hoc opus

Genius Products, the home entertainment distributor controlled by The Weinstein Company, announced in Variety today that it has been made the exclusive distributor "to release Tartan USA's library and new titles domestically on DVD."

Tartan USA is the domestic operations for Tartan Films, a producer, financier and distributor based in the UK. According to Variety, "[the] First title to roll out under the pact will be Korean pic "Cello," which will be marketed under Tartan's Asia Extreme genre imprint." Korean box office winner "Oldboy" was also distributed under this banner.

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Now that Genius Products and the Weinstein Company are well on their way to forging a joint home video distribution company, what would that mean for Genius' efforts to distribute product theatrically through the Wellspring brand acquired in March 2005 when they completed their purchase of American Vantage Media Corporation. Succinctly stated by Variety:

"Wellspring -- which specializes largely in foreign-language pics and has a track record with long-running arthouse films -- was acquired by Genius last year, and the company's role in Genius' plans fell into question when the Weinstein Co. entered the fold."

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Former Disney unit MovieBeam, with a service that allows customers to rent movies from a library of 100 titles stored in a set-top box, has been restarted with $48.5 million in fresh cash from Disney, Intel, Cisco and Mayfield Fund and Norwest Venture Partners, two venture capital funds. The newly independent company carries with it the distribution agreements that it has with all major studios excepting Sony -- which, while in discussions with MovieBeam, according to Variety, "is likely holding back content for its own video-on-demand service Connect, set to add movies in March." One should note, though, the recent reorganization of the currently-music-download-only-service and its uphill fight against Apple's iPod and iTunes Music Store combo, as reported on ZDNet News

Details about the service from Variety highlight Disney's demonstrated commitment to collapsing the distribution windows to a what-you-want-when-you-want-it-where-you-want-it model:

Most films will be available in the video-on-demand window, which typically comes 30 days after homevideo. But in a deal that's the first of its kind, MovieBeam will have films from Disney the same day they hit homevideo, with an option to watch in high-definition.

The LA Times also notes that "other experiments with video on demand, such as MovieLink and CinemaNow, have failed to catch on with customers. Adams Media Research estimates that Internet movie rental services reaped only $17 million in revenue last year."

This is another setback for NetFlix, which announced a delay in launching its own VOD service back in October, when "Reed Hastings, the company's chief executive, told analysts on a conference call that the costs of licensing content for a download service would be prohibitive in the current climate." (see MarketWatch)

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Sony has set its wholesale prices for next-gen Blu-Ray discs. Amidst all of the chatter of the flattening of the home video revenue juggernaut, it's not surprising that Sony is seeking to secure growth in home video. Even if people don't seek to upgrade their libraries, new title sales will still deliver more money.

As reported by The Hollywood Reporter,

"Catalog Blu-ray disc titles will wholesale for $17.95, about the same as DVDs when that format hit the market in 1997. New-release Blu-ray discs will wholesale for $23.45, a premium of 15%-20% over what suppliers were charging for new theatrical DVDs."

Sony's company line was presented by Benjamin Feingold, president of Sony Pictures Home Entertainment, "The premium is for a way better format and to remind retailers that at the time we launched DVD, VHS was selling for $55 wholesale in the first window."

In this announcement, Sony also highlighted its bundling of DVDs and UMDs for just pennies more than the cost of a DVD alone.

UPDATE: This isn't surprising given the announcement coming just a few weeks later, covered in Variety and The Guardian, that "Sony Pictures Home Entertainment, Paramount Home Entertainment and Warner Home Video are cutting back on movie releases for the PSP." Bundling will help Sony move the remainder of its inventory and prop up the type of numbers it reported in 2005 for UMDs. However, The Guardian summed it up in typical Brit bite:

"While it might not surprise you that UMD, a disc format that can only be played in one company's machine, costs more than a DVD, and can't be (easily) played through a TV might not have a great chance of thriving, the same thought clearly didn't occur to Sony's executives."

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Changes are afoot at MGM and the focus is finally clearing up. As pointed out by The Hollywood Reporter,

"Hollywood's once-mighty lion is, in fact, owned mostly by equity investors, including Providence Equity Partners (29%), Texas Pacific Group (21%), DLJ Merchant Banking Partners (7%) and Quadrangle Group(3%). Sony and Comcast each have a 20% stake. MGM has a distribution partnership with Sony that covers films produced by MGM that originate from the library, like the upcoming Bond installment 'Casino Royale.'"

First, MGM hires Harry Sloan as chairman and CEO in October of last year, who announced his intentions to beef up production activities. Then, it's announced that Rick Sands will be moving into the COO spot, just as Dan Taylor resigns his post as President. So, although the original story behind the transaction was for Sony to mine the value of the 4,000 title library, growing its value through new distribution channels (think VOD and VCast), now's there's an announcement that MGM is looking to become the indie rent-a-system pipeline.

That's right, the studios are consolidating - as Dreamworks moves into Paramount and Pixar makes permanent its Disney pipeline - but smaller players are flush with cash - think The Weinstein Company. In fact, specifically think about Harvey and Bob, because Variety reported that MGM "is close to a deal with the Weinstein Co., and in talks with several production companies, including Lakeshore Entertainment and Bauer Martinez, to forge distribution pacts." It has been reported that any such deals would be non-exclusive and focus MGM on distribution and marketing, without spending its own funds on development or production. The Los Angeles Times gets to the meat of the matter for why anyone would want to distribute through MGM,

"Movies flowing through MGM's distribution pipeline would qualify for the studio's existing pay TV and other ancillary deals in the U.S. and in such foreign markets as Japan, Australia, Latin America, Brazil and Europe. Those deals are financially significant to producers because they can yield tens of millions of dollars that can be used to fund new productions."

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So our friends over at Great Magna Global USA have decided to reevaluate the home entertainment category destroying DVRs (after resizing the market). And, according to Media Daily News, based upon current behavior and uptake rates, DVR adoption and use may be no better than current pay channel buy rates -- or a third of U.S. TV homes.

As the article notes,

"The problem comes from lower-disposable-income cable customers who are averse to paying more monthly fees for their in-home TV entertainment."

As to the larger issue of the sales of DVDs, in whatever form they may take and downloading of digital content, well, if digital content is going to be delivered in the form of downloads to separate media boxes in the home, this would indicate that adoption rates will likely not be as great as for DVD players. And that whenever the crisis crosspoint may occur, it's further out than most believe.

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Image Entertainment Inc., a distributor of DVDs and entertainment programming (see Criterion United), is the subject of an unsolicited bid from Lions Gate Entertainment Inc. and has engaged a financial services firm to advice it on the tax-free share-swap merger estimated in the range of 0.38 to 0.42 shares of Lions Gate for each share of Image (see the 8K).

Image announced the bid on September 13th and in its press release response, Business Week notes:

Martin W. Greenwald, Image Entertainment's president and CEO, said in a statement that the company was not for sale and that its value is "far greater than what is being offered."

The letter spelled out Lions Gate's intentions:

"This acquisition would be consistent with our desire to broaden and deepen our library of filmed entertainment, as well as to add an important musical component, and, as we discussed, to introduce (Image Entertainment) as a new studio label focusing on specialty theatrical content," co-Chairman and Chief Executive Jon Feltheimer wrote in the letter.

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In yet another sober reminder that we don't truly understand the future until it is the past, MediaWeek brings us news that DVR penetration has slowed and, ahem, might not grow as fast as predicted. "[T]he latest "On Demand Quarterly" report from Magna Global, which cites data from both DirecTV and Time Warner cable indicating that consumers are not flocking to DVRs as quickly as originally expected."

So why I am highlighting some rather anticlimactic information? Well, hopefully it will bring some perspective to the apocryphal trumpeting that the media has perpetrated with respect to the death of box office, the death of the theatrical release and the simultaneous death and prominence of DVD. Clearly there are issues to understand, such as the rapid escalation of marketing costs bringing into question the value of a theatrical release that is shortly followed with a similar campaign shilling the DVD. However, imminent threat is not one of the issues. Let's get some analysis without the heaping of gloom.

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