How to Remake the Home Entertainment Industry

Herman Cain may have his 9-9-9 plan to remake the tax system, but the Hermanator’s plan is nothing compared to my plan to remake the home entertainment business.

The big problem, these days, is that studios aren’t making enough money because too many people are renting discs from Netflix and Redbox, and the return to studios from rental isn’t nearly what it is from sellthrough.

So here’s my three-part remedy:

Consumer electronics manufacturers immediately stop making DVD players and only manufacture Blu-ray Disc players. The margins are better, and if they tout the fact that these players not only play high-definition discs but also are backwards-compatible – and make standard DVDs look better – I think they’ll do all right. As any first-year marketing student knows, consumers need to be educated, and if we’re concerned that too many people are still living in DVD land, then maybe a forceful eviction is what’s needed.

At the same time, computer manufacturers need to stop putting DVD drives in new computers and also adopt an all-Blu-ray Disc approach. Again, they can tout the backwards compatability angle, as well as the fact that Blu-ray Disc offers far greater storage capacity – which in this era of increasingly large photo and video files should be a great selling point.

The third thing that needs to happen is for studios to release movies on Blu-ray Disc a month before they release them on standard DVD. They can charge full price for the Blu-ray Disc, and then a month later offer bare-bones single DVDs for maybe $5 a pop. The idea here is that consumers who don’t want to wait, as well as movie collectors, will rush out and buy the new release on Blu-ray Disc, while those who are less enthusiastic won’t mind waiting a month to buy it for $5 a DVD.

This second category of consumer is the rental crowd, and they already are accustomed to waiting a month to get their movies from Netflix or Redbox – which they don’t mind doing, because it’s only costing them a few dollars.

By imposing a similar window on DVD and charging just a little more than the average rental fee, I believe many of these consumers will migrate back to the purchasing habit, particularly since buying a movie at places like Wal-Mart and Target is so convenient.

It’s a way for studios to take back the rental business, once and for all, and not have to share with anyone. Netflix and Redbox can still rent movies, but under this scenario the playing field between sellthrough and rental is leveled.

As for physical video rental stores, they can do it all: They can sell new Blu-ray Disc releases, rent them, and then after a month do the same with standard DVD. I believe video stores will regain at least some of the market share they’ve lost over the years, and at the same time get a crack at the lucrative sellthrough business that for the most part has eluded them.

What do you think?

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Possible New Warner Window Could Change the Sellthrough Game

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

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

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

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

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

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Paramount Restructuring an Exercise in Common Sense

I’ve gotten a lot of calls today concerning the shakeup over at Paramount, ranging from “What the hell happened?” to “What does it mean?”

What happened is this: Paramount put all channels bringing entertainment into the home under one roof, in a new division, Paramount Worldwide Home Media Distribution, headed by Dennis Maguire, previously president of Paramount Home Entertainment.

What does it mean? It means the powers that be at Paramount are exhibiting a great deal of common sense.

One thing we learned earlier this year, when we were compiling our “Digital Drivers” section: The studios are all over the place when it comes to categorizing digital distribution. Some put it under the TV group; others, home video; and still others, on its own platform, separate but equal to TV and home entertainment.

In creating its new Worldwide Home Media Distribution division, Paramount has taken a bold step toward integrating its various into-the-home distribution channels and putting one guy, an industry veteran known for his team-building and ability to work well with others, in charge. Dennis Maguire is hardly a polarizing figure; he’s a universally respected, and accepted, executive who doesn’t have sharp elbows and, quite frankly, knows his stuff. He’s worked his way through the Disney home entertainment boot camp — which has produced myriad other talented executives, from Universal’s Craig Kornblau to Paramount’s own Mary Kincaid — and emerged as something of a statesman, if you will, in our industry.

Of course, he’s got a monumental task ahead of him, figuring out the direction our business is going and aligning the various delivery and distribution mechanisms now under his control to maximize value to both studio and consumer.

But at least he’s got a starting point, a general direction from which to begin.

As one observer put, Paramount finally has a blueprint. Now, it’s time to start building the house. And while there may be many design changes up ahead, at least there’s a solid framework for what’s to come.
 

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One of Our Own Makes Good — Again

Bob Chapek

It’s always gratifying to see one of our own make good, establish a name for himself outside of the confines of home entertainment.

Bob Chapek has made good for the second time in less than two years, and all of us who have worked alongside him for more years than I can recall should be very, very proud.

In what observers and analysts agree is a very smart move, the former president of Walt Disney Studios Home Entertainment has been promoted to president of Disney Consumer Products, an expanded group that includes toys, books, apparel, DVDs and Blu-ray Discs, and video games. Chapek, who since November 2009 had been Disney’s distribution chief, now oversees a mighty consumer products empire that will handle retail and licensing across all of Disney’s businesses, from film to television and interactive media.

The restructuring gives Disney more clout than ever at retail, now that everything it sells is under one corporate roof. Media analyst David Miller, managing director of Caris & Co., told the Los Angeles Times he surmises Disney’s goal is to become “a one-stop shop for the Wal-Marts and all the big-box retailers looking for a place to go with all kinds of toys and consumer products.”

That Disney entrusts such a critical mission to Chapek isn’t surprising. Chapek, who joined Disney in 1993 after working in brand management for H.J. Heinz and in advertising for J. Walter Thompson, quickly made a name for himself in home entertainment for an approach that was at once strategic and visionary. He emerged as a de facto industry spokesman as he eloquently and convincingly pushed for new packaged media innovations such as Blu-ray Disc and 3D when standard DVD sales began to flatten, and at the same time tirelessly championed digital delivery mechanisms such as Disney’s cloud-based KeyChest initiative, which lets consumers buy a movie once and access it whenever they want on computers, notebooks, tablets and other portable devices.

Accordingly, he also broadened industry trade group DEG from a DVD champion into one that promotes all facets of home entertainment, both physical and digital.

Having known Chapek for quite a number of years, I can say this: He’s a true standup guy, honest, forthright and approachable. He’s also a very, very hard worker, thanks in no small part to a solid Midwestern upbringing in Hammond, Ind. As a boy, he was an altar server who showed up at St. John the Baptist Church promptly at 6 a.m., according to a story in his hometown newspaper. His dad was an oil refinery machinist; his mom worked at an insurance agency.

Bob Chapek truly is a self-made man. He may not have been born with a silver spoon in his mouth, but he has a way of touching things and making them turn into gold.
 

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Home Media – There’s No Escaping Us!

Honey, they shrunk the magazine!

Your next issue of Home Media Magazine will be a little smaller — but not by much. We’ve trimmed an inch off the top to make our digital edition fit perfectly on the iPad, since the booming tablet market, dominated by Apple, is giving digital editions of magazines a whole new life. (To see for yourself, click and subscribe to our digital edition — it’s free!

We’ve also taken the opportunity to redesign the magazine to give it a fresher look. Thanks to our creative director, Melbert Sebayan, and his design team, Home Media Magazine is now easier than ever to read and digest.

As many of you already know, we’re also on and . If you haven’t already, I encourage you to visit these sites so you can “Like” and “Follow” us.

And coming soon will be smartphone apps for Home Media as well as a special “mozine” designed especially for smartphones, so you can get the latest news, reviews, commentaries, blogs and photos as soon as they are posted, no matter where you are.

It’s all part of the evolution of Home Media Magazine into the Home Media Group, our transformation from a weekly print magazine aimed at video retailers to an around-the-clock information source aimed at the entire home entertainment food chain, from content creators and producers to distributors, manufacturers, and of course retailers, analysts, the consumer press, and “super” consumers with a wide swath of influence through blogging or other means.

We were founded 32 years ago this month as Video Store Magazine, a selling tool for the studios as they pitched the concept of watching movies on videocassette to a wary retail base. We’ve grown up with the industry as these retailers established their own rental businesses, and the studios, eager for a bigger cut of the action, pushed a new and improved medium, DVD, directly to consumers to establish the even bigger sellthrough business that in 2001 overtook theatrical as Hollywood’s biggest source of revenue.

Today, there are more ways to bring movies into the home — or directly to consumers, one should say — than anyone could have imagined, even just five years ago. Home Media has been embraced as the voice of the industry, and with the industry going off into so many different directions, all at once, it’s critical for us to be everywhere, as well.

So that’s what we’re doing. Home Media’s voice is as loud, and as vital, as it’s ever been — and the more places you can hear us, the better.
 

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Hollywood Holding Course With 3D

Can there be any more obstacles to 3D’s growth as a home entertainment viewing choice, or option (emphasis intended)?

We’ve got far too many competing formats, not enough good content, media reports that theatrical audiences are tiring of 3D and that it may be bad for your eyes, and mass consumer confusion over exactly what it is — and how it differs from the old red-and-blue glasses we used to wear during periodic 3D fads in the past.

Plus, it’s not user-friendly. The best systems require glasses, expensive glasses, which can easily be lost, misplaced or broken — particularly in homes overrun with children.

Sad, because I really like the concept of 3D, and while I certainly wouldn’t want to watch everything in 3D, there’s a fair amount of stuff out there I would like to immerse myself in to feel as though I’m part of the action instead of merely watching it — which of course is the ultimate goal of the current wave of 3D technology.

3D also has the misfortune of being launched during the worse recession since the Great Depression — and an economy that continues to be troubled to the point where more and more smart minds are questioning whether what we’re all doing is even sustainable. The United States, Europe, Greece — Houston, as they say, we have a problem. A big, big problem.

Fortunately, Hollywood isn’t throwing in the towel, at least not yet. Avatar didn’t light the 3D world on fire, but Walt Disney Studios’ decision to give The Lion King a 3D do-over certainly could give the format a considerable boost.

It would be nice to see more films of that stature come to 3D, but honestly, it’s an expensive, time-consuming proposition, and one that studios are unlikely to invest more money into until they at least catch a glimpse of a potential return on investment.

I had the opportunity, recently, to speak with Robert Neumann, the chief stereographer for WD Animation Studios. He told me the process of converting The Lion King to 3D took a team of about 60-odd artists working for four months, full-time, “including overtime and crunch time.”

But the result, at least in his opinion, is certainly worth it. “The results are stunning,” he said. “After seeing the finished product, at that point I was convinced this is almost a new medium, a new kind of art form, because it retains all the character and energy [of the original] but at the same time gives it a different feel, a certain tangibility, a hyper-real feel. People feel they can reach in and touch the characters. It’s almost like a moving painting.”

Personally, I can’t wait to see The Lion King in 3D. But I’m already a fan. The challenge, now, is to get more people onboard — and that’s what’s going to take what I call the two “Cs,” consolidation (of formats on the hardware side) and content, a lot more content.
 

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Rest In Peace, Maria LaMagra

I’m still reeling with shock and sadness at the death a few days ago of Maria LaMagra, the veteran home entertainment publicist who spent more than a decade running the PR show at Universal Studios Home Entertainment and then went on to become a successful PR consultant and independent contractor for Walt Disney Studios, Sony Pictures and others

So often, when people die, those of us who are left say something along the lines of, “She left us too soon. She was so full of life.”

In Maria LaMagra’s case, this isn’t just another platitude. It’s God’s honest truth. Maria didn’t observe life, nor did she merely live life. She took life by the shoulders and shook the bejesus out of it, and made it do her bidding.

Come to think of it, she did that to all of us.

Maria LaMagra was the diva of the Hollywood publicists when I joined what was then Video Store Magazine in 1991 and she was still the diva of Hollywood publicists when she died after a brief battle with cancer.

Her family put out a statement saying she was 66 when she died. Maria would have killed them. We all thought she was at least a decade younger. After a certain point, you see, Maria LaMagra stopped aging and became, well, ageless.

I’ll never forget her raspy voice, her loud laugh, the way she would throw back her head when she laughed, those expressive eyes, the way she carried herself, her sense of fashion and style, that aura of self-assuredness she always projected. And her approach – well, let’s just say Maria LaMagra was not from the Subtle School of Publicity. She emailed and then she phoned; she phoned and then she emailed. And she kept doing it, over and over again, until a journalist had no other choice than to say “yes.”

She was, as rocker Dave Edmunds would say, “subtle as a flying mallet.” When Maria LaMagra walked into a room, she owned it. She was loud, no question – and yet her heart was even bigger than her voice.

I’m half expecting a phone call, chastising me for putting her age in print – and asking me for one last favor, for a client, of course. Just six weeks before she died, she was at the EAA’s Wine & Wisdom event at the Skirball Center – clearly ill, but still a big, overwhelming presence. I was on vacation, but our editor in chief, Stephanie Prange, was there and talked to Maria.

The last thing she said, as Stephanie was preparing to leave: “Tell T.K. he still owes me a write-up on Smore Entertainment.”

If there’s a heaven, I can only imagine Maria up there right now, that loud laugh echoing through the clouds as she tells God and his angels what to do.

               

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Convergence Is a One-Way Street

Well, we finally have our first Internet-connected Blu-ray Disc player in our house, and the boys were beside themselves at the prospect of watching YouTube videos on the big screen … until they saw how crappy they looked.

Their excitement lasted roughly three minutes. Then, out came the Blu-ray Disc of Hall Pass (all right, I’m a bad parent!), three big bowls of popcorn, and just like that the novelty of connecting the big TV to the Internet was forgotten.

I say this because for years everyone has been proselytizing about convergence, convergence, convergence. Turn your TV into a computer, turn your computer into a TV. But as the failed Web TV experiment of the late 1990s showed, migrating the Web to the family room widescreen might not be what people want.

And today — exactly a decade and a half after the launch of Web TV, I might add — I still don’t see it happening.

As our primary home TVs have gotten bigger and clearer, anything less than high-definition simply doesn’t cut it. We’ll watch movies on our PCs, laptops and tablets, but we won’t watch YouTube videos or other low-res fare on our TVs.

Streaming HD movies may ultimately turn out to be a different beast, but for now getting a true high-definition movie on my HDTV in any manner other than a Blu-ray Disc is way too much of hassle. Netflix’s streaming-only plan continues to be hampered by a poor selection; pay-as-you go options from Vudu and iTunes are cumbersome and give me this nasty feeling of someone sticking his hand in my pocket, feeling around for every last bit of change I might have. And I am the only one who is sick and tired of slow download times and “buffering,” which is rapidly becoming the most hated word in the English language?

As for buying digital downloads, forget it. I’d still rather buy a physical object for $10, $15, even $20, than a digital version for half that amount. Too many things that I have downloaded onto my computer over the years have simply disappeared.

I think true convergence has come about, but it’s a one-way deal: our computers have become TVs, but not the other way around. And quite honestly, I don’t see that changing, at least not in the foreseeable future.

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Home Entertainment's Human Touch Alive and Well in New Orleans

Thomas K. Arnold (second from left) with Entertainment One's Griffin Gmelich, Michael Rosenberg and Wally Schmidt.

NEW ORLEANS — It’s the middle of July, the daytime heat is unbearably hot, the nighttime streets are awash with neon and crawling revelers, and everywhere I look people are talking about DVD and the home entertainment industry.

No, I haven’t time-warped back to the glory days of the annual VSDA convention in Las Vegas. I’m in that other party town, New Orleans, attending the annual sales conference of Entertainment One, a potent player in home entertainment — and one whose executives still believe, very strongly, in packaged media.

Entertainment One’s primary business, after all, is in music, and the music side of the company’s business is holding up quite well. Indeed: Entertainment One Music, as it’s officially known, has since its inception as Koch Records charted more than 100 albums on Billboard’s Independent Chart, more than all other U.S. indies, and was the No. 1 indie label, according to Billboard, for four years running.

On the home entertainment side, Entertainment One deals with the same big retail accounts as the studios, from Walmart to Netflix, and in recent years has hired several ex-studio big guns — including Griffin Gmelich (ex-Warner Home Video executive) as VP of video sales and Jeff Chapman (formerly with New Line) as regional sales manager, video — to pitch its DVDs and Blu-ray Discs.

In addition to maintaining its own home video label, Entertainment One distributes product for more than 70 affiliated labels, including Cinevision, Disinformation, Palisades Tartan and S’More Entertainment, the latter run by former Rhino honcho Arnie Schorr.

The grand get-together in New Orleans — all told, there are about 200 people here, mostly Entertainment One employees but also a few retailers, such as Lisa Nishimura of Netflix and Jeff Wyrick of Hastings, as well as distributors VPD and Ingram — is meant to reflect on the past year, look forward to the future and network in the present. About 50 labels are here presenting during the course of four days; at night there are gala networking dinners and parties, including tonight’s concert, featuring various Entertainment One Music artists, at the House of Blues, followed by “Elvira’s Movie Macabre” at The Dungeon.

If the business is hurting, as the quarterly studio numbers suggest, you wouldn’t know it here. The mood is decidedly upbeat, and while most of the product being discussed here is niche — from Tribeca Film Festival favorites to eclectic documentaries, concert films and TV shows — it’s clear there’s still a market for DVDs and Blu-ray Discs beyond the big-budget fare put out by the Hollywood studios.

Touching on a recent column I wrote in which I decried the fact that our industry, by and large, has lost its “human touch” — well, I’m happy to report there’s still quite a bit of it here this week in New Orleans.

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We Need That Human Touch!

 

The home entertainment industry, I’m afraid, has lost its human touch.

The social experience of walking into a video rental store and maybe chatting with the clerk or other customers before picking out a movie to watch that night has been replaced by a few clicks of the computer mouse to update your Netflix queue.

The rush to pick out a hot new movie the day it comes out on DVD or Blu-ray Disc, where you will likely rub elbows with other fans, has been replaced by complacency that further minimizes the human touch. We wait a day or two, maybe a week, and then toss the movie into our shopping cart as we race down the center aisle to pick up toilet paper and contact lens solution. Or maybe, judging from the way sales have been going, we just wait for it to come out on TV — or while away our evening with Angry Birds on our smartphones.

Inside the business, it’s no different. We don’t see each other much anymore; heck, we don’t even talk on the phone the way we once did, preferring to communicate via Facebook messages or an occasional text.

I miss the periodic events where you saw everyone — the key retailers, the studio presidents and their entourages, the frantic publicists and frazzled marketing executives. The annual VSDA convention is a distant memory; so is the Home Media Summit, two events that fell by the wayside because the studios no longer wanted to support them.

And has it really been a decade since “event marketing” was one of the big buzz words in our business? Grandiose DVD launch events were the norm for awhile there; how I long to see Craig Kornblau ride a camel, as he did for one of Universal Studios’ fabled launch events for The Mummy.

Granted, there are still some studios that do stage elaborate launch events, most notably Warner. But for most there’s barely a press release, and then we wonder why there’s no excitement, no pizzazz.

A lot of us are wondering where this business is heading, why sales are down and we’re no longer seeing record-breaking first-week sales for newly released theatricals. I think we need to look inside. If the movers and the shakers in the home entertainment business aren’t showing any passion, how can we expect the consumers to get excited about our products?

To quote from Bruce Springsteen, “I ain’t looking for praise or pity/I ain’t coming round searching for a crutch/I just want someone to talk to/And a little of that human touch.”

 

 

 

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