The ailing chain is touting today’s availability of “The Blind Side” at Blockbuster stores, by mail or on demand. Netflix and Redbox, which recently agreed to a 28-day rental window in exchange for improved terms, does not yet have access to the movie, which notched an Oscar win for Sandra Bullock earlier this month.
The question: How much will this new window help the chain, and rental stores in general, compete against popular Netflix and Redbox? Blockbuster is making a big deal out of the fact that it’s the only “multi-channel provider” with access to big movies on street date. But is it really that great a selling point with consumers?
Studios would prefer consumers buy their movies on disc or via download. Barring that, they would prefer consumer rent movies on demand or at a Blockbuster; the economics are better that way. (Netflix operates on a subscription-based model; Redbox’s bargain pricing is considered a threat to sales, VOD and revenue-sharing rental chains like Blockbuster.)
As for digital: The release carefully notes that existing deals remain in place. The updated deal only applies to DVD and Blu-ray.
So no, bloggers, the studios aren’t really giving Blockbuster scandalously preferential treatment. They’re just agreeing to continue supplying the ailing chain with discs at a time its future looks shaky.
UPDATE: LATimes reports that the new revenue-sharing arrangement improved terms for both parties.
Blockbuster release (via paidContent)
Who really wants MGM, and what are they willing to pay for it? Six years ago, the Sony-led consortium that bought the Lion overpaid for a library that had already been mined exhaustively. Not that many people were willing to admit it at the time.
Now that the DVD bubble has burst, however, people are taking a closer look at the troubled asset. Drowning in $3.7 billion debt, it is unlikely to draw anywhere near $5 billion it last commanded.
The next round of bids are due tomorrow, with Time Warner apparently still in the hunt. Relativity Media’s hedge fund backer Elliott Associates is apparently out, though it’s not clear to me how interested it was in the buy.
The bigger question is what film libraries are worth these days. The DVD glory days are over, with more people opting to rent rather than buy movies on disc. Video on demand is growing, but still very small.
Will VOD and other movie delivery technologies help make up for DVD declines? The future’s still unclear, the experts admitted at the Film Finance Forum earlier this month. But they also said that companies overreacted to the DVD decline, slashing valuations of individual film earnings too far.
Which leads me back to my original question: What, then, are film libraries worth?
Those fretting that Comcast will immediately and drastically close theatrical windows once it takes over NBC Universal should take a breath.
Yes, Comcast has been a leading proponent of video on demand, and would like to shorten the theatrical window AND the cable window. But now it will have a big stake in the content creation side as well. And one thing studio execs do NOT want to do is diminish the much larger revenue streams from exhibition and homevideo sales.
Rather, they are engaged in a delicate balancing act, trying to adjust to consumer demand for content in home more quickly while also protecting established revenue streams. (For more on this, read my Variety story from last week here.)
Brian Roberts is not a digital revolutionary. He is, by all accounts, a button-down businessman who wants more control over his company’s destiny. And that he will have control over both sides of the equation. Will he push for premium VOD ahead of disc releases? Probably.
When I was on the beat, I was never sure what to make of Ryan Kavanaugh. He always had a million financial deals going, but didn’t talk like one. He was always running late, and seemed a bit scattered. And there were rumors about his finances, a couple drunk driving incidents….
Yet studios like Universal and Sony kept doing big slate deals with him.
A couple weeks ago, I had a chance to sit down with Ryan for this Billion Dollar Producer section Variety ran in last Friday’s paper. Ryan was running late, of course, but once the interview began he was all mine. The interview stretched several hours as he showed off several projects he’s working on. Just as I suspected: He’s always running late because he gets caught up in the moment.
How long will studios continue to defer to exhibitors on theatrical windows? Does it make sense for them to do so as other windows collapse further down the distribution chain?
In the past few weeks, NATO, the trade org for theater owners, has won concessions twice. First, Paramount delayed the homevid debut of “The Goods” to make amends for a speedy release of “G.I. Joe.” More significantly, Sony abandoned its plans to release “This Is It” on DVD for the holidays due to pushback from theaters.
Sony argued that the movie was different given its limited theatrical release, the LAT reported yesterday, but theater owners did not see it that way, and the studio ultimately backed off.
“We didn’t want it to be an issue,” Sony’s Jeff Blake told the LAT. “At the end of the day, we wanted a big theatrical run and they certainly stepped up and supported that.”
Ten years after the Napster Revolution, digital media is wreaking havoc on Hollywood and the book world. All the old assumptions and biz models are being tested. It’s amazing to watch. Even I did not realize how much studios had been collapsing DVD to VOD windows this year — and the trend has only accelerated in recent months.
I’ve said it before, and I’ll say it again: This is going to be a VERY interesting holiday shopping period for studios. Very curious to see how many discs consumers buy and how many choose to rent discs or order up the same movie on VOD.
Apparently studios are considering a sales-only window for DVD releases as a way to combat sliding sales and fight back against cheap Redbox rentals.
There are many reasons why this is a bad idea.
1. Rental stores will be able to buy discs and rent them, just like they did in the early days of home video. According to Netflix CEO Reed Hastings, who disclosed the plan during yesterday’s earnings call, retailers might be willing to wait if studios price rental discs cheap enough.
2. But consumers eager to watch the movies will just do so other ways — through pirated versions or VOD. How much will it increase or protect sales? Hard to say.
3. They risk pissing off consumers who are used to renting the movies right away. Pissed off consumers might then feel justified viewing contraband.
4. They can’t stop retailers from renting movies under the sales window due to a little thing called the First Sale Doctrine.
Hastings interest in this scheme should not be overlooked. At least one studio — that would be Warners — is trying to impose a later rental window on Netflix, arguing that its subscription based business should not be considered the same as video stores than rent on a disc by disc basis. Also not to be forgotten: Hastings really wants to focus on streaming movies; that’s been his goal since he founded the company. The technology wasn’t there yet then.
But it sure is now.
For more on studio plans, read Ben Fritz’s LAT story.
Last year, holiday disc sales fell short, as the careening economy took its toll on gift giving. DVD sales are still down, although it’s unclear how bad the situation is.
All this sets the stage for the most important time of the year for homevideo: The big summer hits are about to roll out on disc. “Transformers 2” comes out Oct. 20, for example, followed by “Ice Age 3” the next week, “Up” Nov. 10, “Star Trek” Nov. 17 and so on. Will they all sell? Or will consumers opt to rent instead? Rental’s making a big resurgence, thanks to the recession and cheap Redbox kiosks.
Wal-Mart apparently has some doubt: The chain reportedly cut back on shelf space for DVD. And, as the WSJ notes, the chain accounts for a third of DVD retail sales in the U.S.
To hedge their bets, more studios have decided to follow Warners lead and release pics simultaneously on DVD and VOD. Sony and Universal collapsed the VOD windows for “Angels & Demons,” “The Ugly Truth,” “The Taking of Pelham 1 2 3,” “Julie & Julia” and “Bruno.” Warners will do it on “Orphan,” “Four Christmases” and “Terminator: Salvation.”
If people are going to rent rather than buy, studios vastly prefer they view movies on VOD. It’s simple economics: Studios get a bigger cut of each VOD transaction than they do with disc rentals. The shorter the VOD window, the more enticing a rental prospect that delivery platform becomes.
For more, see my Variety story from yesterday.
In yesterday’s NYT, Beastie Boy turned indie film distributor Adam Yauch made a very pithy prediction about DVD:
I think that VOD, streaming and/or downloading will soon replace the rental market. And buying DVDs will just be for serious collectors, or when someone really loves a film. DVD sales are becoming more like people who collect vinyl records.
This seemed very wise for a number of reasons, not least being I’ve believed for a while that VOD and streaming will supplant DVD rental and sales. But I especially liked the comparison of DVD purchasers to the hobbyists and purists that collect vinyl records. Coming from a musician, the metaphor packs extra punch.
As Internet and cable VOD becomes easier to use, it will grow in popularity: The convenience of ordering a movie from your TV or computer outweighs a trip to the rental store. And let’s face it, more and more people are realizing they won’t necessarily watch the movie a second time, making a purchase harder to justify. But those than do want to will be able to download the movie for repeat showings.
This isn’t necessarily tragic: As I’ve pointed out before, studios wouldn’t mind a shift away from DVD rentals to VOD, for they get a greater cut of the action.
The NYT story explores indie film distribution in great detail. Read it here.