Worth Reading This Monday: Turning Distribution Upside-Down... Make More Movies?...Redbox + Studios

- Filmmaker and futurist John Ott has this very thought-provoking post on what would happen if theatrical screenings became the equivalent of concert tours, and if movies were released in other formats first to build up demand for those screenings. Ott writes:

...Why not reverse the cycle and make the other distribution formats the advertising (much cheaper) and build to theatrical events. You could theoretically have so few screenings (such scarcity) that the filmmakers or actors could make personal appearances. You wouldn't have to shell out for the theatrical tour until you knew, from statistics on download and home video sales, that the movie had a sizable audience (and you would also have geographical stats, so you could tell where the highest concentrations of those fans were).

The infrastructure for theatrical screenings currently exists. Most money is already made in shorter and shorter windows, theatrically. Why not confine it? That's a scarcity that the digital revolution has left untouched.

- The media analyst firm SNL Kagan apparently concluded that studios should make more movies, not fewer. (Something CinemaTech has been advocating for a few years now...) In a scenario based on 611 major studio releases between 2004 and 2008, a 15-movie slate would have done much better than slates with just five or ten titles.

- Interesting Wall Street Journal piece today on the relationship between Redbox and the studios. The central question is, will Redbox cannibalize DVD sales? From Sarah McBride's piece:

One studio-commissioned study showed that 9% of people who visited Redbox kiosks ended up renting a title they had previously planned to buy, and 25% said they would buy fewer DVDs this year because they could rent them at kiosks.

Redbox says its research shows many customers take a "trying before buying" approach and end up buying the DVDs after renting, and that its customers purchase DVDs at the same rate as Blockbuster Inc. and Netflix Inc. customers.

Every time a customer rents from Redbox rather than Blockbuster, the studio is missing out. While other companies cut the studios in on revenue each time they rent a movie, Redbox doesn't. With Redbox, the only income studios see is when the retailer buys the movies for its kiosks.

Universal: Let's Stamp Out $1 Movie Rentals

The Journal has a great piece today about Universal's campaign against Redbox, a company that operates 12,000 DVD rental kiosks in the US.

The basic issue is that while consumers love renting movies from the kiosks for $1, Universal feels that, A, the kiosks threaten important partners like Blockbuster Video, and, B, don't cut Universal in on a share of the rental revenue. (They just purchase the DVD, and that's it.)

From Sarah McBride's story:

Blockbuster, which must rent and staff stores, might charge as much as $4.99 for the same rental. Last week, Blockbuster said it was testing renting some classic movies for 99 cents, because of factors such as the poor economy. It is also rolling out DVD kiosks of its own, starting with about 50 kiosks during the next few weeks at various retail locations such as convenience stores.

Big retailers such as Blockbuster typically give studios a portion of rental revenue on top of purchasing the DVDs they rent out. But Redbox doesn't cut the studios in on rentals.

...In addition, studios claim that stuffing DVDs in kiosks may cheapen the underlying product. "The studios have been worried about the Redbox model from day one," says Tom Adams, president of Adams Media Research. As a studio, "Why would I help you build a business that charges a dollar for a product I'm trying to sell for $20?"

So let's recap: New technologies that make movies more accessible and affordable to consumers... Hollywood still hates 'em.

Good Luck to Ya! (Blockbuster Will Unveil Set-Top Box)

Blockbuster wants to be sure it still has a connection to consumers once movies go digital, so it's apparently developing its own set-top box for the holidays, according to PaidContent. The device will deliver movies from the Movielink service that Blockbuster now owns. From the coverage in Home Media Magazine:

Analyst Edward Woo with Wedbush Morgan Securities in Los Angeles said the set-top box device sounded ambitious, but wondered how consumers under pressure from the current economic downturn would receive it.

“Until I hear more concrete information, I'm not sure how receptive consumers will be and whether it will be different or better than other boxes out there or planned be out there,” Woo said.

Blockbuster downplayed posting a third-quarter (ended Oct. 5) net loss of $17.8 million and 2.7% decline ($33.6 million) in total revenue to $1.2 billion, citing a limited slate of movie titles and competition from Olympic telecasts.

Update: Venture capitalist Bijan Sabet thinks what we need is an open set-top box that will let anybody deliver content to it and build applications for it.

A Few Monday Reads: Piracy, Cameron, Blockbuster, and Digital Cinema Fees

- The NY Times has an interesting piece today that suggests that piracy is moving from NYC street corners to the Internet. (This may be in part due to a big enforcement initiative by NYC Mayor Michael Bloomberg.) Eric Taub writes:

Since December 2003, when Mayor Michael R. Bloomberg started an initiative to stem the trade in bootlegged and counterfeit goods, [NYC enforcement agent Shari] Hyman has “seen a huge decrease in illegal DVDs being sold in buildings.” In a February sweep, the organization checked out three buildings and 32 storefronts for bootlegged DVDs, and found none.

But New York may not be the best barometer of piracy. Worldwide and on the Internet, video piracy remains rampant. The movie industry has devised new ways to fight piracy, and has pushed for antipiracy laws and run ads to discourage pirates.

Besides pirated DVD copies of first-run films, copies are also available online for illegal downloading, mainly through peer-to-peer file-sharing networks. High-definition camcorders, some not much bigger than a cellphone, can copy films from a movie screen with little loss of detail.

- James Cameron shares a lot about what he's learned about shooting in 3-D in this e-mail interview with Variety's David S. Cohen. It's full of juicy observations, advice, and opinions. A snippet:

COHEN: Right now, 3-D is pretty much being used for films that have some spectacle in them, whether it's "Journey to the Center of the Earth" or "U2 3D"; nobody's talking about using it for domestic dramas. But there are people wondering whether it will actually enhance the impact of character-driven stories. What are your thoughts on how 3-D changes the experience of watching actors act?

CAMERON: I plan to shoot a small dramatic film in 3-D, just to prove this point, after "Avatar." In "Avatar," there are a number of scenes that are straight dramatic scenes, no action, no effects. They play very well, and in fact seem to be enhanced by the stereo viewing experience. So I think this can work for the full length of a dramatic feature. However, filmmakers and studios will have to weigh the added cost of shooting in 3-D against the increased marketing value for that type of film.

- Blockbuster wants to buy Circuit City for more than $1 billion, according to the Wall Street Journal. Why? Blockbuster's CEO wants to create a company that can sell digital and physical media, and also the devices you need to play it on ... "an $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices," CEO Jim Keyes wrote in a letter.

- Studios and cinema owners are wrangling over the fees studios will pay each time they deliver a digital file to a theater. (Known as the "virtual print fee," this helps theater owners --or a third-party that installed the digital projector and server -- defray the cost of the digital equipment.)

One more set-top box, this one from Blockbuster

Andrew Wallenstein of The Hollywood Reporter writes:

The home video giant [Blockbuster] is developing a set-top device for streaming films directly to TV sets and is expected to announce the offering sometime this month.

(CNET's News.com has some additional analysis.)

My belief is that most of us will likely never purchase a device that *only* delivers digital movies (like Vudu, for instance, and potentially this new product from Blockbuster). It'll have to serve multiple purposes, like providing WiFi access to your entire home, acting as a DVR, storage hub for your digital files, etc. It'll probably come from your cable or satellite provider, much as we loathe those guys.

But it's admirable to see Blockbuster moving so definitively in a digital direction, after buying the Movielink download marketplace last August.

Paramount's Direct-to-Net 'Jackass' Release

We can debate whether 'Jackass 2.5,' made up mostly of left-overs from 'Jackass 2,' really counts as a new, stand-alone feature film... but Paramount is claiming that it'll be the first studio feature released first online as an ad-supported streaming program. Later, it'll be available on DVD and as a paid download on iTunes and Amazon Unbox. Essentially, this is experimentation with what would've been a direct-to-DVD release, and the budget for the movie was under $2 million.

It goes up December 19th on Movielink, and on sale as a DVD and on iTunes on December 26th

From the NY Times:

...Viacom executives emphasized that this was a stand-alone venture that would pay for itself.

They described the online premiere as an experiment aimed at gauging the potential revenue streams for studio-produced, longer-form Web material that could take advantage of the consumer appetite for user-generated content.

“If this works, it could open up and really change the game about additional content that studios can create,” said Thomas Lesinski, president of Paramount Pictures Digital Entertainment. Then again, Paramount executives acknowledged it might not be the fairest test of long-form films, given that the movie, like the TV show, is made up of many short segments, consumable in morsels.

From the Wall Street Journal story:

The move comes as the studios explore new media in the face of lackluster revenue in traditional outlets. Box-office sales are down about 7% for the holiday season beginning Nov. 2, according to Media by Numbers LLC. DVD sales are down for the year, dropping 1% so far in the fourth quarter, according to Nielsen VideoScan.

If Paramount can show this tactic brings in revenue, it could become a template for movies aimed at young, Internet-savvy viewers. The original "Jackass," released in 2002, took in $64 million at the domestic box office. "Jackass 2," released in 2006, took in $73 million domestically.

Blockbuster CEO Watching Movies on His BlackBerry

Pretty cool... Blockbuster CEO James Keyes seems to grok the concept that people want to watch movies on mobile devices, and he's even worked out a way to get Movielink titles onto his BlackBerry (with a little help from his IT staff.)

Post-Thanksgiving Linkage: Blockbuster Kiosks, Streaming Video Piracy, Speed Racer, Vudu

- Blockbuster is gonna try putting automated movie rental kiosks into Papa John's pizza joints and Family Dollar stores. DVDs will rent for just a buck, cheaper than at Blockbuster's traditional outlets, and they can be returned to any kiosk -- not just the one they came from.

- Slate has a great piece on a new kind of online movie piracy. Dan Morrell writes:

As the MPAA has focused on BitTorrent downloading, however, a newer, more popular kind of piracy method has come along. BitTorrent is out. Streaming video is in.

Before it was shuttered by European authorities in October, the British-based TVLinks—which offered links to hundreds of pirated movies and television shows—had become perhaps the Web's leading destination for illicit streaming video. If you've never heard of it, you're not alone: A LexisNexis search found only four mentions of TVLinks in major news sources over the past year. The Pirate Bay, one of the most popular torrent Web sites, was cited more than 300 times. The lack of hype didn't stop the site's spread. According to Web traffic analyzer Alexa, TVLinks passed both the Pirate Bay and TorrentSpy in global traffic rank this August. At the height of its popularity, TVLinks ranked 160th in global traffic, near the level of the New York Times.

- Looks like the Wachowski Brothers are taking the green screen approach with 'Speed Racer.'

- To help market its $399 set-top box, Vudu is throwing in high-def copies of two of Universal's 'Bourne' movies. (Here's more on Vudu.)

- My mother-in-law asked me on Thanksgiving for my advice on whether she should buy "a Blu-ray." When I mentioned the format war, she didn't seem aware of it, and she didn't seem to have much recognition that HD DVD existed. She and my father-in-law are big Netflix users, and Netflix offers movies in both Blu-ray and HD DVD, so I told her the only possible problem could be if HD DVD wins, they'd need to buy a new DVD player in a couple years. Just a data point...

Blockbuster Takes Movielink Off Studios' Hands

Blockbuster is buying Movielink for less than $20 million, according to the Wall Street Journal. Movielink was founded by a group of movie studios in 2002, which spent as much as $150 million on the site over the next four years, according to BusinessWeek.

We could spend a while listing the problems of Movielink: limited selection, high prices, Windows-only DRM, poor marketing and promotion.

I've been bullish for a while that Blockbuster may be able to solve some of those problems.

This deal will expand Blockbuster's Total Access program, allowing customers not just to rent DVDs in stores and by mail, but download them, too. That makes Blockbuster a more formidable competitor to Netflix.

From the Forbes story:

Blockbuster's Total Access service, which allows customers to select DVD rentals online and receive them through the mail, has about 3.6 million subscribers. Netflix has 6.7 million subscribers.

Blockbuster added 600,000 subscribers in the second quarter, while Netflix lost 55,000 - its first quarterly decline since the service began in 1999.

Sunday/Monday links: Cellphone entertainment ... Blockbuster picks Blu-ray ... Digital cinema overseas

- Interesting piece in yesterday's New York Times about producing content for cell phones. Much of the focus is on ESPN's efforts.

Funny how everyone mentions the small screen as being the main limitation of working on a cell phone -- for me, it's the slow or stuttery frame rate.

- Blockbuster Video says it'll carry primarily Blu-ray high-def discs from here on out. From Forbes:

Since late 2006, the movie rental company has offered both formats at 250 stores across the country. Both formats were given equal billing, but Blockbuster soon realized that Blu-ray outsold its competitor by 70%.

Blockbuster will continue to rent the HD DVD titles it already offers and may expand its HD DVD inventory in the future but, for now, the company has placed all its chips on Blu-ray.

I still am not sure this is the HD DVD death knell everyone will assume it is. (I certainly can't remember the last time I was in a Blockbuster, and the one near my gym closed last year...)

- Variety has a report on the digital cinema roll-out in Europe.

- My Boston Globe column yesterday covered the use of artificial intelligence in videogames.

Wal-Mart: 3000 movies downloaded in first month

The AP has a story talking about how retailers are likely to see their DVD sales slip, just as CD sales have fallen each year since 2003. Two interesting tidbits from the piece relate to Wal-Mart and Blockbuster:

Wal-Mart Stores Inc. is the farthest along [in terms of retailers offering digital downloads] after selling 3,000 movie downloads in its first month, February. Blockbuster Inc. spokeswoman Karen Raskopf said the movie rental chain intends to enter digital downloads by the end of this year, perhaps in partnership with another company.

"We don't see digital downloading becoming a huge business in the next year or two, but our view is we need to be in the business, and we don't want to be at a competitive disadvantage," she said.

Could that other company Blockbuster may ally with be Movielink?

Thursday News: Blockbuster May Buy Movielink ... Walt Mossberg on Vid Sites ... Cuban on the Oscars ... and More

- The Wall Street Journal reports that Blockbuster is in advanced talks to buy Movielink, the movie download site founded by five of the major studios that launched in 2002. The Journal pegs the acquisition price at about $50 million. Sarah McBride and Matthew Karnitschnig write:

[The acquisition] would help Blockbuster compete against its main competitor, Netflix Inc., which unveiled its own movie-download service in January. Blockbuster is still stinging from the strategic mistake it made in initially ignoring the shift of consumers to Netflix's DVD-by-mail rental service.

Blockbuster's management is under intense pressure from its board to quickly turn around the business. Billionaire investor Carl Icahn, a major shareholder who led a successful proxy fight against the board two years ago, now sits on it himself with several allies and has been pushing for radical changes.

Blockbuster Chief Executive John Antioco has said he believes the company needs to be able to offer a "triple play" of rental options -- in stores, online mail ordering and through downloading. Movielink would give the company the last piece of that puzzle at relatively low risk. Management has concluded that creating its own platform would be considerably more expensive, according to people familiar with the situation. "This is the fastest, safest, most economical way to get into this business," one of these people said.

This'd be a good deal, I think, for both Blockbuster and Movielink. Movielink has never been well-promoted, which is something Blockbuster may help fix. And when I bumped into Movielink CEO Jim Ramo at the Consumer Electronics Show in January, he acted like time was running out (while telling me that time was in no way running out.) The site has reportedly been for sale since last year.

- The Journal's Walt Mossberg looks at Web video sites. He concludes:

...My favorite is blip.tv, run by a team made up of a former systems administrator for the NHL, and a former TV news reporter and producer. Blip.tv (not to be confused with a similar-sounding site called bliptv.com) hosts a bunch of these new Web TV series, and also helps them attract funding, sponsors and advertisers. Anyone can upload a show.

One of my favorite shows available on blip.tv is called "Goodnight Burbank," a comedy series about the squabbling that goes on behind the scenes at a local TV news show. Another is "Alive in Baghdad," news reports from Americans and Iraqis on how the war affects average Iraqis. "Cube News 1" is a series about life in the office cubicle. Other shows I've enjoyed on blip.tv include "HotRoast," "The Ministry of Unknown Science" and "Josh Leo."

- Mark Cuban has some ideas about how the Oscars should be using YouTube, rather than pulling their clips from it. He suggests using lots of short clips on YouTube to drive viewers to Oscar.com. But the big problem is that the Oscars' main source of revenue, as I understand it, is their TV broadcasting deal with ABC... they haven't yet started selling digital downloads of the show, or really figured out how to monetize it in the realm of new media.

- From the Hollywood Reporter: 'Hollywood too often misses the moment.' Interesting to think whether the very same argument Steve Bryant makes about the Web could've been made about television in the 1940s and 1950s.