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.
Tech Toured and Absorbed
One of the interesting elements of last month’s Los Angeles Entertainment Summit (LAES) was the Tech Tour, a series of booths with information on technology that can both help market and forward the industry. I hope attendees were able to take advantage of it because it offered some interesting insight into the future direction of our business.
The tour included companies that help clients use “big data,” or vast amounts of consumer information collected WITH their knowledge (not that spy stuff that has the U.S. government chasing Edward Snowden around the globe). Learning what consumers “like” on Facebook or what they will offer up about themselves to enter a contest is useful data to target them with marketing messages on brands they consume.
There were also companies eager to assist studios with apps connected to entertainment brands and disc releases. Navigating this new world (oft termed “second screen”) is a challenge facing every studio, and it was interesting to talk to those who design apps as well as companies that help the studios streamline app production for Apple, Android and other platforms.
Also part of the tour were companies that help package and display product; create value-added exclusive trinkets; and prepare, deliver and copy-protect digital files for delivery to digital services, such as Netflix, Amazon and Hulu.
I spent about six hours (with a few caffeine breaks) talking to the folks on the Tech Tour. I know some studios, such as Warner with its Media Camp (many campers were on the Tech Tour), are looking to create a forum for new ideas. The Tech Tour was such a forum, and I think I absorbed a great deal of information that I am still processing.
The industry backed off of this kind of gathering for a few years as we all absorbed the financial collapse and fast-moving technological changes affecting us.
Entertainment Merchants Association president and CEO Mark Fisher eloquently outlines the sentiment in the industry in his opinion piece in our Aug. 5 issue. He titled his column “The Good New Days,” which I think is particularly appropriate, considering both the nostalgia for past conventions elicited by and the new tech element of the LAES.
Times changed, as did technology, but the need to gather and learn about the changes in the business didn’t.
Summer Camping in San Diego
I’m getting ready to head down to San Diego for the Comic-Con International Convention as I write this column. Meanwhile, the kids (thank goodness) are in summer camp. The following week is the Los Angeles Entertainment Summit, which like Comic-Con the week before brings together many of the players in our industry.
Years ago, we all gathered in Las Vegas for the annual VSDA convention. The VSDA (Video Software Dealers Association) is now the EMA (Entertainment Merchants Association), and the EMA is a co-host of the Los Angeles Entertainment Summit, which benefits the Cystic Fibrosis Foundation (a truly worthy cause) and brings together suppliers and retailers in the home entertainment space.
While our annual July convention in Las Vegas is no longer a venue to catch up with friends and colleagues in the home entertainment industry, Comic-Con and the Los Angeles Entertainment Summit provide a forum for industry discussions before the all-important fourth quarter, when many of the biggest home entertainment releases of the year hit shelves and shoppers look to physical media to round out their stocking-stuffers and gift lists. With the summer theatrical slate already producing winners and losers, the pressure is on for home entertainment to offer an assist to the losers and fulfill the promise of the winners.
We will no doubt also discuss the digital future, and how the home entertainment industry might transition from physical to digital delivery.
I look forward to catching up with friends and colleagues during these two events to help the industry plan for the future. It’s nice to touch base at least once a year, if not more often (the International Consumer Electronics Show in January also is a good place to take the temperature of home entertainment). But getting together once or twice a year is an invaluable chance to forge a path and provide a vision for the home entertainment business.
An ‘Implosion’ of Creativity?
Talk about a blockbuster! The fathers of blockbuster film, Steven Spielberg and George Lucas, recently predicted a Hollywood “implosion” that could change the film industry forever and lead to dramatically hiked ticket prices for blockbuster films, quashing creativity.
Speaking at the opening of a new media center at the University of Southern California, Lucas and Spielberg predicted that a succession of failing big-budget movies would forever change the economics of Hollywood and force audiences to pay exorbitant prices upfront for film tickets to the most anticipated blockbusters — rollercoaster rides with no lasting substance.
“There’s going to be an implosion or big meltdown where three or four or maybe even a half-dozen megabudget movies are going to go crashing into the ground, and that’s going to change the paradigm.” Spielberg said.
Well, I can see how that cynical view might be correct. Certainly, there are a few big-budget films this summer and over the past year that have been — well let’s just sugarcoat it — less than awesome; and I felt I was taken on opening weekend. I certainly have sat through a blockbuster or two that I felt were sheer torture.
But I don’t think, ultimately, that the most creative and entertaining fare will be overlooked in the home entertainment realm — and that’s where truly creative films, blockbuster or not, will find their value.
You see, home entertainment (or the aftermarket), is where many films find their audience (or don’t) based on the lasting appeal of the creative endeavor. Lucas’ “Star Wars” trilogy, Spielberg’s “Indiana Jones” series and other such cultural touchstones have a lasting value in home entertainment. The Wizard of Oz (the 1939 version with Judy Garland) is gold in the home entertainment realm.
While theaters may be hosting a few overpriced duds, it is in the home entertainment market that many of the most creative films will find their true value. And I don’t think that will go away.
Digital Drivers on a Roll
This issue includes Home Media Magazine’s third Digital Drivers special section, a compendium of the players driving the transition from physical media to digital distribution, including studio, retail, cable, Internet and technology executives.
The past year has seen a raft of changes in digital distribution, as well as the continued development of trends already under way.
UltraViolet, the cloud-based service spearheaded by the Digital Entertainment Content Ecosystem, has grown to more than 13 million household accounts. In addition to the boost it got from Walmart last spring, UltraViolet also took center stage at this year’s International Consumer Electronics Show with home entertainment presidents from most of the major studios appearing on stage with Consumer Electronics Association president Gary Shapiro in support of the service.
Meanwhile, Netflix’s streaming service made an impressive comeback, tallying profits, new subscribers and new international territories. Perhaps its most striking achievement was its move into original programming, spearheaded by “House of Cards.” The move had pundits asking, “Could Netflix be the new model for television?”
Netflix’s comeback had us again listing CEO Reed Hastings among our high-level digital strategists this year.
But Netflix wasn’t without challengers. Amazon Prime stole content and launched original programming of its own, the launch of Redbox Instant propelled the kiosk company into the digital realm, and Hulu entertained suitors.
Meanwhile, studios such as Sony Pictures and Fox continued to experiment with early digital release of titles before disc, looking to lure digital consumers to purchase the most-sought-after new releases. Executives there, along with the top home entertainment players at Warner, also made our list of high-level strategists for their continued push to drive profitability and innovation.
Each year the digital sands seem to shift, but it is clear digital delivery is hitting its stride, and digital streaming is becoming a habit. Yes, digital is becoming an ever-growing piece of the entertainment pie.
The Kids Aren’t All Right
One of the backbones of the sellthrough business has always been the kidvid genre. Kids will watch the same content over and over again, and buying a title is a good investment if they plan to watch it 20, 30, 100 … however many times. Kids like what they like, and they are obsessive about it.
More recently kids are having an effect on the subscription video-on-demand business as well. It seems there are subscribers who use services such as Netflix and Amazon Prime to access stuff for the kids. As I am writing this, I’m at swim practice for my 11-year-old. If I had a toddler with me, I can imagine accessing Netflix or some other subscription service to entertain him or her for the 45-minute lesson. Obviously, TV episodes would fit the bill. Perhaps I had been accessing “Blue’s Clues” for months during these lessons via my Netflix account, and suddenly “Blue’s Clues” (owned by Viacom) isn’t available. The horror! The tantrums!
That’s the consumer experience of what is happening in the SVOD universe. Now, thanks to a $200 million deal between Amazon and Viacom, subscribers who want “Blue’s Clues” have to turn to Amazon instead of Netflix.
Ted Sarandos, the savvy chief content officer at Netflix, downplayed the loss of Viacom kids content, saying kids’ TV has a short shelf life. That may be true. I certainly didn’t watch “Blue’s Clues” as a child, and my kids have no emotional attachment to most of what I grew up watching. (That doesn’t include “Scooby-Doo,” which seems to be timeless. Go figure.) But if you’ve ever had a kid who could be calmed by nothing but “Dora the Explorer,” the lasting value of the show is sort of beside the point.
This, I think, is where a scheme such as UltraViolet shows its value. Via the content locker, a family can simply buy exactly the content the kids like, without having to worry whether Netflix or Amazon sign with a particular content owner. This is UltraViolet’s advantage. Ultimately, consumers want easy access to the content they like, not to the content a particular subscription service is willing to pay for. That goes for the adults, as well as the kids.
Xbox: Better Late Than Never
Last week’s announcement of the features for Microsoft’s new Xbox game console, dubbed the Xbox One, included some news that much of the press overlooked but is particularly interesting to our home entertainment audience. The Xbox One will include a Blu-ray Disc drive.
For a time, Xbox gamers could get an add-on drive with the competing (and now defunct) high-definition format HD DVD, but Blu-ray was the purview of the competing PlayStation 3. The PS3 was a major driver in Blu-ray’s victory in the high-def format war. It was a bitter loss for Microsoft.
But, as they say, if you can’t beat them, join them (even if you are pretty late to the party). Years after the end of the format war, Microsoft has finally accepted Blu-ray. It probably didn’t hurt that in the latest DEG: The Digital Entertainment Group numbers for the first quarter of 2013, Blu-ray Disc sales have finally begun to lift the overall disc sellthrough business. Disc sales, which had been trending downward for more than five years, were buoyed by a 28.5% increase in Blu-ray Disc sales, with overall packaged media sales up 2%, to $2.1 billion from $2 billion in the first quarter of 2012.
“Xbox One is designed to deliver a whole new generation of blockbuster games, television and entertainment in a powerful, all-in-one device,” said Don Mattrick, president of Microsoft’s interactive entertainment business. “Our unique, modern architecture brings simplicity to the living room and, for the first time ever, the ability to instantly switch across your games and entertainment.”
The fact that Blu-ray figures into Microsoft’s entertainment future is a testament to the format’s longevity and quality. With the capacity to handle superior video resolution, including 3D, Blu-ray Disc has proven to be a sturdy format, despite its early growing pains during a protracted format war.
It is perhaps comforting that there wasn’t more of a frenzy in the news about Microsoft’s adoption of Blu-ray. It shows the format without question is integral to entertainment. It’s here to stay.
The Digital Impulse Purchase
The world is going digital, and how the studios fit into that new world is still up in the air. We’ve got subscription streaming, electronic sellthrough, UltraViolet (which is sellthrough for the moment), early digital availability and (though most don’t want to admit it) digital piracy vying for customers.
Fox and Sony may be on the right track with early digital availability of titles, but the ultimate digital purchase would take advantage of moviegoers as they leave the theater.
After enjoying a blockbuster such as Iron Man 3 or a film that the little ones exclaim they want to see again and again, it would seem only logical to have the ability to purchase that film, either on disc or digitally. There is never a more opportune time to capture the enthusiasm of a movie audience than after they have just seen the film.
Think of it as the rent-to-buy option the video and game industry have been touting for years. Seeing a film in the theater is similar to renting it (though the screen size is obviously much bigger, the sound better, and the popcorn and drinks exponentially more expensive).
For years, theaters have been marketing vehicles for the video industry and others down in the entertainment food chain. Why not take advantage of the marketing muscle closer to the release of the film?
I know what I’m proposing may seem like heresy to film connoisseurs. Certainly, many, including myself, relish and respect the experience of viewing a film in the theater.
But I think Fox and Sony may be on to something. They just aren’t marketing it at the correct point. If, after viewing a particularly good movie in the theater that I want to own, I were to get a pitch to buy it and have it delivered to my house either digitally or on disc (or both via UltraViolet) in a matter of weeks, I might make that digital impulse purchase at the right price. It would allow the studio to reap a more-instant gain on the film, and, if the deal were structured properly, might even help the theater owners.
I can envision a future in which you walk out of the theater and can buy that movie on your mobile phone for delivery at a later date (either on disc or digitally).
Netflix Coming Into Focus
About six months ago, I wrote a column titled “Netflix Needs Some Focus.” The column asked what Netflix wants to be when it grows up: a content distributor or content creator. I really don’t think it can do both equally well, and based on recent developments, neither does Netflix management.
Every company needs a laser focus on its vision and market, and perhaps Netflix is solidifying its own. The company is concentrating on building its content creation business, funding original productions such as “Lilyhammer,” “House of Cards” and “Hemlock Grove.” And they know what their customers like. Netflix knows what you are watching, when and how. It’s how they determine what content to greenlight and license.
In the old days, the TV was on, and it was mostly somewhat educated guesswork as to what anyone was actually watching. Now, a streaming company can know exactly what you are watching. And they know the exact value of each old movie they license. That’s why Netflix is indicating it may be more choosey as to which old movies and TV shows it licenses and will no longer buy content in bulk. The company is letting its Viacom deal expire, signaling the change in direction.
“As we continue to focus on exclusive and curated content, our willingness to pay for non-exclusive, bulk content deals declines,” reads the April 22 letter to shareholders from Netflix CEO Reed Hastings and CFO David Wells. The letter was released just before Netflix announced boffo earnings, sending the stock into the stratosphere.
That must send shivers down the backs of studio executives, who saw dollar signs when they looked at Netflix and its competitors and who hoped to get bulk catalog license payments from them.
In the end, Netflix seems to have come to the realization that its status as “first mover” can only go so far in the bulk streaming business. But the quest to be the next streaming AMC or HBO is a more profitable goal. The key is exclusive content, especially original content.
Whether consumers will buy the new Netflix really remains to be seen.
The Next Gen Likes Apps
In recent weeks, one characteristic I’ve observed in the younger set (meaning my 10-year-old) is a desire to go into online worlds via apps. She wants to buy stuff for her virtual creatures or play a new app with yet more virtual creatures, some of which are related to linear programming on TV or disc.
In reading our six questions in the April 8 issue with Jargon Technologies CEO and co-founder Bhanu Srikanth, I was reminded of my daughter’s interest in apps. She noted children’s “need for activity and more interactivity” on the second screen. I couldn’t agree more.
Disney has been a pioneer in this arena, via its many apps surrounding discs, as well as its exploration of the fairy world online and its acquisition of Club Penguin. Who would ever guess that obtaining a Rainbow Penguin would mean so much to a 10-year-old?
Other studios also have a growing vision of the second screen, releasing apps for top titles aimed at adults and children. And they are right to develop and hone this type of interactivity now. Interaction with entertainment will surely grow as these kids do. My 15-year-old knows more about some online stars than she does about the latest hunk on the cover of the tabloids.
The entertainment consumer of the future (today’s kids) will crave interactivity and an online connection to linear content. It’s both an added burden and an opportunity for revenue growth for studios. If content creators get it right, innovative and creative apps will add to the studios’ bottom lines. If they let other developers capture the attention of the next generation, stealing time that could be spent watching and engaging with traditional linear programming, the studios may find they capture an ever-shrinking share of consumers’ entertainment time.
Hollywood is great at creating worlds that viewers want to enter. Now content creators again need to expand those worlds beyond the hour-long TV episode or the two-hour feature. We got a good head start with disc extras such as commentaries and making-of featurettes. The next “extras” will be online. They will change with the times and will engage viewers more than ever before.
Physical Rental Hangs On
A few years ago — heck, even a year ago — not many people would tell you it was a good investment to buy a house. The market was broken. There were more shoes to drop. More foreclosures were around the corner. Likewise, the physical rental business was on the ropes. Who would want to rent a disc when digital delivery was the future?
Like the housing market, which is returning from the dead, physical rental is getting some votes of confidence and rising from the ashes — albeit in a different form. Analyst Eric Wold, of Los Angeles-based B. Riley & Co. sees a future in physical rentals at kiosks.
“We continue to believe there is a large group of consumers that prefer and will continue to prefer renting DVDs or Blu-ray Discs for a number of understandable reasons: the large cost differential between DVDs and VOD, a lack of appropriate broadband access, or a desire for the better quality and enhanced content of Blu-ray versus downloads (i.e., alternative endings, additional features, etc.),” Wold wrote in a March 25 note.
He sees kiosks, especially Redbox, as a beneficiary of consumers’ continued appetite for physical rental. As stores close and Netflix continues to de-emphasize its physical business, causing those subscribers to turn elsewhere, a Redbox kiosk, he believes, will be physical rental consumers’ destination of choice. (It also doesn’t hurt that the kiosk company has dipped its toe in the digital water with its Redbox Instant by Verizon service.)
Meanwhile, the Blockbuster U.K. chain was saved from the dead by a British private equity firm, which Wold suspects may help revive the kiosk business there. Redbox has machines in storage with the Blockbuster name already emblazoned on them by their previous owner, NCR. And Redbox would like to expand internationally.
Redbox isn’t going away, and it has smoothed over much of the rancor with studios via windows and better (non-litigious) relationships. Just last week, Redbox announced the extension of its deal with Universal.
Yes, physical rental is hanging on, at kiosks and at the remaining stores that serve a clientele who prefer to watch content on disc.