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Thomas K. Arnold is considered one of the leading home entertainment journalists in the country. He is publisher and editorial director of Home Media Magazine, the home entertainment industry’s weekly trade publication. He also is home entertainment editor for The Hollywood Reporter and frequently writes about home entertainment and theatrical for USA Today. He has talked about home entertainment issues on CNN’s “Showbiz Tonight,” “Entertainment Tonight,” Starz, The Hollywood Reporter and the G4 network’s “Attack of the Show,” where he has been a frequent guest. Arnold also is the executive producer of The Home Entertainment Summit, a key annual gathering of studio executives and other industry leaders, and has given speeches and presentations at a variety of other events, including Home Media Expo and the Entertainment Supply Chain Academy.

TK's Take
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31 Oct, 2016

Is Content Still King?

I read an interesting article the other day on the Bloomberg website, from a columnist who argues that content is no longer king.

Shira Ovide, a Bloomberg Gadfly columnist who used to write for The Wall Street Journal, argues that with distributors buying content owners — first Comcast buying NBCUniversal and now AT&T proposing to buy Time Warner — and not the other way around, distribution is now king.

“We’re awash in content,” writes Ovide. “Sure, most of it is garbage, but this ubiquity splits people’s time and money into a zillion pieces. What is scarce is any company that has the attention or money of hundreds of millions or billions of people. Today, those giant human aggregators are distributors … that are the gatekeepers to digital information, communication and entertainment. Own the distribution, and you decide what content matters.”

I’m normally a big fan of Ovide, but in this case I think she’s wrong. I can point to her own argument: Yes, distributors are buying content owners, but doesn’t that underscore the importance of content? It certainly does not diminish it. Distributors know they need content more than anything; no matter how many pipes you have, if they’re empty, they are useless.

AT&T is ready to spend $85 billion to buy Time Warner because it’s the biggest content empire around — and AT&T is out to build the biggest distribution empire.

Ovide maintains that without distribution, content isn’t nearly the draw it once was, thanks to the proliferation of cheap, user-generated content like farting cat or Russian dash-cam videos on YouTube or your neighbor’s rant about traffic on Facebook. “Time Warner’s epic ‘Game of Thrones’ on HBO isn’t a hit unless it reaches people,” Ovide writes. “Today that’s mostly over TV pipes controlled by the likes of Comcast and AT&T’s DirecTV; tomorrow that may be over internet and mobile pipes controlled by the likes of … Comcast and AT&T.”

She certainly has a point. But at the same time, it could be argued that good content will always find its audience — and that audience will use whatever distribution channels it needs to in order to consume that content.

The history of entertainment has been driven by content and consumers’ quest to get it. The more content that became available, the more content we wanted to consume — and in an easier, faster, and better way. In music, we went from records to 8-tracks to cassettes to CDs and then downloads — the latter, a key factor in Apple iTunes’ success. On the filmed-entertainment front, we went from broadcast-TV to pay-TV and now direct-to-consumer streaming — the latter, driving ongoing media consolidation.

Without content, AT&T and Verizon would be content to remain phone companies.

And if content is no longer king, then why are Netflix and Amazon making so much of it?

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23 Sep, 2016

Let's Inject Some Excitement Back Into Our Industry

Another fourth quarter is upon us, and the silence, sad to say, is deafening. The gala parties that a decade ago heralded the release of hot new theatrical features onto DVD and, later, Blu-ray Disc, are a fuzzy memory.

No more Craig Kornblau riding through the streets of Hollywood on a camel (as the former Universal Studios home entertainment president did to promote The Mummy); no more gastronomical feasts where guests are wined and dined as executives talk up the popularity of their holiday season slate (Walt Disney’s Ratatouille).

And those junkets sending media types to New York, even London, for such disc releases as a “Harry Potter” movie, The Godfather and “Seinfeld”? Forget it.

The excitement that preceded the holidays in those halcyon days of DVD and Blu-ray Disc, when sales growth each year was measured in the double digits, is conspicuously absent.

And yet I can’t help but wonder, are we giving up too soon? Disc sales are holding steady. Blu-ray Disc purchases are up. We have a hot new physical format, 4K Ultra HD Blu-ray, that comes close to replicating the theatrical experience — something of a Holy Grail for home entertainment marketers ever since the first VHS cassettes rolled off the assembly line. And the electronic sellthrough business, while hardly a fireball, is slowly but surely gaining ground, as viewers get hooked on a movie franchise or TV series on Netflix and then go to Amazon Prime or Hulu to buy the latest installment.

I know. I recently spent $24 each on the second seasons of “How to Get Away With Murder” and “Scream” (don’t judge). And my kids keep buying movies on Prime as well.

Yes, Netflix is a hungry monster that’s only growing bigger. Yes, OTT is taking over our business. Yes, consumers are spending about half what they did a decade ago on buying discs.

But does that mean we can’t have a single party for one of our fourth-quarter tentpoles? A junket to, say, Las Vegas? Or even a press release touting first-week sales, complete with a studio president quote about what an achievement it is?

We need to breathe some life into this business. There’s a lot to show, a lot to tell. But we can’t very well expect consumers to get excited about our business if we keep shaking our heads and wistfully reflecting on the good old days when the latest “Shrek” broke all sales records.

Let’s put some fun, some energy, some excitement back into the business. The fourth quarter begins Oct. 1. Come on, Hollywood — don’t let me down.

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29 Aug, 2016

Spotlighting the Women Who Guide Our Industry

This is the ninth year that we are honoring the women of home entertainment, and I am both gratified and disappointed that we’ve been doing it so long.

Gratified, because on a national level much progress appears to have been made. For the first time ever, we have a woman presidential candidate nominated by one of the two major political parties to be our next commander in chief.

And we have more high-profile women CEOs than ever, including the top executives at such celebrated companies as General Motors (Mary Barra), IBM Corp. (Ginni Rometty), and Lockheed Martin (Marillyn Hewson, who since taking over in 2013 has doubled the company’s market cap).

And yet if you dissect the numbers there’s still work to be done on cracking that glass ceiling. In June, Fortune reported that the percentage of female CEOs in the Fortune 500 has dropped to 4.2% — or 21, down from 24 the prior year. This prompted Fortune to observe, “For women at the top levels of American business, it can sometimes feel like every step forward is followed by two steps back.”

Over at the S&P 500, we see a similar sad figure — just 22 out of the 500 CEOs are women, a mere 4.4%. Dissecting the S&P 500 data further, we learn that women account for 44.3% of total employees, but just 9.5% of the top earners — reinforcing the notion that women are still, far too often, paid less than men are for the same work.

Until these statistics change, we are going to continue shining the spotlight on the women of home entertainment — as always a smart, savvy group who continue to drive one of the most significant transformations any industry has ever undergone: the transition from physical media to digital, and the simultaneous technological evolution that brings us closer and closer to a truly life-like image, from standard-definition DVD to high-definition Blu-ray Disc and, now, Ultra HD Blu-ray with high dynamic range and wide color gamut.

I like to think the entertainment business has always been more open than the rest of corporate America to putting talented women in charge of things — big studios, major studio divisions, key departments, critical projects. On the home entertainment front, we’ve set the bar pretty high, going back to the 1990s, with such visionary pioneers as Ann Daly, Kelley Avery and Mary Kincaid.

And over the years the bar has stayed high, thanks to such brilliant strategists as Disney’s Janice Marinelli, Sony’s Lexine Wong and 20th Century Fox’s Mary Daily, along with the many other fine executives profiled in the August 2016 issue of Home Media Magazine.

What I wrote three years ago rings even truer today: “What began as a way for us to honor the industry’s top women executives now reads almost like a who’s who of cutting-edge and visionary leaders who are forever changing the way studios deliver, and the general public consumes, entertainment.”

Here’s to the women of home entertainment, Class of 2016.

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25 Jul, 2016

Netflix's Pricing Dilemma

Netflix’s latest financial report can be taken in one of two ways. Cynics may read the report, in which the streaming service reported missing its growth projection by 32%, as a precursor of impending doom. They might take issue with CEO Reed Hastings’ assertion, in a shareholder letter, that market saturation in the United States isn’t a factor, and that the slower-than-expected growth was largely a reflection of a price increase in monthly subscriptions — a price increase Netflix badly needed to remain competitive in acquiring, and producing, content. In fact, one might argue that if the U.S. market isn’t saturated, then why bother to raise the price? As for international expansion, growth projections there weren’t met, either.

Cynics see this as a clear indicator that Netflix has some serious headwinds to contend with, headwinds that will only grow stronger as time marches on. The most pessimistic among them believe Netflix is living on borrowed time, and — just like so many trendy products and services, may ultimately shrink (like MySpace) or vanish completely (like Blockbuster, which ironically was deep-sixed by Netflix effectively building a better mousetrap).

Personally, I don’t see much cause for alarm in Netflix’s latest numbers — at least, not yet. Subscription growth may be leveling out, but I don’t see churn increasing significantly anytime soon, as long as Netflix keeps future price hikes in check. It’s sort of like gym memberships — the gyms that charge 10 bucks a month are flourishing because the amount is too small for most people to notice each month when it’s automatically charged to their credit cards or taken out of their bank accounts.

Saturation is a bigger concern, both in the United States and globally. While a flattening out of Netflix revenue would still see the company in serious money, investors aren’t generally drawn to slow and steady. They want growth to continue, as evidenced by the 15% plunge in Netflix’s stock price in the wake of the earnings report’s release.

Another challenge Netflix is facing is competition. Dozens of OTT rivals have sprung up, and Netflix is finding that while its logo is popping up on more and more TV screens, so are those of other services, from Amazon Prime to Hulu. And despite Netflix’s push toward original programming, Netflix fatigue will become a bigger factor over time — which means the company will have to spend even more money on content, money that at some point in time will be harder to cough up.

It’s a classic case of damned if you do, damned if you don’t. Netflix will need to keep raising prices to remain in the game, but it can’t raise prices too much or else subscribers will jump ship and go elsewhere — particularly as the pool of alternatives continues to expand.

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27 Jun, 2016

Happy Birthday Blu-ray!

I’ve long felt that Blu-ray Disc hasn’t gotten the respect it deserves. Yes, it was birthed during a bruising format war, followed by the Great Recession. And in its adolescence it had to contend with a consumer rebellion against the buy-everything mentality that gripped the public during the halcyon days of DVD.

And yet Blu-ray Disc continued to grow, although its true upswing was obscured by the industry’s tendency to lump all packaged-media sales together, a move that softened DVD’s precipitous plunge but also hid the fact that even during Netflix’s meteoric rise Blu-ray Disc adoption continued to increase. In the first quarter of this year, Blu-ray Disc unit sales were up 3% from the previous year’s first quarter, while consumer spending rose 6%, according to Home Media Research estimates.

As it celebrates its 10th birthday, Blu-ray Disc has passed the $15 billion mark in consumer spending, which equates to nearly 750 million discs in the market.

If DVD was to home entertainment what the album Thriller was to Michael Jackson, then Blu-ray Disc is Bad. Thriller sold 65 million units worldwide, while Bad did about half that, 32 million units. Now, 32 million is certainly nothing to sneeze at; Bad was Jackson’s second-biggest seller and ranks as one of the 10 top-selling albums of all time.

But, it came after Thriller, and that was an exceptionally hard act to follow. The same can be said about DVD, the most successful consumer electronics product launch in history.

And yet DVD was, in some respects, a one-trick pony. It transitioned our business from rental to sellthrough, and turned millions of Americans into movie collectors — and yet capacity and resolution limits cut short its glory days with the advent of HD.

Blu-ray Disc, on the other hand, was designed to be future-proof from the very start, both on the software side, with its incredibly higher capacity than DVD, and on the hardware side, with consumer electronics companies wisely looking ahead and seeing a connected future. The Blu-ray Disc was smart a good year before the first iPhone; Blu-ray Disc players were connected at a time when skeptics were still wondering how to string an Ethernet cable into their family room.

As a result, Blu-ray Disc not only offered consumers the highest-quality high-definition viewing experience, but now makes the same boast for Ultra HD. Let the cable companies and streaming services talk up “4K” until they are blue in the face (pun intended); pick up an Ultra HD Blu-ray Disc, with High Dynamic Range, and you’ll see what’s passed off as “4K” is all too often a weak, and meek, pretender.

At the same time, Blu-ray Disc players are universally hailed as the best streaming machines in the business.

So happy birthday, Blu-ray Disc. You had some growing pains, and you were raised in the shadow of DVD, our industry’s “perfect child.” And yet while DVD flamed out, you’re blazing ahead as brightly as ever, a true technological marvel that is once again on the front lines of home entertainment.

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30 May, 2016

The Power of Disruption

“Disruption” is one of those buzz words that everyone uses, but few really know what it means.

Like two earlier buzz phrases, “paradigm shift” and “out-of-the-box” thinking, it tends to get applied far too often to retain its inherent impact. A disruptive innovation is not simply a better product, or a more efficient way of doing something. It’s a new product, or a new way of doing something, that addresses an inherent problem with the old product or way of doing something.

Blu-ray Disc was not a disruptive innovation — it was merely a better disc, with a sharper picture and greater capacity. DVD, on the other hand, was a disruptive innovation — it allowed consumers to buy movies as soon as they hit home video, instead of having to wait six months, as they did in the VHS days, and watch them on a format with all the nifty digital advantages, like random access, they had come to know and love through the CD.

Capitalizing on these advantages, the DVD changed how we consume entertainment at home — as did the other big disruptor of our industry, Netflix. Reed Hastings took advantage of a major consumer frustration, having to make return trips to the video store or incur a late fee, and came up with the subscription model, first with discs delivered and sent back by mail and then with streaming. You might say with streaming, Reed disrupted his original disruption — in an even more pronounced way, shaking up not just how entertainment is delivered to consumers but how that content is made.

Netflix has gone from being just another window for studio content to a distributor of original content — much of it now custom-crafted and based on data analytics that provide insight on exactly what it is that consumers want to see. As Root, the data center company, noted in a recent blog post, “Data analytics throws the traditional process of scriptwriting, casting, production and marketing on its head. Using content intelligence, Netflix is able to create shows tailored to specific target markets. They found that Kevin Spacey and the films of David Fincher were popular among subscribers. Meanwhile, the classic but horribly outdated British ‘House of Cards’ had developed a cult following in North America. Their research gave them a certain level of confidence as they committed to the big-budget program. Instead of deciding how to market content after it’s completed, producers now use a business case to build a show from the ground up. The process continues right to marketing and distribution, with Netflix deploying trailers tailored to different sub segments of their target audience. Mr. Spacey fans will see him featured prominently, while anyone who has watched The Social Network and Fight Club will see more of Mr. Fincher’s dark style. … Where once executives tried to guess what people wanted, big data means they already know. ‘Narcos,’ about Pablo Escobar and the DEA agents hunting him, was released to coincide with Netflix’s major expansion into Latin America. …”

In our feature this month, we have come up with a subjective list of the top disruptors in home entertainment. Granted, none of them have had quite the impact of Netflix, which even outside of our business is an oft-cited example of disruption. But they have all, in one way or another, not just improved on something, but shaken up a business model — from Comcast’s digital movie store to 20th Century Fox’s brave new world of virtual reality.

According to Clay Christensen, the Harvard Business School professor credited with bringing the term “disruption” into the business world in his 1995 book The Innovator’s Dilemma, there are actually two types of disruption.

A new-market disruption addresses a market that previously couldn’t be served. DVD allowed consumers to build movie libraries, something they couldn’t do in the VHS days because cassettes were too big and clunky and cost too much out of the gate. A low-end disruption offers a simpler, cheaper or more convenient alternative to an existing product. Netflix, in its original form, was cheaper and more convenient than going to a brick-and-mortar video store, particularly if late fees were involved. Only later, with streaming, did it evolve into a new-market disruption.

But enough with the tech talk — follow this link to our list of top disruptors and let us know what you think.

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20 May, 2016

Remembering Rick Doherty

Rick Doherty
Rick Doherty

I was saddened to hear of the passing of Rick Doherty, the celebrated CE journalist and analyst who moderated nearly all of the panel discussions on OTT for Digital Hollywood that I was on, including one just last January at the Consumer Electronics Show.

Doherty, most recently cofounder and director of The Envisioneering Group, a 20-year old international consultancy, died May 12 of a heart attack at the age of 64.

He was not only one of the most brilliant people I have encountered in my nearly 30 years as an entertainment and technology journalist, but also one of the most charming, charismatic and humble. I still get a chuckle when I read the email he sent out before one of our many panel discussions on OTT: “If you have a burning topic you'd like asked and the audience seems shy, tell me before 8:45 a.m. please.  I'll have a few extra passes for your associates at 8:30 a.m. … This is about my 230th panel for Victor [Harwood, creator of Digital Hollywood]. Don't worry.”

The terseness of the email belies what a conversation with the man was like — and we had many of those, both before and after our half-dozen or so panels together. Doherty was a walking, talking encyclopedia of CE, and yet he was remarkably up to date on the latest technological developments affecting our industry — the rise, and impact, of OTT; the importance of data analytics; and the various advances in the connected home, the connected car, the connected everything.

Doherty lived in, and worked out of, Seaford, N.Y., a little town on Long Island. He launched his company back in 1983 and grew it into an international team of super-smart professionals dedicated, according to the Envisioneering Group website, “to providing our public, subscriber and client audiences with the best possible news, data and trend research possible — to better enable them to engage with existing and emerging markets.” According to his official bio, Doherty “directs laboratory testing of technologies, products and services; oversees publication of the Envisioneering newsletter and market research reports; and provides senior executive counsel on market development and intellectual property protection, portfolio management and licensing opportunities. Doherty's prime focus is on researching and articulating the impact of advanced digital technologies, services, products, industry initiatives and standards efforts on consumers, industry and society.”

Before that, Doherty spent 13 years as the Senior Technology Writer for Electronic Engineering Times, a trade publication for design engineers, managers and business and corporate management in the electronics industry.

Doherty, an electro-physicist, has dozens of U.S. and international patents to his credit in computing, communications, medical electronics and other fields. He was a member of the Society for Information Display, Society of Motion Picture & Television Engineers and various other technology and professional business industry associations. He was a senior member of the Institute of Electrical and Electronics Engineers and was active with its Biomedical Engineering, Solid State Circuits Society, Consumer Electronics Society, Broadcast Engineering, Magnetic Technology Society, Technology & Social Policy and other I.E.E.E. societies.

Prior to launching his own company he was Director of the Urban Vehicle Design Group at Pratt Institute, an engineer for Data General Corporation, Chief Engineer of Lourdes Industries Inc., and founder and President of Optronic Labs.

He was a smart man, a kind man, and quite honestly I can’t do his memory any better justice than by quoting from an excellent piece in EE Times written by Junko Yoshida, the publication’s chief international correspondent: “Rick’s life touched every aspect of consumer electronics. He explored and explained the growth of computing, communications and digital media that brought a genuine revolution to the way we live today. … Rick was appreciated by many in the media because he was always generous with his time, giving us what we needed to know when we needed, on deadline. Rick knew deadlines. But we all loved him beyond that because he was always such a kind soul. Whether we shared a bus ride with him on a press trip, bumped into him in the press room at a tradeshow, or spotted him in the front row at a huge press conference with his video camera in hand, he always had a smile and a hug and asked how we were doing. He was personable and affectionate. He reminded fellow journalists of the importance of the personal connection, when you’re trying to get to the bottom of a story. … Rick’s interest and his knowledge were always beyond bits and bytes. He knew people. And he loved them. He was a class act.”

He sure was.

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25 Apr, 2016

The Growing Dominion of Digital Distribution

Back in 2011, when we launched our annual Digital Drivers feature in Home Media Magazine, our intent was to spotlight the executives behind the “transition from physical media to digital distribution,” according to a column I wrote back then introducing the new feature.

A lot has changed since then — to the point where there is no longer any transition. I don’t know of anyone who hasn’t streamed or downloaded a movie; moreover, to all of us, digital distribution is a habit, a way of life.

In our own family, we still watch a lot of movies and TV shows on disc, but invariably we will simply press a few buttons on the remote and chill with Netflix. If there’s been a change over the last year, it’s that we’ve broadened our scope. We watched season one of “How to Get Away with Murder” on Netflix, and then, for season two, alternated between Hulu and Amazon Prime, paying a $2.99 premium per episode to watch the newer shows in high-definition.

All three are competitors, but in our household they are simply ways to bring the entertainment we want to watch into the home, existing quite peacefully alongside both each other and the pristine Blu-ray Discs and DVDs we have filed away in our little walk-in “library” off the family room.

We have a wider, broader selection of programming than we’ve ever had, and while in our household at least we still consume new films on disc at a rapid clip, streaming has effectively replaced regular broadcast and cable television.

The digital transition, then, has already happened — and efforts in both the entertainment and technology industries are focused on making the experience even easier and more satisfying for the consumer. Of course, none of this is being done for altruistic purposes; on the content side, studios continue to experiment with ways to get people to buy more movies and TV shows online, since the transactional purchase model is a much better value proposition for Hollywood than third-party streaming.

Meanwhile, the cable industry is grappling with an announcement the FCC made in February about its new “Unlock the Box” campaign, which seeks to free consumers from having to rent a set-top box to get cable. The FCC wants to force cable operators to open up the set-top box market and let Google, Apple and other companies get in on the action. Just this month, Comcast announced its intent to do what Fortune calls an “end run around the FCC” by launching a new feature for its Xfinity service that will let consumers watch their cable through Roku streaming boxes and Samsung Smart TVs.

No, it’s never dull in digital distribution land — which is why the need for innovation and vision has never been greater.

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28 Mar, 2016

Saluting the Top Retailers

For the first time in nearly two decades, Home Media Magazine is spotlighting the top retailers in the home entertainment space. And for those of you who might remember the annual Top 100 ranking we compiled each year back when we were still known as Video Store Magazine, our Top 10 for 2016 will be a real eye-opener, underscoring how dramatically, and how drastically, our business has changed since the Top 100 days when retailers were ranked by how much income they generated by renting VHS videocassettes to consumers.

Indeed, the Top 10 for 2016 reflects the diversity of home entertainment options consumers have today as well as the disruptive business models that ultimately toppled Blockbuster Inc., which for years was perched at the very top of our Top 100, and also paved the way for digital delivery, both streaming and download sales, which most observers expect will soon dominate the business.

The big sellers of the digital video disc, both Blu-ray Disc and its older, standard-definition predecessor, DVD, continue to be a formidable force in home entertainment, both as a source of revenue for studios and other content owners and as a way for consumers to get the movies and TV shows they want. Walmart continues to lead the physical disc sellthrough charge, and while both Target Corp. and Best Buy no longer seem as enthused about the category as they once were, they continue to pump huge quantities of discs out into the market — and are largely responsible for the 8% increase in Blu-ray Disc sales our industry saw in the fourth quarter of 2015.

Not to be dismissed in the physical disc arena is Amazon, which despite its Amazon Prime Instant Video service is still a prime mover of Blu-ray Disc and DVD. Thanks to the free shipping offered to subscribers of Amazon Prime, consumers who want movies and TV shows on demand are also more inclined to buy their hot new disc releases from Amazon. I know — I’m one of them.

On the streaming front, you will notice that we have included Netflix as one of the Top 10 retailers. Despite the company’s attempts to position itself as a TV network, we continue to regard Netflix as a retailer, first and foremost — following the basic premise of home entertainment, which is to let consumers watch specific movies and TV shows where and when they want to, with the ability to pause, fast-forward and rewind — just like Blu-ray Disc, DVD and, way back when, the videocassette. Streaming is the new rental, and Netflix, in many ways, is the new Blockbuster.

We’ve also included iTunes on the list — the pioneer in selling movies and TV shows electronically, and still the dominant seller of downloads. In fact, one high-ranking studio executive recently told me that iTunes is now a bigger source of revenue to his studio than Target.

Because estimating revenue is such a specious proposition in this era of subscriptions and deep discounting, we have elected not to rank these retailers. Instead, we have relied on extensive research and interviews with studio executives, analysts, researchers and actual retailers to come up what we believe is an accurate list of the Top 10 home entertainment retailers, and have listed them alphabetically.

We’re already getting some great feedback, so in all likelihood we’ll do this again next year. And who knows — perhaps this will become an annual tradition, just like our Top 100 once was.

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26 Feb, 2016

Time for Redbox to Go Digital Again

Redbox has always been a successful fluke — a company that began renting discs at a time when everyone else was selling them, out of vending machines long after such a concept had been tried, tested and tossed by grocers back in the VHS era.

But Redbox confounded the “experts” and was a smashing success, playing into those key drivers of consumer habits, convenience (right outside Walmart or inside the supermarket) and cheap (a buck a night, initially; now $1.50).

I remember when Redbox used to give studio executives almost as many headaches as Netflix, triggering sales bans, lawsuits and, ultimately, the current wave of 28-day holdbacks from Warner Bros., 20th Century Fox and Universal Pictures.

But after years of flying high, Redbox has begun a rather rapid descent. Outerwall, Redbox’s owner, recently announced that in the fourth quarter of 2015 revenue was down 17% and movie rentals were down by an even higher percentage. Rentals are expected to decline an additional 15% to 20% in 2016, prompting Outerwall to scale back its fleet of vending machines, cutting out as many as 2,000 of its 35,000 red kiosks.

What I can’t figure out is why Outerwall doesn’t tap into its most precious asset — gobs of consumer data — and do something with it. Oh, sure, the company has jumped on the data analytics bandwagon like everyone else and is using a data visualization tool to figure out the best places to put new kiosks.

But that only affects the company’s current business model, which shows every sign of cratering.

Redbox/Outerwall needs a strategy session in which the company can figure out a smart, sensible approach to tap into the digital marketplace. I know, I know — the last time Redbox tried getting into electronic delivery things didn’t work out so well. In partnership with Verizon, Redbox in March 2013 launched a subscription streaming service that was a disaster, chiefly because the ill-conceived venture took aim at Netflix without any sort of superior value proposition. As I wrote in October 2014, when “Redbox Instant by Verizon” — catchy name, eh? — was mercifully shuttered, “Generally, if you take aim at a competitor, you build a better mousetrap, as they say. Apple entered the cell phone market with the iPhone; Sony jumped into the video game business with the PlayStation.”

But now, opportunity is knocking once again. Electronic sellthrough and transactional VOD are good options to deliver to Redbox's 35 million emails, although questions remain about how tech-savvy their customers are. Regardless — I’m sure the studios would wholeheartedly support such a move, since they’ve been trying for years to develop a viable EST business through early release windows and other incentives to the consumer. So far, there’s been just one real success story, Apple’s iTunes.

Redbox could harness its many years’ worth of consumer data and offer its customers the chance to buy (or stream, on an a la carte basis) movies in a way that’s even simpler, and easier, than sticking a credit card into a vending machine. It would take time and a smart, measured approach, with data-driven micromarketing and sensible pricing.

But it’s certainly worth considering, and soon. Time is running out. The smaller Redbox’s existing business gets, the less consumer data there is to mine. And while Redbox vending machines won’t disappear overnight — it’s a still a cheap and easy proposition, compared to other entertainment alternatives — the digital migration is accelerating.

And businesses that want to be around five, three, even two years in the future had better climb board — now.

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