Stephanie Prange is the editor in chief of Home Media Magazine. The Yale University graduate joined what was then Video Store Magazine in 1993 and was instrumental in transitioning the publication into a tabloid newsweekly. She spearheaded the publication’s reviews section, as well as aggressive coverage of the home video sales market. She also helped launch the magazine’s Web site in 1996. In her position as editor-in-chief since 2006, she has spearheaded the launch of such projects as the daily blast, transmitted via email each day to readers, and Agent DVD, a consumer publication aimed at genre enthusiasts who attend Comic-Con International in San Diego. She has freelanced for The Hollywood Reporter, The Los Angeles Times and parenting publications. She has an M.A. in journalism from the University of Southern California.
The music business has long mirrored the video industry, facing many of the same challenges. Singer Taylor Swift, fresh off the launch of her latest blockbuster album, 1989, recently pulled her catalog from subscription streaming service Spotify, saying artists and their labels aren’t paid enough for the many times listeners stream their songs.
“Valuable things should be paid for. It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is,” she wrote in a column in The Wall Street Journal.
Ah, it’s sounds so familiar to those of us in the home video business. The studios have been making the same accusation against subscription service Netflix and kiosk vendor Redbox — that they devalue entertainment. And several studios, too, have limited access to top entertainment on those services.
Unfortunately, consumers also help determine the value of entertainment, and since the advent of the great recession, they have flocked to the cheapest venues, some of them, such as YouTube or pirate sites, offering free entertainment. Low price has driven the rise of Netflix and Redbox, as much as innovative distribution models. For consumers squeezed by lower wages, the value of entertainment is heading downward. After Netflix raised prices to new subscribers, their growth slowed domestically in the last quarter. Redbox’s attempt to do the same could end badly, analysts have opined. Both are treading carefully, testing the waters.
Artists such as Swift may have the popular muscle to get fans to pay more by buying her album instead of streaming it through Spotify. But U2, one of the biggest bands in the world, recently took a different tack, offering their album at no charge on iTunes.
Here’s hoping that Swift has some effect on raising the value of entertainment. If there were a large supply of free diamonds or diamonds at little cost, no matter how beautiful they were, they too would lose their value. It’s high time we value the talent that produces our music, films and other artistic content. They work hard on their art, and not to pay them for it seems, well, out of tune with the idea of the American work ethic.
Recent news is awash with content owners and producers breaking the cable cord and following the Netflix model of online subscription streaming. Companies such as HBO, CBS and Lionsgate are looking to the Web to create a new avenue to the consumer.
It is particularly interesting that both a broadcast network, CBS, and a major cable network, HBO, are looking to the Web to capture viewers. They represent the entrenched establishment of television programming. Both CBS and HBO have made fortunes via the traditional cable and broadcast route.
CBS Corp. Oct. 16 announced the launch of “CBS All Access,” a $5.99-per-month standalone subscription streaming service that doesn’t require a concurrent pay-TV subscription. That came on the heels of an announcement to an investor group by HBO’s Richard Plepler that the company will launch a standalone over-the-top video service not requiring a cable/satellite/telecom subscription (as opposed to the current HBO Go service) in the United States in 2015. It all makes me think of the World Wrestling Entertainment announcement at the Consumer Electronics Show last January. The wrestling company unveiled a grand plan to go directly to its consumers via a 24-hour streaming network, with a $9.99 a month subscription offering live PPV events, reality shows, original shows, documentaries, classic matches and more than 1,500 hours of VOD programming.
My question is what does this all add up to for the average consumer? Say I’m a wrestling fan ($9.99 a month) who wants to have access to CBS programming ($5.99 a month) with a basic Netflix subscription ($7.99 or more a month) in addition to my basic internet/cable access cost and goodness knows what other programming.
It seems to me that cord cutters may get more specific choices, but may end up paying more than what they would with your average cable package. As any restaurant customer knows, a la carte menu items often end up costing more than the buffet.
Digital changes are shaking the industry like earthquakes, and I see at least four major disruptions facing the home entertainment industry.
1. Breaking windows — After taking on appointment TV by offering original episodic programming all at once (“House of Cards,” “Orange Is the New Black”), Netflix is planning to offer digitally for streaming feature film product traditionally offered first at the cineplex. The Weinstein Co. inked a deal with the online service to release the Crouching Tiger, Hidden Dragon prequel to Netflix streaming subscribers at the same time it hits theaters. Also, Adam Sandler, a longtime draw at the movie theater, signed a deal to bypass that venue and offer his uniquely crude humor on smaller screens via Netflix streaming.
2. Business model bustup — As has long been noted, the revenue model that has underpinned the entire Hollywood ecosystem is under assault. The theatrical business looks shaky. The summer box office disappointed, as consumers found other things to do (including watching digital content). Meanwhile, studios can no longer count on bigger and bigger, or even the same, bags of money coming from the sale of discs as consumers decide to stream rather than buy their content. Meanwhile, advertising upfronts are taking a hit in the TV business as time-shifting and social media disrupt the traditional advertising model.
3. Talent revolt — Those who create content are looking for a bigger piece of the revenue pie and greater creative freedom as the distribution model shifts. Sandler isn’t the only star looking to find a new partner in the digital world. Comedian Chelsea Handler broke up with E! and is looking to create the next form of talk show in the digital realm on Netflix. It’s happening in the music arena as well. According to a report in the Los Angeles Times, at a recent industry event musician Jimmy Buffet asked the CEO of the music streaming service Spotify if he would pay talent more than the traditional labels.
4. Entertainment in new forms — And there’s the possibility that the entertainment of the future won’t resemble the feature film and episodic TV model of the past. What makes 30-minute or hour-long episodic TV or a roughly two hour film the most popular models for visual entertainment? Until now, that kind of entertainment has been shaped by the distribution model, i.e. how long folks can stand to sit in a theater seat, etc. On the web, small-bite entertainment may play a bigger part. Witness the success of sketch comedy online. Also part of the new entertainment model: watching folks play and comment on video games. Witness the outlandish success of Twitch, worth nearly a billion dollars to buyer Amazon.
Yes, the entertainment ground is shifting.
As I nervously put my foot on the accelerator of a Ferrari to celebrate the Blu-ray, DVD and digital HD launch of Paramount Home Media Distribution’s Transformers: Age of Extinction, the home entertainment industry was also at the starting line for the most important season of the year, the fourth quarter. The adrenaline is likely flowing in home entertainment marketing departments.
As has been widely reported, the box office punch over the summer wasn’t as strong as it has been in past years, and that can affect performance on home entertainment. Still, what doesn’t take off with lightning speed at the box office can often make up ground in the home entertainment arena. Consumers distracted by vacations and summer pursuits often discover what they have missed at the box office on disc or digital.
The acclaimed Chef from Jon Favreau is a smaller-budget film about a man’s rekindling of his passion through cooking that many consumers will likely discover at home. Titles may become gifts to put under the tree, to stuff in a stocking or to offer up at the staff holiday party.
At the start of the fourth quarter, a lot is riding on the marketing acumen of home entertainment executives. In addition putting reporters in the driver’s seat of some very expensive and fast cars and staging cooking demonstrations by filmmakers (Favreau cooked up some Cuban sandwiches for Chef), marketers have designed an array of exclusive extras for retail clients. Look at any of our merchandising sections and you will see T-shirts, exclusive featurettes, toys and many other enticements rolled out at top retailers to draw consumers to buy discs or digital HD.
Home entertainment marketers are working closely with retail accounts to offer that something extra that will spawn an impulse buy. Here’s hoping their efforts help disc sales take off.
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.
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.
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.
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.
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.
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.