RIP Blockbuster... All Hail VOD!

Is it a coincidence that in the same week that "a slew of Hollywood studios and cable companies are teaming up for a $30 million advertising campaign... to further promote awareness of movies available on cable VOD" (THR.com - "Studios, cable companies team for VOD"), we have "Blockbuster shares tumble after bankruptcy warning"? (Associated Press) Well, actually, it is a coincidence, I guess, but there is a very specific shift in the industry that's causing both events to happen...

Truth of the matter is, the DVD is dying. I don't think it'll ever fully go away, but it's definitely being devalued. According to Redbox, the subsidiary of Coinstar that specializes in the vending of rental DVD's via self-service/interactive kiosks, the rental of a DVD is worth a couple bucks, at best. Then, you have the Hulu's and Netflix's. Hulu is streaming content for free and Netflix is mailing DVD's out using a subscription model, which pushes the value of each DVD even lower. However, even Netflix sees the downside of DVD's and they're pushing heavily into VOD and streaming, by partnering with the likes of XBox, PS3 and even TiVo. Blockbuster tried to shift with the times, concentrating their outlets on being a retail experience and getting into mailing out DVD's and creating their own VOD experience, but, hey... it's a crowded marketplace.

Now, for fun, let's go back a few years. Back to the early 90's... the Worldwide web didn't exist, Mark Wahlberg was just a rapper, email was a few years away, we were anxiously waiting for "Jason Goes to Hell: The Final Friday", after the disappointment that was "Jason Takes Manhatten", and computers were relegated to getting information from floppy discs. Your computer was used to play "Leisure Suit Larry" and write term papers, that was about it. However, there were a few visionaries out there that knew what was coming... This thing called the Internet was about to come along and with it would come massive changes in hardware, software and infrastructure. Fast forward to present day and we now have the ability to interact, download and stream the richest of content, instantly. We got here pretty fast, didn't we? Now, what does this all mean?

Well, really, it doesn't mean that much. Looking back, TV meant the demise of the movie theater. VHS meant the demise of TV. Cable meant the demise of the Networks. DVD meant the demise of VHS. Now, streaming and VOD mean the demise of DVD. Looking at it that way, VHS is the only thing that really got hooped... poor VHS. Well, that was bound to happen. Remember when you used to have your VHS tapes and you'd keep their boxes all clean and on display? Remember how proudly you displayed your DVD collection? I don't know about you, but I've lost most of my DVD boxes and I have scratched up, old DVD's everywhere. This is just a shift in the industry and shifts will keep happening. After streaming and VOD, my bet is that everything goes to a cloud system - pay once for the rights to view content, then you'll get it forever, on any device... but it'll only be streamed, you'll never actually hold the file itself. Imagine if there was only ONE file at the studio and everyone, from the theaters to Billy Joe Bob in Utah, all just streamed from that. That's next. Remember when you needed a hard drive? That's so early 2000's... Next up, fully ubiquitous devices that can handle all media formats, you watch.

For now, I think this shift is good for indie filmmakers, I've been saying that for a while... and I feel it's been a long time coming. We're inching forward and I like it. It lowers the barriers of entry for distribution and the barrier for content creation is already low. Now, there's no tapes, DVD's or film. No shipping, retail outlets or kiosks. You'll just have a file. Upload it to somewhere and people can get it. Now, we just have to sit back, watch this all unfold and hope that the infrastructure is put in place for us indie guys to use it and profit from it.

Have a great weekend, see you next week!

A look at: Blockbuster, Netflix, Amazon and Regal Cinemas. Why? Why not...

Well, I don't really know what I uncovered here. Certainly nothing earth shattering. However, as promised, I looked into the DVD rental and sales figures and compared them to theatrical release numbers. If you remember, this came up because I was commenting on how the summer is a great time for theatrical released films, but I think it's a bad time for you to release your indie horror on DVD... and, because the distributors know that, that's why we see some shitty weeks for DVD horror releases in the summer. Well, there's nothing scientific about this and I'm not sure what I revealed, but... let's look at some figures.

I'm sure there's reports and reports on reports looking into similar things, but I don't want to pay for that, nor do I have the time or effort to look into it all. So, I went the easier route. I looked into public companies. You see, public companies have to file with the SEC and all their financials are out there for everyone to see. So, I sorted through the financials on Blockbuster, Netflix, Amazon and, to compare, Regal Cinemas.

Here's what I found...

First off, Blockbuster. I figured Blockbuster would be a good, obvious starting place for rentals and their financials allowed me to look at the straight revenues that they generated from them. Know that video games would also be included here, but... like I said. Nothing scientific. So, below, are Blockbuster's revenue from base rentals, which means it doesn't include sales of previously owned DVD's, merchandise and other stuff.

Base rental revenues, First Quarter (13 weeks, ending April 6th) $901.7Million
Base rental revenues, Second Quarter (13 weeks, ending July 6th) $812Million
Base rental revenues, Third Quarter (13 weeks, ending October 5th) $751.4Million
Base rental revenues, Fourth Quarter (13 weeks, ending January 4th) $773.4Million

If you're interested, they had revenues of $627.3Million from sales of their previously rented products, $1.4BILLION from merchandise sales and $32.7Million from other shit. There's a couple of other interesting things you should know about Blockbuster. First up, James Keyes is the CEO of Blockbuster and they hired him away from 7-11... which makes sense, since they're trying to turn the actual Blockbuster stores into more of a retail focused experience. They're also trying to take an 'anywhere and anytime' approach to rentals now. Not only will they be enhancing the in-store experience, you'll be able to get DVD's and get movies digitally, plus you'll get them from stores, in the mail, from kiosks and through your computer. Anyhow, if you look at the rental revenues there, the biggest quarter is the first, which is Jan/Feb/Mar. That makes sense. The lowest quarter is the third, which is Jul/Aug/Sep. That makes sense. I think that supports my theory that rentals are down in the summer months versus the winter months. The fact that the other two quarters are sort of in between also supports it, I think. So, there you go... but, as I bothered to look into other companies, let's look at them, too.

Okay, now on to Netflix. At first, I thought... I'll look into Blockbuster and Netflix, they both rent movies. However, Netflix works on a completely different system. They work on the subscription based method, which means that you pay a flat monthly fee and get as many movies as you want. (I think that's how it works, I'm not a subscriber) So, let's look at their straight revenues, quarter by quarter.

Revenues, First Quarter (Three Months Ending March 31) $326.2Million
Revenues, Second Quarter (Three Months Ending June 30) $337.6Million
Revenues, Third Quarter (Three Months Ending September 30) $341.3Million
Revenues, Fourth Quarter (Three Months Ending December 31) $359.6Million

What's interesting here is, their revenue goes up quarter to quarter. In fact, looking back, it just keeps going up every quarter, with a few exceptions. Why? Well, it's the subscription model, just like a gym membership. If I get 100 people at X dollars per month in the first quarter, then add 20 more people at X dollars the next quarter, I've now got 120 people paying X per month, therefore more revenues. Problem with this is, what happens when you stop getting new subscribers? You stop growing. How do you keep growing? There's various ways, but... usually, lower your prices. Now, revenue drops. Anyhow, what's interesting is how steady their revenue is. That subscription model sure has something going for it.

After looking into DVD rentals, I thought... I better look into DVD sales, as well. So, who better to look into than Amazon? So, here's their quarterly sales from media in North America only. Media would be DVD's, but would also include CD's and things like that. Here's their quarterly sales from media in North America

Media Sales NA, First Quarter (Three Months Ending March 31) $1.2BILLION
Media Sales NA, Second Quarter (Three Months Ending June 30) $1.15BILLION
Media Sales NA, Third Quarter (Three Months Ending September 30) $1.25BILLION
Media Sales NA, Fourth Quarter (Three Months Ending December 31) $1.75BILLION

First off, holy shit. Amazon dwarfs Blockbuster and Netflix. This is JUST North America and JUST media. Insane. Also, note their biggest quarter - the fourth. That's Oct/Nov/Dec. Guess why that's so big? Christmas. No question. It could also be due to the fact that more people are staying in and watching movies due to the bad weather, but I think it's more about Christmas. Proof may be in the fact that all the other quarters are relatively similar. Also, CD sales have something to do with it... I'm not sure how DVD's do next to CD's.

Just to compare, I decided to look into Regal Theaters, which is the biggest chain of movie theaters in North America. Here's their quarterly revenue from admissions alone. Remember, their cash cow is concessions and I'm leaving that out.

Admissions revenue, First Quarter (Quarter ending March 27) $432Million
Admissions revenue, Second Quarter (Quarter ending June 26) $455.7Million
Admissions revenue, Third Quarter (Quarter ending September 25) $516.8Million
Admissions revenue, Fourth Quarter (Quarter ending January 1) $478.6Million

Third quarter IS their biggest, which is Jul/Aug/Sep, and that makes sense. However, quarter over quarter, they're a lot steadier than I thought. I'm not sure what that says, to be honest. This actually poses more questions than it solves answers, really. Maybe it's an 80/20 deal? Meaning that fewer movies are taking more money in the summer and more movies are splitting money over the other quarters. Therefore, individual movies make more money in the summer and everyone gets smaller pieces of cake in the other months? Who knows... I'll have to dig deeper on that, I guess.

Anyhow, let's try to wrap this up a bit. What did we learn from this? Fuck if I know. What I do know is that I'm surprised at how much money Amazon brings in. That goes to show you that the real money is in DVD releases. Adding up Netflix, Amazon and Blockbuster, you can see that it's a huge market. Way more potential money there than in theatrical releases. However, I would like to say that, although it's a little less pronounced than I thought, it IS safe to say that theatrical releases get a bump in the summer and DVD's get a bump in the winter. Point made, proven and put to bed.

Further, as an indie filmmaker, I think you can take this away... going straight to DVD is just fine. It's definitely a big enough market to get your piece of the pie.

Linkapalooza - August 6th, 2008: New interesting projects announced, Insight into the future, again... and Dead Harvey gets no respect!

So much stuff going on out there! A few new projects announced on THR.com, some insight into the future of distribution, cool new integrated concepts and we're still waiting for OUR clip about "5 or Die". Should get here any time now...

Del Toro, Miramax not 'Afraid of the Dark' on THR.com: I always like reading the little Hollywood Reporter blurbs, as it gives you a bit of insight into how these big deals get done and where the players come from. Usually I hate it when they get ideas from old TV shows, but this first project is kind of cool. The idea comes from a cult show that ABC made in the 70's, they have a comic book artist-writer helming it and del Toro is producing with Miramax. Since I'm mentioning that one, here's another one from THR.com - 'Blood' work for 'Family Guy' scribe. I don't get why they would tap a showrunner from "Family Guy" to adapt a horror property, but maybe there's something I don't know. What's interesting is the fact that Hollywood is going ape-shit over comics these days. I gotta say, the idea behind "Last Blood" is awesome. "Human survivors of a zombie massacre find themselves protected by a band of vampires who need their blood to survive." F'ing awesome.

Viacom CEO: 'Great' content is king on Cnet News.com: Viacom's CEO, Philippe Dauman, spoke at the Fortune Brainstorm Tech Conference a little while ago and said some pretty interesting things about 'content'. Now, before I get into what he said, let me clarify something. Please do realize that what you're making, as an indie-horror filmmaker, is content. I think a lot of people make the mistake of thinking that what they're making is just a film. If you think of yourself as your own little studio and you're making content for distribution, you're going to open yourself up to a lot of new avenues. So, even though Viacom is a multi-national, billion dollar company, try to do what they do. So, what do they do and what did Dauman say? Well, they see themselves as a 'content producer' and they seek to find distribution any way they can and to make money any way they can, while looking to find new audiences thanks to emerging distribution. There you go...

Blockbuster adds Movielink's video downloads to Web site on DallasNews.com and LG Electronics Device To Deliver Movies Online on WSJ.com: The battle for delivering movies to your TV through your PC rages on... another article on Blockbuster finally using Movielink, a company they bought almost a year ago, to offer movies for people to download to their PC as soon as they're available for rent. The other article is how LG Electronics will soon offer a device that plays Blu-ray over the internet from Netflix. We already knew that LG and Netflix were partnering up, but both are really pushing the envelope and trying to open this whole market up. LG isn't really the big story here, it's really Netflix. It looks like both Blockbuster and Netflix are vying to be the new gatekeepers, as they're partnering up witheveryone they can find. Stay tuned to the battle... and don't forget that Microsoft, Nintendo and Sony are all in this fight, too.

Sci Fi Plotline to Play on TV and Video Game on promomagazine.com: I've been waiting to post comments on this article for a while... This is a pretty cool idea and this is the way filmmakers need to think as we delve forward into this new era of distribution. Basically, it's a series that's going to air on Sci-Fi, but it's also a video game that will follow the series. So, you basically play along with the series. I'm not saying that you should go out and copy this idea... what I'm saying is, think of ideas that use other mediums, think outside the box. Maybe you develop a series that has a huge online component, or that's based around live events, a CD release or a mobile campaign, I don't know. Basically, anything that uses other mediums and angles to compliment your project will gain you a bigger audience.

Speaking of ways to drum up interest about a project... a bunch of the horror sites all got sent a video clip called "5 or Die", which looks to be a viral campaign for something. Nice campaign... and a pretty cool way to build interest, as all the sites are talking about it. Including us, who, of course, had to find out about it by reading other sites... thanks "5 or Die" guys, that hurts. I guess our clip got lost in the mail? Whatever... here's a link to 'Icons of Fright' site, which shows the video AND all the sites that aren't called Dead Harvey that got sent the link.