Maynard Consulting

releaesd December 14, 2009 

Motion Picture Association of America (MPAA) CEO Dan Glickman and Recording Industry Association of America (RIAA) CEO Mitch Bainwol today joined U.S. Immigration and Customs Enforcement (ICE) Assistant Secretary John Morton, Assistant Attorney General Lanny Breuer and other federal officials from the National Intellectual Property Rights Coordination Center to announce the recent results from a nationwide federal law enforcement crackdown on counterfeit products.

The enforcement action, codenamed Operation Holiday Hoax, focused on illegal vendors throughout several major U.S. cities and netted five arrests and 79,796 counterfeit CDs and 79,610 DVDs.

The full release can be viewed here.

from VARIETY December 14, 2009:

Studio chiefs and showbiz CEOs will gather at the White House today for a roundtable discussion on piracy hosted by Vice President Joseph Biden.

The Obama administration is calling the meeting a first-of-its-kind event to highlight ways to combat piracy in the face of fast-changing technology.

link to full article here.

An excerpt from Hastings Entertainment, Inc. 3rd quarter report for fiscal 2009:

“The recession continued to negatively impact consumer spending; however, our total comparable revenues increased in September and merchandise and rental comparable revenues increased 2.0% and 4.1%, respectively, for the month of October,” said John Marmaduke, Chief Executive Officer and Chairman. “Our core customer base remains stable; however, customer purchase behavior has shifted toward value priced merchandise which is evidenced by the fact that the sale of total units increased 6.9% for the quarter compared to the same period for the prior year. Our movie rental business was negatively impacted by the de-valuing of the price of a rental movie primarily as a result of the growth of rental kiosks that rent movies for a dollar per day.”

Mr. Marmaduke continues to explain Hastings’ response to the impact of the de-valuing kiosks:

“In response, we have implemented a promotion where thousands of movie titles in our stores now rent for $0.99 per week. This has lowered our rental revenue in the short-term; however, we are seeing a significant increase in units rented along with growth in new customer membership sign-ups.”

A clever and resourceful response, without question.  But it’s also desperate and bodes poorly for the future.  This is one rabbit we collectively should NOT chase down the hole.

Isn’t this a suicidal ploy?  How can producers and retailers recover the margins when the content is distributed at astonishingly (and diminishingly) low price points? 

The entire Q3 2009 report can be read here.

Why bother with these cases?

Because the outcomes of these cases could help clear up the “fair use doctrine” for consumers, content producers and manufacturers.

It may also help establish some redeeming value to DMCA:

In its “circumvention” provisions, the DMCA prohibits the manufacturing or trafficking of products designed to circumvent measures that protect copyrighted titles.

Most fair-use-loving authorities will concede that DVD rippers that chuck the CSS schemes don’t pass muster with the DMCA.

“But is it circumvention if the manufacturer makes bit-for-bit copies of copyrighted DVDs? The big studios think it is. Under the auspices of the Motion Picture Association of America (MPAA), they sued RealNetworks for its RealDVD ripping software, claiming violations under the DMCA.

In the most recent decision, Judge Marilyn Hall Patel upheld her original preliminary injunction against Real, prohibiting the company from distributing RealDVD until the case concludes. The court concluded that Real violated both contract with the DVD CCA, as well as the DMCA provisions that prohibit the trafficking of anti-circumvention devices.”

For more information on what has transpired over the past 4 years in these cases, visit this link to Julie Jacobson’s article in CEPro.

To be sure, there are a handful of contributing causes for the downturn in packaged media sales.  In no particular order:

1. sluggish economy
2. mature product (DVD)
3. piracy
4. voluntary drop in price points

Number four is probably the least discussed.  But i’ve been LONG saying it’s a harmful practice.  Even the revenue sharing deals for large rental outlets is a poison pill.  But the short term boon was always enough to encourage people to turn a blind eye.

At the Independent Film & Television Alliance Production Conference, Bill Mechanic spoke directly on this very subject.  Who is Bill Mechanic?  What are his credentials?  Among other things, he was the CEO of Fox Filmed Entertainment and the head of Disney’s video division.

Here are a teaser of his comments: 

“I get asked a lot if the problems [of declining DVD sales] are systemic. My answer is: not necessarily. That we would reach a point of maturation in DVD is natural and logical, but too much of the downturn is completely self-imposed.

Like much of the bad decision making that has helped take a lot of the profit out of the business, the air was let out of the tires by the studios themselves. No top management of a studio really cared what was going on over the past few years other than was their budget being met.”

Read Marcy Magiera’s full article from Video Business magazine here.

Indie retailers take aim at Redbox

PHYSICAL: Campaign suggests kiosks hurt entertainment industry

By Susanne Ault — Video Business, 9/4/2009

SEPT. 4 | PHYSICAL: As Redbox battles three of the major studios in court, a group of independent bricks-and-mortar video retailers is working on a campaign to convince consumers that the kiosk operator’s $1-a-night rentals are putting the entire entertainment industry at risk.

Meanwhile, a study released this week by SNL Kagan suggests that Redbox’s low prices could hurt the burgeoning video-on-demand segment as VOD companies would not be able to match the kiosks’ prices while maintaining profitability.

The Video Buyers Group, one of the main drivers for the indie retailer campaign, said its 1,700 mostly mom-and-pop member stores are struggling to compete with Redbox’s inexpensive rentals. VBG and an unspecified publications firm are reaching out to studios and guilds to secure their support and/or participation.

The campaign aim’s to show Redbox as hurting future film production because studios are generating less revenue due to the $1 rentals, as opposed to the $3 to $5 rentals or $15 to $20 DVD sales available at traditional retail outlets.

Print, online and TV ads will encourage the public to drop Redbox as a source for DVDs.

A spokesman for Redbox had no comment.

“Dollar rental kiosks are to the film industry as the Internet was to the music industry,” VBG president Ted Engen said. “That’s how bad this thing can get.”

Apart from VBG, no other businesses have formally signed onto the campaign, but there is indication of some studios being sympathetic to the group’s cause.

“One company can’t be allowed to artificially reduce the value and availability of movies,” said one studio source. “Redbox’s short-term gains will shortly wreak havoc on producers, writers, laborers and ultimately consumers who love a broad selection of movies. If you don’t work with Redbox on its terms, it sues.”

The kiosk operator has split the major studios. Warner Home Video, Universal Studios Home Entertainment and 20th Century Fox Home Entertainment have tried to impose a kiosk window at least 30 days after the general retail street date of their titles, and Redbox responded by suing the studios. Sony Pictures Home Entertainment, Lionsgate and Paramount Home Entertainment, however, have signed lucrative distribution deals with Redbox. Walt Disney Studios Home Entertainment has an agreement with the kiosk operator in regard to limiting used DVD sales.

http://www.videobusiness.com/index.asp?layout=articlePrint&articleID=CA6694763

In May, Susanne Ault reviewed some NPD Group findings for Video Business magazine.

Here is an excerpt:

“Breaking down consumer preferences, 63% of spending was on standard-definition DVD purchases; 18% DVD/Blu-ray rentals; 9% cable/satellite video-on-demand; 7% Blu-ray purchases and 3% Web-based downloads and online streaming.”

That sound you hear is me chuckling.  More:

“In the past three months, 9% of consumers with home Internet connections said they streamed a movie online. Last year, 5% of people said the same. Also, 8% said they rented an online movie, versus 4% last year.

Movie downloads on videogame consoles drew less than 5% of consumers.”

Click here to read the full article.

Generally those 3 topics are seldom associated with one another.  But the RAND corporation published a research brief on this very topic.

Watch the video here.

Or read the 2 page brief in PDF format here.