Bill Mechanic is the former head of 20th Century Fox Studios, and thus can offer some interesting perspective on the inner workings of the industry. Yesterday, Mechanic was the keynote speaker at the Independent Film & Television Alliance’s production conference. In his remarks, Mechanic said that much of the blame for the current DVD retail downturn should fall squarely in the laps of the studios themselves.
Archive for September, 2009
When the largest corporation in the world shifts its merchandising strategy away from your product, you’re bound to take notice. This is the dilemma facing Hollywood movie studios, according to the Wall Street Journal. Mega-retailer Wal-Mart, whose balance sheet exceeds the size of many countries, is in the process of revamping its stores through what it calls “Project Impact”. Designed to reduce clutter and more prominently feature big-selling items, the new strategy is part of Wal-Mart’s attempt to attract more upscale shoppers.
Respected market research firm NPD has released the results of a study comparing customers who were using Blu-ray set-tops in February of 2008 to customers using the format in August of this year.
NPD divides the consumer market into various groups based on their willingness to adopt new technology. Over the eighteen month period of the study, Blu-ray’s user base extended well past “cutting edge” early adopters and made substantial inroads into the more mainstream “sensibles” and “dreamers” groups. If adoption of the format continues at this pace through the holiday shopping season, NPD says, Blu-ray players and discs will be considered mainstream products by early 2010.
I was just writing a response to one of our frequent commenters – Joey – who takes the side of the studios in this battle. Instead of just posting the comment as a response to his, I thought I would write a new post and get thoughts from all of you.
Here is my response to Joey, and to any others who may be siding with the studios in all of this…
On September 24, Redbox announced in a press release the formal launch of SaveLowCostDVDs.com. According to the release, the site is “a new online community designed to inform and mobilize consumers who want to preserve access to low-cost, new release DVDs.”
The press release (and the site) don’t pull any punches, name-dropping Universal Studios Home Entertainment, 20th Century Fox and Warner Home Video as companies trying to limit customer access to new releases at Redbox kiosks. The site, which has been up and running for several weeks prior to this “formal” launch, is fairly intuitive and organized, but far from subtle. In an enormous font size and in bright red capital letters, the phrase “DON’T LET A FEW MOVIE STUDIOS PREVENT YOU FROM SEEING THE LATEST DVDS FOR AN AFFORDABLE PRICE” can’t be missed.
Netflix recently held an event where it handed out a million dollar prize to a team that developed an algorithm to improve Netflix’s movie recommendations. CEO Reed Hastings was in attendance, and during an interview had some interesting comments to make concerning the future of Netflix and the DVD rental industry as a whole.
Here is your list of new movies coming to Redbox on September 29, 2009.
What will you see? Is anything missing?
Red States versus Blue States is so 2008. The newest red against blue contest is the Battle of the Boxes. In this corner we have Redbox, the dominant player in the industry with nearly 20,000 kiosks in operation nationwide. In the other corner we have the challenger, Blockbuster Express, which is on track to have 10,000 boxes of its own in the next year, outnumbering regular stores.
Every Redbox has them. You’ve probably seen them. You might even (gasp!) BE one of them. I’m talking about the colorful, eclectic cast of characters that patronize Redbox and make each visit such an “interesting” experience. There are several Redbox kiosks close to my house, and each one has provided an up-close, personal introduction to many of these characters. You yourself most likely know a few of them.
The pendulum continues to swing away from the traditional sales and rental models preferred by the studios and towards the cheapness and convenience of Redbox and company. According to the Digital Entertainment Group, DVD sales plummeted 13.5% during the first half of 2009, while, DVD rentals rose by 8.3%.
“We fear that the industry will be trading sell-through dollars for rental pennies from here on out,” said Michael Nathanson, analyst at Sanford C. Bernstein, in a note to clients last week.
And as we all know, it’s not just declining sales that have the movie studios playing nasty with Redbox. Consumers are demonstrating their preference for cheaper, more convenient rentals more strongly than ever.
“Within physical rental, we think the advances of Redbox and Netflix are potentially understated by the data,” Nathanson of Bernstein wrote. “A bottoms-up view of the first half of 2009 underscores the continued shift away from traditional, in-store rental and toward Redbox and Netflix.”
Even with the sales numbers in their supple, moist hands, I don’t think most studio execs are going to embrace the new zeitgeist and look for innovative ways to take advantage of it. I do need to add that there are, thankfully, still one or two clear thinkers in Hollywood.
Burying your head in the sand and clinging to a dying business model is exactly what happened to the music industry earlier this decade. Hollywood execs should ask their buddies in the record business how well resisting change and ignoring customer trends worked out for them. I believe many of them can now be found working at McDonald’s stores that contain a—wait for it—Redbox. See how life serves up such tasty little ironies sometimes, Insiders? Your comments below, please.
[via The Wall Street Journal]