definitively into its territory, Netflix may find the road ahead is not so easy.

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Slow and Not So Steady …

In the many format changes the home entertainment industry has experienced since the advent of the videocassette more than three decades ago, there have always been hiccups, causing pundits to opine that the business is in trouble, even doomed. But consistently, the industry has rallied during that change and continued to serve the home entertainment consumer.

At the very beginning, a format war between VHS and Betamax raged, a chaotic start to a business that would see more change, more often than many. Then came DVD, which faced an uphill battle when certain executives backed a D-VHS format they considered a better bulwark against digital piracy and a more familiar package for the consumer. A lower sellthrough price, great picture and sound, and its compact size made DVD the format that emerged triumphant in that design upgrade. About a decade later, high-definition loomed and the industry was embroiled in yet another format war between Blu-ray Disc and HD DVD. With its more familiar name and backing of DVD’s early proponents, HD DVD initially seemed to have the upper hand. But Blu-ray eventually emerged victorious after gaining penetration in the Trojan Horse of Sony’s popular PlayStation 3 game system.

The industry this year has embarked on yet another format change in Ultra HD with high dynamic range, along with other enhancements such as Dolby Vision, Dolby Atmos and DTS X. The industry made a major step toward growing that format at CES in January, when the UHD Alliance — Home Media Magazine’s 2016 Home Entertainment Visionary — rolled out specs. In March, Samsung launched the first UHD Blu-ray player and the studios put a handful of titles in stores. As might have been predicted, considering the industry’s history, the launch came in fits and starts, causing some to wonder if the new format had any chance. Predictably, store visits showed a slow rollout. Some stores had the player, some the UHD Blu-ray titles, and some had neither. Many clerks were clueless.

Slow and not so steady, though, seems to be the way of every format change in home entertainment. They emerge in fits and starts, not in a burst of triumph — but with competitors and naysayers. UHD seems to be no different.

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Quality Assurance at CES

This year’s CES event highlighted two facets of the home entertainment business: the exploding streaming video service of Netflix (which is more about instant access that top-quality picture and sound) and the premium-quality of 4K Ultra HD with high dynamic range (HDR).

In a press conference prior to the show, the Ultra HD Alliance made the case for premium viewing on 4K Ultra HD with HDR. Meanwhile, in the opening day keynote, Netflix CEO Reed Hastings made the case for the wide distribution footprint of Netflix, announcing international expansion with a flourish, while chief content officer Ted Sarandos mingled with stars such as Chelsea Handler on the stage to tout Netflix’s growing library of original content.

Our industry has often stressed the quality of picture and sound in the home theater as its key advantage, and the UHD Alliance is once again defining quality for home entertainment viewing with its new Ultra HD Premium logo and specs, announced at the show. Blu-ray as the delivery mechanism in the Ultra HD Premium home theater system really “lights that bad boy up,” as Mike Dunn, president of 20th Century Fox Home Entertainment, so colorfully put it. Warner Bros. Home Entertainment president Ron Sanders said the picture was so good that it looked almost 3D.

Meanwhile, Netflix executives at CES touted their unmatched international reach and burgeoning quirky and unusual content targeted at niche audiences. With its data insight, Netflix can create content for the myriad tastes of an international audience, unhampered by the quest for mass market ratings, executives argued.

In reaching for quality in home entertainment, I think both facets of the business are benefitting consumers. While 4K Ultra HD with HDR is widening the highlight, color and contrast gamut on home theater systems — offering a top-notch picture — Netflix is increasing the variety of content for niche and international audiences. It’s a great time to be a consumer of home entertainment, as the industry expands in picture and content quality.

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Back to the Future: Bridging a Generational Gap

It’s very fitting that Universal’s iconic “Back to the Future” series celebrated its 30th anniversary in 2015. Finding the right balance between the past and the future was atop the industry’s agenda.

The home entertainment business grappled with new forms of disruptive distribution while setting up the specs and packaging for a new disc-based format, 4K Ultra HD Blu-ray Disc, that promises to revitalize the legacy physical business. Indeed, it seemed that all year entertainment executives were attempting to find the right balance of revenue between new digital distribution models and the continuing cash cow from older models, whether it be physical disc or cable bundles.

Just as Back to the Future’s Marty McFly grappled with the tastes and technology of generations both older and younger, the home entertainment industry looked to bridge a technological generation gap in 2015. The industry tried to satisfy the tastes of cinephile collectors who skew older and like to build libraries of high-quality physical discs, as well as the millennial generation weaned on digital delivery and “Netflix and chill.” A generation comfortable with physical media and cable bills was joined by a younger, more digitally addicted generation ready to cut the cable cord and find the entertainment they want when they want it (often without advertisements) online — and often without a TV.

It’s no accident CES chose industry father and Netflix CEO Reed Hastings to give a keynote at the 2016 confab. OTT was the talk of 2015, as it promises to be the dominant distribution format of the future.

As entertainment executives face a business in which the old reliable revenue streams are under threat and the digital revenue of the future is uncertain, it’s perhaps useful to remember that famous Back to the Future line: “If you put your mind to it, you can accomplish anything.”

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Fighting Over That Crown

By now everyone in our industry has heard the saying “content is king” with regard to digital distribution. But considering the powerful rise of over-the-top distribution companies such as Netflix, I’ve begun to wonder if that saying is really true.

Certainly the fact that Netflix, Amazon and others have moved to distribute exclusive content is an argument in the favor of giving the crown to content. I remember when Netflix touted its famous recommendation engine as what made it unique. (As an aside, my mom once got frustrated that after watching one depressing drama, Netflix kept recommending the same depressing stuff. “I like to laugh, too!” she said.) Now, I don’t hear much about that engine as the driving force for Netflix’s success. Netflix is too busy pushing its own original content, such as “Orange Is the New Black,” “House of Cards” and theatrical releases such as Beasts of No Nation. Amazon, too, has gotten in on the originals game with such acclaimed series as “Transparent.” Score a point for content being king.

On the other hand, as evidence in favor of giving the crown to distribution is the growing dominance of OTT channels, which are helping consumers cut the cord on the studios’ cable revenue stream. Cable subs are down, and the research evidence of millennials’ cord-cutting is growing. Home entertainment sellthrough and rental, as well as theatrical revenue, are also under threat as OTT services help consumers bypass traditional revenue streams. Time Warner’s Jeff Bewkes in that company’s most recent financial call noted that his studio may have to revisit its content deals with SVOD services such as Netflix and widen those windows, while Disney’s Bob Iger said his studio could make “different decisions” with regard to OTT services as millennials cut the cord. Heck, even World Wrestling Entertainment Network’s OTT service is taking off after an alarmingly shaky start. Score one for distribution.

So which is king? Content or distribution. I think the kingdom is up for grabs.
 

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Home Entertainment Biz Talking Turmoil

The Interview

Over the past month I’ve attended a couple of events designed to shed some light on the digital delivery business and its effect on content owner revenue and business models. The only conclusion I can come to is that it’s indeed the Wild West out there, as Vubiquity CEO Darcy Antonellis once noted to me. The rules are in flux, and no one has created the perfect model that will create revenue growth for the studios as the physical disc business melts.

“Is the current distribution model maximizing revenue?”; “Who profits from it?”; and “How is that revenue divided across the revenue chain?” were three salient questions put to the audience by industry veteran Mitch Singer at the Entertainment Merchants Association Digital Media Pipeline event Oct. 14. Singer, who moderated a panel, is president of the Digital Entertainment Content Ecosystem (DECE), which is the consortium around the buy-once-play-anywhere system UltraViolet, but he has also worked in the studio system at Sony. He queried fellow studio vet John Calkins about such window experiments as Paramount’s recent revenue-sharing scheme with theaters on VOD, as well as the day-and-date (some say forced) VOD and theatrical release of the controversial Seth Rogen film The Interview, which spawned a hacking attack on Sony. Did the studio maximize its revenue by releasing the title on VOD so early? Calkins expressed doubt.

“We’re all in this very complex ecosystem,” he said, adding that it’s hard to determine the revenue model with one title.

Fellow panelist Patrick Corcoran, VP and CCO of the National Association of Theater Owners (NATO), said that theater companies, which participate in that ecosystem, want to be consulted about window changes, which Paramount did in the rev-sharing scheme, though several chains opted not to participate. “Ubiquity and ease of use cheapens your product,” he said, warning about collapsing windows.

There is also a difference between the models for tentpole titles and independent films, the former warranting longer windows and the latter more day-and-date releases, speakers said.

So much for the good old days of the four-to-six month window on most titles on disc.

At THE Summit: Transforming Home Entertainment, put on in Sept. 24 by the Media & Entertainment Services Alliance (MESA), panelists discussed the coming 4K Ultra HD format, as well as HDR (high dynamic range) that offers more vivid contrast among other advantages. There are also Dolby’s and DTS’s various technologies for better picture and sound, as well as frame-rate choices. All of this must flow through either digital delivery, Blu-ray Disc (which just announced 4K Ultra HD specs) and various consumer electronics devices. And then there’s the question of whether digital delivery will meet the quality of Blu-ray for this upgraded technology. (Hint: Blu-ray seems to be winning that battle at the moment.)

It’s enough to make your head spin (mine did). This rapid change is good for at least one thing though: Panels at industry events. With little clarity on the future revenue model for content owners, there is a lot to talk about.

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