A Train Wreck Indeed!

How do you f’up the pay-per-view business? You don’t. No need to – it has been one train wreck since 1984. (Full disclosure: In 1984, I started a nationwide satellite delivered ‘A’ title Movie service called’ The People’s Choice’ alongside of Jeff Reiss’s ‘RequestTelevision’ and Scott Kurnit’s ‘Viewers Choice’). When I was in this business, Bill Mechanic (ex-CEO, Chairman of Fox, Disney, green lit ‘Titanic’) and Barry Diller were at Paramount, Jamie Kellner ( Orion Pictures who went on to run ‘The WB Network’), Hal Richardson ( President at Paramount) was at Disney/Dreamworks, Eric Frankel (President for 26yrs) and Stanley Solson along with Eddie Blier were at Warner Bros. ( close to the Steve Ross reign whom I knew well from High School days), Mike Medavoy at Tri-Star, Ned Nalle at Universal and Andy Kaplan at Sony. Most all of these people now still are around and are running their own ship BECAUSE back then, they had a some foresight and moxie. They DID agree to let the PPV at least try and get off the ground by granting PPV rights to a few nascent, early entrants in the business. At that time, there were only a few addressable homes to see the films.

Since the inception of PPV on the cable landscape, its always been a ‘promise’ business at best. Nothing really ever took off or was unbelievably successful (and I am referring to MOVIES, not the WWF, Boxing or the Adult business). Many a business and consulting firm was built around it, hardware made for it, ordering systems invented and manufactured and in the end, most went out of business. Most cable operators didn’t even understand it or what it was suppose to be, what ‘tier’ to put it on and how to promote it. Most felt it would cannibalize their existing cash cow, PAY TV.

It never cannibalized anything because it never got off the ground. No one could agree on a movie PPV ‘window’ (the timing of when a PPV movie should be allowed to be seen and ordered on PPV). Many a conference, discussion group, speech and convention sessions were had – all futile. Nothing was ever decided. The VCR’s were blamed as the culprit, then it was the movie studios, then it was theater owners, then it was Pay TV and the ‘exclusivity’ wars of the 90’s. Then the Internet crept upon us all and that was the new Darth Vadar. You can’t release a film on PPV too early because it could be copied easily and even easier become distributed by means of the internet all over the planet (meaning no more duplicating and bicycling cassettes as if my friends ever did this in mass to begin with). Now, using the Internet, movies would be all over the place, everywhere. Everyone would have a copy. Well? Do we ALL have copies of Avatar? Tootsie? As Good As It Gets? Dirty Harry? A good industry has got to know its limitations! And this one never did!

Now, theater owners are afraid of the 60 day release window. Pahleeese! Just read a few of the articles below.

http://engt.co/lWRaty

http://bit.ly/kXEgRU

http://lat.ms/kiRwwc

Theater owners and the Hollywood creative community are livid about Premium VOD, which they perceive as paving the road to cannibalizing theatrical attendance which would in turn harm a movie’s overall economics, creating a dangerous downward spiral. In addition, there’s concern that if consumers switch to watching movies on the small screen then the creative license implicit in a big screen emphasis will get squeezed. While their concerns MAY be justified, the good news for them is that Premium VOD will be lucky to achieve even minimal success.

Why? The cost is one – $ 30.00 for a poor film or film that has not done well at the theater or is released directly to DVD (or what was once called DVD) is insane. Sorry, justification by babysitter fees and popcorn costs don’t cut it. These are niche films. Avatar and other BIG films will never see this light of day through this window. But ‘Cloudy with a Chance of Meatballs ‘ will (and has already, sort of). Example – first film up is Just Go With It” starring Adam Sandler and Jennifer Aniston. Ho-hum. Good cast and a flop a the box office for the most part. I’d be pissed if I paid $30.00 for this AND CAN’T EVEN KEEP A COPY IN A DIGITAL LOCKER TO SEE WHEN I WANTED AGAIN? WTF? And frankly that could be one of the keys to making this viable. Give me the ability to KEEP it as if I bought the DVD ( keep it in a ‘cloud’ locker) and I’d might buy a few films – that would help at least justify the cost.

And, as Will Richmond from VideoNuze so aptly points out, “Studios seem to believe that making movies available sooner in the home will attract demand. But the problem is that there are already so many choices for watching movies in the home – pay-TV, Netflix, iTunes, Amazon, Vudu, etc. etc., that it will be very hard to break through the noise, solely with a “sooner” positioning, which is more than offset by a ridiculously high price point. Consumers are savvier than ever; they’ll quickly realize that they can get the same movie for $4-5, a sixth to a seventh the price of Premium VOD, just by waiting a couple more months for it to appear on pay-TV or online VOD.”

So, theater owners who vow to ‘go to war’ are wasting their time and efforts. I guarantee them that the Movie studios and cable operators and satellite delivery services will win the war for them. Somehow, these guys think that consumers are not too smart. When are they going to wake up and smell the coffee? When are they going to realize that all of us don’t rush to ‘steal’ digital copies of films for any number of reasons (i.e., they are 700megs of data AT LEAST, cumbersome to store, less than perfect copies that lack subtitles at times and extra’s.) They are not MP3’s! Music and movies may both have a digital base as a common denominator but ultimately I’ll listen to Hotel California many more times than I can watch Avatar in my lifetime. And the pirates don’t make a bit of difference except barely on the streets of lower Manhattan or Tokyo where poorly made copies sell for $5.00 until those vendors get caught that day. And they on sell about 30 movies at that point – no MASS market like that that would ruin a $250m box office in the theaters or in any ancillary market I know of.

Theater owners should rejoice that soon this whole business will be in Netflix’s (or some other digital distributors) capable hands and not the studios. (Apologies to those friends of mine at the studios now – its not your fault, it’s just the ‘economics’ to blame and perhaps a few at the top thinking we are still in the DVD/VCR age). Make the business consumer friendly – give us a copy of what we buy and allow us to watch it whenever we want for our money that we spent. After all, I can do this with new music released, why not new movies released?

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The Day the Studios and Theaters Stood Still

Sometime in the near future there will be an explosion heard only in the entertainment trades and whispered and talked about between studios, marketing executives,  theater owners and DVD retailers. The FCC gave everyone permission to enter this pissing match and what a pissing match it will be.

If you ever go to the movies (and many of us do) with more than 1 person – so two people attend a film and you have a child where you needed to hire a sitter, you might not be going to the theater so quickly anymore. Well, maybe you still will. Time will tell this one. Soon, a mere 6 weeks AFTER any movie starts playing in a theater, you will be able to watch it at home in the comfort of your ‘Aunt Fay’s couch’ (nod to Steely Dan) on your nice large LCD flat panel TV.  To help you To help you visualize what this means in numbers, there are about 115 million television households in the US. Approximately 100 million of them are currently cable, satellite or IPTV subscribers. Through these cable boxes (although not every one of them, only the ‘digital’ households that have a set-top box) you will be able to purchase the very same film that was JUST in the theaters 6 weeks ago on cable for $24.99 – called premium V.O.D. – video-on-demand.  BUT, the movie studios will be able to activate a technology to prevent films sold through video-on-demand cable systems from being copied.  This is the ruling that the FCC just allowed in May 2010 after a two year battle with the studios.

Right now, theaters get an exclusive period — 120 days (4 months vs. 6 weeks), on average — to serve up new movies. Then the releases appear on television video-on-demand services at a price of about $4.99. Now the studios want to offer us new movies on video-on-demand services about 45 days after they arrive in theaters.  But, you can’t keep a copy or make a copy (your DVR, VHS or whatever won’t work). Just like a theater, once its over, its over.

So, if you are more than 2 people (+ a baby sitter), and unless you are dying to see the film on a BIG screen, I guess you might wait a few weeks.

So, what’s the big deal? For starters, the theater owners, have made it clear that releasing a movie early on video-on-demand services — thus cutting into their window — would be the equivalent of declaring war. They feel people will be more reluctant to buy movie tickets, at an average cost of almost $8, if they know they can catch the same film just a few weeks later in their living rooms, and for less money than it costs to haul the whole family to the theater. The average moviegoer spends more than $3 on popcorn and soda and the like, the cost of Friday night at the movies for a family of four can easily reach $45 – $60 — or much more in cities like New York and California.   And theater owners say this doesn’t take into account second-run and discount theaters, and that there are big exceptions: “Inception,” for instance, was still raking in millions in theaters 10 weeks after its release.

Next up, DVD retailers are fuming – Best Buy and Wal-Mart have told the studios they will retaliate against anyone who tries early-release V.O.D. because of the threat it poses to DVD sales. Huh, what DVD sales? The DVD is going the way of the CD in case anyone hasn’t noticed. Blockbuster just filed for bankruptcy. DVD sales for the year are expected to total about $9.9 billion, down 30 percent from their peak in 2004  (about $13 billion), according to Adams Media Research.

Who is the big winner here? The Studios (or so they think) because as much as 80 percent of that early V.O.D. revenue goes to them, therefore movie executives see a new way to compensate for their dwindling DVD business. And the studios are aware that consumers are growing impatient about being unable to access all movies whenever and wherever they want. An early video-on-demand option might prevent some of those frustrated customers from turning to pirated copies.

So where’s the flaw in this plan? I have a couple of thoughts. First of all, the pay-per-view business has been an anemic business since its inception on cable in 1984 when Request TV, Viewers Choice and The People’s Choice (yes, this was my company back then). Part of the problems was with the windows given to PPV movies, part was the terrible job the cable operators did to market these films to us, part was the billing mechanism (it was archaic) and part was the fact that the VHS back then and soon the DVD was simply an easier option. Not to mention you could rent the same film on VHS/DVD so much earlier than on PPV and then buy a copy to own, to watch again and again.  Second problem is that you can’t keep a copy of what you fork out $24.99 for. This just begs for pirates to hack the system (and it will happen and supposedly already has). So forget the studios argument that an early video-on-demand option might prevent some of those frustrated customers from turning to pirated copies.  Maybe at first, but I have no doubt pirated copies will turn up on the streets all the same – now just earlier and better quality DVD copies.

The fact you can’t keep a copy is just self-defeating. Instead, what the studios SHOULD be doing is giving everyone a ‘cloud’ storage locker for say, $ 10.00-20.00 a year. Once you pay $24.99, the film goes straight to your locker. Then, its kept there to be watched as many times as you want for as long as you keep the locker subscription current each year. Sure, pirated copies will still happen but there is a much better chance that people will be more willing to pay the $24.99 IF they can watch it over again, anytime, and on any ‘authorized’ device you own (i.e. mobile phone, Galaxy ‘Tab’, iPad, etc).  Apple does great job with ‘authorized’ devices and computers.

I’m sure a studio would say ‘well, then your friends can come over and see the same film without paying for it because its in your locker’. Well, its in YOUR locker, not theirs and they can come over anyway under the present scenario. And this is the same ridiculous argument studio exec’s made in the early years of the PPV business.  It didn’t stop anyone back then and only help stifle the PPV business – a misjudgment they appear are doomed to repeat once again.  Will they ever learn from past mistakes?

So, will you pay $24.99 to watch a film at home you can only see one time?  You might if it’s a title you don’t really care to much to see in the theaters. Would you have seen Avatar that way?  NOT ME!

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Sshhh!…what’s real reason why Comcast is buying NBC? TV Everywhere of course.

G.E.’s decision to sell NBC Universal reflects the shifts in fortune that are battering the media business, especially network television. The broadcast division of NBC Universal could lose big, a remarkable downturn for a network that had earned roughly $400 million in past years.

Problem: the Internet has fractured audiences and few viable business models have emerged for the distribution of content online.

What the new Comcast venture looks like: Comcast will contribute its own cable channels, which include Versus, the Golf Channel and the E Entertainment channel, and a modest amount of cash, about $5 billion, to a joint venture in which it will own 51 percent. G.E. will retain a 49 percent stake, and would likely reduce its ownership over several years and in theory, Comcast-NBC Universal will be a company separate from Comcast’s cable assets.

Some interesting possibilities could be:

It could use its power in film, with Universal Studios, to expand video-on-demand offerings by altering movie release windows to make movies available on demand the same day they are released on DVD.

It could use its power in film, with Universal Studios, to expand video-on-demand offerings by altering movie release windows to make movies available on demand the same day they are released on DVD to all active basic cable subscribers that buy HBO and SHOWTIME or purchase at least 1 on-demand film per month.

Buying Netflix: Stream movies through this service coupling subscription on cable with certain consumer benefits through Netflix, i.e. day and date with DVD or perhaps even a scheme to stream films just released in theaters 1 time only to ‘frequent flyers’ or renters of the service, but at a big ticket price on-demand.

But here is the real reason why Comcast is buying NBC: TV Everywhere. “TV Everywhere” model, which promises to give their subscribers exactly what they want: anytime, anywhere access to any TV content. They have to do this to keep their customer bases and compete. In a TV Everywhere world, the role of the multi-system operator is diminished. Your cable or satellite TV provider will no longer be your only (legal) means of watching the current episode of HBO’s Curb Your Enthusiasm. In a TV Everywhere world, Curb Your Enthusiasm will be available on literally thousands of websites and mobile apps, as long as you can authenticate yourself as a paying cable or satellite subscriber with the HBO package. Comcast risks becoming a “dumb pipe,” providing little more than bandwidth. To avoid that fate, Comcast recognizes that it needs to move upstream and own or control the content itself, thus NBC/Uni. More to the point, a consumer COULD elect to turn off his cable basic subscription and turn around and subscribe to TVE thereby allowing him to see his basic cable channels but on his PC, phone etc. Now that Comcast owns content and some of those channels it can monetize the consumer whether or not they subscribe to the cable in the house or not.

In a TV Everywhere world, it will be a terribly crowded space, with a ton of noise and websites with similar content. The sites that perform best will be the ones that create the best user experience for viewing TV content – and right now, that’s Hulu ( and who knows, maybe Clicker ?). If Comcast buys NBC, Comcast will own about 1/3 of Hulu, providing an ideal launching pad for TV Everywhere it has a very passionate and loyal audience.

This online world is a very splintered and exceedingly difficult to measure, especially when you are asked to sell advertising against the content. The real problem is a lack of tools to properly bring the right economy of scale to online which equates to buying media in a traditional way. Therefore, instead of trying to monetize a cable channel online one by one, with TVE, you can monetize the whole package in a similar way that cable already is monetized. Its a structure already understood by the consumer now. Bundle a bunch of cable channels for a small monthly fee and let consumers have access to them everywhere, including home or NOT.

The Internet while very big, does not yet command the equivalent kind of media rates and fees that Cable or Network gets today. No agreed upon means of measurement exists to give advertisers a definitive ‘rate card’ for the internet. There is no Nielsen for the web, (yet, although it was announced yesterday by Nielsen that eventually, there will be). comScore, even though they do a great job with data can’t extrapolate the data to equate to viewers ‘watching a TV set’. Making the comparison when placing an ad on a video online and the same ad on TV impossible to compare TODAY. Hulu streamed 855 million video stream last month. What does that really mean? Did all 855m viewers who watched those streams watch ALL of each stream or were many of them counted as they ‘surfed’ through Hulu clicking on various videos for a few minutes or even seconds – were they counted among the 855m? What does 855m stream equate to in Nielsen ratings/eyeballs? Does anyone really know? Nielsen despite its shortcomings has some measurable statistics for this, but its still not apples to apples.

Furthermore, Hulu still has a long way to go to prove it can monetize its audience as effectively as its parent companies can do with programs viewed on-air. Why? Its uniques are flat. Hulu’s uniques are scarcely better than they were 6 months ago. Unless the unique number jumps in the coming months (which I doubt it will), Hulu will have to meaningfully enhance its value proposition to grow its audience (can you say “Hulu to-the-TV-via-Xbox/Roku/Apple TV/etc?”) says Will Richmond of Videonuze (Nov 30th 2009). He goes on to ask “What happens to Fox’s programs on Hulu should Rupert Murdoch expand his focus beyond his newspapers’ online content going premium? What if Disney decides to launch its own subscription services? What if Google or Microsoft or Netflix (or someone else) decides to open their wallet and make a bigger play in premium online video?” And, these questions become somewhat less mysterious now that Comcast has bought NBC/Universal.TV will NEVER be the same again.

Comcast chart above courtesy of VideoNuze.com

Posted via email from williamsager’s posterous

Blockbuster killed the video store all by themselves

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It was a lethal combination of technology, fatter pipes and morons who THOUGHT they understood this business but didn’t have a clue. That’s right. MORONS. Why do I say this? In August of 2008 when interviewed about the success NetFlix was having, Blockbuster CEO Jim Keyes was “baffled by his competitor’s success”. And what was even more confusing to Mr. Keyes was the emphasis on catalog size. “Why would anyone want to watch anything other than new releases”, he wondered. He goes on to say : “I don’t care how many movies are available to me. As my personal taste as a customer, I want to watch the new stuff so whether we have 10,000 movies or 200 movies doesn’t matter if I don’t want to see any of the movies that we have . . . our assortment is heavily weighted toward newer releases and mainstream staple titles.” This guy clearly just does not get it. He’s not a film person and why in the world any responsible and half-way intelligent person responsible for turning around a business like Blockbuster hire someone like this is beyond me. FAIL.

blockbuster_p2p

Blockbuster used to be the 900 lb. gorilla in this space. It was dominant. And they did nothing to extend that dominance into the 21st century. Content to rest on this 80’s-90’s business model of retail foot traffic, Blockbuster basically put its head into the sand and held its breath. For a company with the kind of cash flow it had and market power and brand awareness they simply mismanaged their business into the ground, all the time telling shareholders that their business was doing great.

blockbuster

And then there was the Circuit City possible acquisition for $ 1.35 billion. I guess someone figured that expanding the brick-and-mortar business was a way to increase Blockbusters business. Why you want to expand the brick-and-mortar business when over the last 18 months, Blockbuster closed 412 stores (including Gamestation stores), presumably because they were operating at a loss or weren’t terribly profitable. FAIL. But it gets even better.

movielink

In August of 2007, they acquired ‘Movielink’ for $20 million dollars. Then one year later rolled out to the general public in ‘beta’ a service for ‘downloading’ of movies online. It included 5,000 titles. The downloading prices started at $8; and rental fees started at $2. It didn’t matter that it took nearly as long to download one movie as it did to get the same one in the mail from Netflix. Nor did it matter that once you spent the $8.00 and a day to get the film, it was laced with DRM making it unwatchable anywhere else but the device you received it on and unwatchable after 24 hours. Very consumer friendly indeed. If you were an executive in the business, you knew that Movielink was already dead long before Blockbuster bought it. CinemaNow and Movielink were both dead. You had to be living under a rock to believe that Movielink with its ‘PC windows’ download client manager with DRM was the future of the online movie business. How management at Blockbuster managed to convince their board of director to use $20 million dollars of the companies funds to buy Movielink is nothing but pure stupidity and mismanagement of funds. If I were a shareholder, I would have sued them. FAIL once again.

DISCLAIMER: (I started iWatchNow.com in late November of 2003 with a partner)

Fast forward to 2006, we had started an online film and TV distribution service called iWatchNow.com. My partner knew how to sling code something wicked and I knew where and how to get the content. We were one of the very early entrants in this area, next to CinemaNow and MovieLink. Neither iTunes, Hulu, Amazon, Reeltime, Veoh, Joost, Babelgum, etc., were there yet in 2003 when we were around. But they were coming big time. We acquired over 3,000 movies and TV shows. Everything from Jack Nicholson’s ‘Little Shop of Horrors’ (the Roger Corman public domain (PD) classic) to non-public domain goodies like ‘Tunnel Vision’ with Bill Murray, Gilda Radner and the original Saturday Night Live crew. It was eclectic, fun and as irreverent as we could make it showing rarely seen and hard to find content. We gave away some content for free with advertising. Other programming cost $ .99 cents per rental/24 hrs to stream.

But there were 4 things that we felt were important; to stream instead of download, to not use a client to stream but use the browser, to make the search on the site for content lightning fast and purchases easy with as few clicks as possible. We didn’t focus on ‘new’ releases because we knew that in a short time, EVERYONE would be showing them. The advances were too big from each studio for our little company, so we focused on the ‘long tail’ and convenience.

We thought that we had created a pretty good framework for a start-up online company and launched in January 2006. Then in March I decided to call Blockbuster and invite them in to our offices to see our system for the expressed purpose of selling it to them so they could jump start their online business. So, two executives showed up at our offices; Dean Wilson and Richard Jenrud. They looked under the hood, saw the library, kicked the tires and then left. We never heard back from them. Then we heard they paid $20m for a failing ‘Movielink’ service. What I am saying here is that Blockbuster probably had not only our service to look at but many others in the fledgling marketplace, yet they chose a dinosaur to spend $20m and buy Movielink. What in the world were they thinking?

and the new Tex Avery of our time is…. John Kricfalusi

Brilliant is the only word for John. John is most famous for “Ren and Stimpy”. His style and humor most often makes me recall watching the master of exaggeration and grandfather of cartoons, Tex Avery. Tex made some unbelievable cartoons – some of which have been ‘banned’ today (like ‘Uncle Tom’s Cabana‘). Here is one of his best “Red-Hot Riding Hood“.

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Or this cartoon about a “King-Size Canary

John has his own demo reel. John’s style is so much like that of the Avery style I think sometimes he really IS Tex Avery. I’d love to hire John to create a new series of cartoons for adults (non-porn), just very edgy. I think he’s the guy that can pull it off.

John’s demo reel can be viewed here.