What's New at End-of-Quarter?

With mid-year upon us, here are updates on a couple of ongoing stories:

• Hulu finally announced its long-rumored pay service, Hulu Plus. For $9.99 a month, you can get rolling access to full seasons of many new shows, as they air. And you also get access to more complete seasons of older (sometimes "classic") programs. How many people will pay for this in addition to their cable bills, which often include DVR service, which can duplicate the current-season offering on Hulu Plus? And how will the "classic" series offering compete with Netflix? Time will tell.

• Brad Stone reports in today's New York Times that Google will be helping independent bookstores when it launches Google Editions, its foray into the e-book market. A deal is apparently near between Google and the American Booksellers Association, which would make e-books available on the websites of independent bookstores via Google Editions. One staffer at Powell's Books in Portland is quoted as saying he thinks this will be a positive thing for bookstores, and that Google won't actually compete with them; though he adds, "I wonder how naive that is at this point. We'll have to see." Indeed. That Google embrace could become stifling.

• And, with that stifling Google embrace in mind, I'll note that we are still awaiting Judge Chin's decision on the amended Google Books settlement. I continue to hope he'll force more changes, in order to eliminate Google's unfair monopoly. Again, time will tell.
  

Windows Proliferate for DVDs

Following on their recent agreement with Warner Bros, Redbox has now settled with both Fox and Universal.

Under the agreements, Redbox will not rent Fox or Universal DVDs from its $1 rental kiosks until 28 days after the films are released on DVD. Redbox also agrees to destroy the DVDs at the end of their rental life, rather than sell them on the used market.

In return, Redbox gets better financial terms from the studios, and guaranteed access to greater quantities of DVDs.

This makes a higher-price rental "window" (for the likes of Blockbuster) common now across the majority of major releases, followed by the lower-price Redbox rental window. The studios also, of course, hope for increased sales of DVDs during this window, since they profit more from sales than from rentals.

Thus, the home video rental window has now been sliced in two. How many more windows will we see as movies make their way online?

End-of-Quarter Updates

With the end of the quarter upon us, here's a review of where we stand with some ongoing stories:

• Just days before Apple launches its iPad and associated iBook store, Amazon agreed to stop discounting the prices of e-books from two more major publishers. As The Wall Street Journal reports, both Simon & Schuster and HarperCollins will set their own prices under the "agency" model. This mirrors the deals at the iBook store, as well as those that Amazon had previously set with other publishers. Now we need to wait and see what the iPad does for/to e-books.

• While we're waiting on the iPad, we continue to wait on the Google book settlement. Judge Chin is presumably still pondering the possibilities, and we can but hope he will continue to be harsh on Google, demanding further improvements in the now-revised proposed settlement.

• And in good news for theater owners, audiences (so far) are willingly paying much higher ticket prices for 3D movies. As Variety reports, the upcharge for 3D tickets at many theaters is now as much as 50% of a regular 2D ticket price. Will audiences tire of a 3D "fad", and decide that movies are no longer the most-economic family entertainment option (as the industry has promoted itself); or will 3D become the new standard, as sound once replaced silent pictures, and color offed black-and-white? Only time will tell.

Reading Into The Vudu That Wal-Mart Do

It’s a lot more fun to Wal-Mart watch than it is to Wal-Mart shop. When you shop there, you have to worry about supporting a venture that is dicey at best for the greater economic good. When you Wal-Mart watch, you get to hypothesize about its complete lack of fear when it comes to using its size to squeeze impossible deals out of suppliers.

My latest Wal-Mart watching has to do with that hammerlock leverage. Wal-Mart just announced it’s buying Vudu, a startup which supplies movie rentals and purchases over the internet. Vudu has deals with all the major studios, including a large library of high-definition movies.

[read the rest of my column at digiday:DAILY]

Redbox accepts delayed access to Warner DVDs

As I wrote in an earlier post, the movie studios have been battling Redbox and its $1 DVD rental machines. Lawsuits ensued.

Warner and Redbox have just announced the settlement of their legal battle. The agreement delays Redbox's access to Warner DVDs until 28 days after initial release, creating a "window" for higher-priced consumer DVD rentals. In exchange, Warner reduces the price Redbox pays for DVDs, and also guarantees the larger quantity of discs Redbox sought.

Thus, just as consumers can buy a hardcover book early or wait for a cheaper paperback, consumers now have the choice of renting from higher-priced outlets like Blockbuster on the day of release or waiting 28 days for a cheap rental. Of course, Warner hopes that some consumers will choose to purchase the DVD instead, which would give Warner a greater profit.

That 28-day window also gives Warner an opportunity to try to build up the market for video-on-demand, online streaming, and digital downloads -- all of which have the potential to provide larger profit margins than DVD rentals.

Although not mentioned in the press release, PaidContent and the New York Times (via AP) are reporting that Redbox has also agreed to destroy all Warner DVDs when demand drops for rentals from their kiosks. Until now, Redbox had been selling off used inventory at low prices, further diminishing demand for new DVDs.

Will Justice Be Done In the Google Books Case?

So which is it? Either (a) the geniuses at Google really don’t get it, or (b) they’re just playing dumb and hoping we don’t notice. Which do you think is more frightening?

The first version of the proposed Google book settlement received a scathing critique by the US Department of Justice, in which the DOJ told the Court to reject the settlement. So Google, the authors, and publishers crafted version 2, an amended settlement agreement ("ASA"). Last Thursday, the DOJ issued its critique of the ASA, asking the Court to push for additional changes, for many of the same reasons. [read the rest of my column, including some pithy quotes from the DOJ, at digiday:DAILY]

"Avatar" gross surpasses "Titanic". So what.

As dutifully reported by Michael Ceiply in the New York Times (and many other media outlets), the global box office gross on Avatar has now surpassed that of Titanic. Aside from giving Fox and James Cameron bragging rights, does this matter? And what do they really have to brag about anyway?

Ignoring for a moment the 3-D surcharge on Avatar tickets, let's look at how things have changed from December 1997 to December 2009:

• The average US movie ticket has gone from $4.69 (per the National Assoc of Theater Owners) to $7.46 (per the referenced NYT story). That's a 59% increase.

• For comparison, the cost of first-class postage went from $0.32 to $0.44, a 38% increase.
  

• The value of the Japanese Yen has gone from $0.00784 to $0.0111 (historical exchange rates per OANDA), an increase of 42%. And the value of the French Franc (since subsumed into the Euro, but you can do the math) has gone from $0.168 to $0.219, a 30% increase. Note that any increase in the price of tickets in Yen, Frans, or Euros would be in addition to the noted exchange rate fluctuations.

So we have the usual problem: even if a movie sold only the same number of tickets in 2009 as an older movie sold in 1997, the total box office gross would likely be up 40-60% (factors such as matinee pricing, child/senior pricing, and so on aside). Given that Avatar is up only1% from the Titanic box office, it has certainly sold far fewer tickets...not much to crow about, is it?

The NYT story says that Fox stated that 72% of worldwide sales came from 3-D screens, which tack a surcharge onto each movie ticket. This further decreases the number of tickets sold, putting Avatar far behind Titanic.

Why do I care about this? I don't. Except that I'm tired of the constant drumbeat every year, as mega-budget movies open and "set new records". The records are in inflated dollars, inflated exchange rates, and (in this case) 3-D surcharges. If the movie studios would report the number of tickets sold, we could track some version of "popularity". The dollar comparisons are nearly meaningless.