Home Media Magazine - March 2-8, 2008 - (Page 32) NEWS The Lord of the Rings: The Fellowship of the Ring www.homemediamagazine.com Blu-ray Victory Short-Lived? Continued from page 1 New Line Folded Into Warner Continued from page 1 development, production, marketing, distribution and businessaffairs operations, but will report to Warner Bros. Entertainment chairman and CEO Barry Meyer and president and COO Alan Horn. Jeff Robinov, president of the Warner Bros. Picture Group, also will play a key role in New Line’s future as it moves from a separate entity to a unit of Warner Bros. The company employs more than 600 people in Los Angeles and New York. It is unclear at this point how many will lose their jobs, although a significant thinning of the ranks is likely. The fate of New Line Home Entertainment, which is situated just below the six major studios and Lionsgate in DVD market share, is uncertain, but product will likely go to Warner as well, sources said. “We are moving quickly to improve our business performance and financial returns,” said Time Warner president and CEO Jeff Bewkes. “New Line has built a strong franchise of cutting-edge entertainment. We can enhance its value by combining it with Warner Bros.” Bewkes noted that there is a trend in Hollywood toward fewer movie releases. “New Line and Warner Bros. will now have more complementary release slates, with New Line focusing on genres that have been its strength,” he said. “With the growing importance of international revenue, it makes sense for New Line to retain its international film rights and to exploit them through Warner Bros.’ global distribution infrastructure.” Bewkes said Time Warner also “can take better advantage of digital distribution platforms by combining our studios.” “These changes will enhance our revenue opportunities and drive dramatic cost efficiencies and higher margins at New Line,” he said. The move to combine the two film companies was hinted at in early February, during Bewkes’ first earnings call as CEO. In that call, he said Time Warner would immediately implement 15% across-the-board cost cuts, beginning with the elimination of 100 jobs at the corporate level, which he said would save $50 million annually. He said the trend toward fewer studio theatrical releases, combined with the greater importance of foreign revenue, brought into question the value of having two completely separate studio infrastructures at Warner and New Line. Phil Leigh, media analyst with Inside Digital Media, said studios can’t expect explosive growth of Blu-ray movies in the short term unless player and movie prices decline, and sales of big-screen HDTVs increase. “Unless the screen is really big, you can’t tell much difference between Bluray and standard DVD,” Leigh said. He projects a gradual conversion to bigger TV screens over the next 10 years, a time period he says might be too long for packaged media due to advances in video streams and downloads. “As new bigger TVs come into the market, Blu-ray gets to be more convenient,” Leigh said. “But there are a lot of trends happening concurrently that compete with Blu-ray.” A 10-year window is about all Bluray can expect before advances in digital downloads to the TV render packaged media moot, said Paul Kocher, president and chief scientist at Cryptology Research. Kocher said in the next 12 to 18 years the ability to transmit large movie files from the Internet will be easier, and hard drive storage costs will have declined. “The effort to send a movie will be the same as it is for a song today,” he said. Michael Pachter, media analyst with Wedbush Morgan Securities in Los Angeles, said he doesn’t anticipate a boost in Blu-ray sales until the fourth quarter. “I think you’ll see a pick up correlated to HD-monitor sales, so a big boost at the holidays,” Pachter said. Jon Peddie with Jon Peddie Research in Tiburon, Calif., said con- sumers who were afraid of buying the next Video Disc, Betamax or 8-track should rejoice that all major studios support Blu-ray and that Sony appears committed to the format for the long haul. “We can expect to see a little bump in BD once the collectors and bargain hunters stop grabbing up the discounted HD DVD stuff,” Peddie said. But Rob Enderle, media analyst with The Enderle Group in San Jose, Calif., cautioned, “BD’s biggest short-term problem is that DVDs are both entrenched and good enough for most consumers,” he said. VIACOM BIDS HD DVD ADIEU By Erik Gruenwedel and Chris Tribbey iacom is happy to put the format war behind it, said CEO Philippe Dauman. “We are quite happy that there’s been unification of an important new revenue stream for the industry,” Dauman said. Paramount greatly valued its relationship with defunct next-generation format HD DVD and Toshiba, he said, but looked forward to releasing titles in Blu-ray depending on consumer response. V Paramount will end its HD DVD releases with Things We Lost in Fire and Into the Wild March 4, the studio reported. Planned HD DVDs from the studio that will not be released include The Kite Runner, Sweeney Todd: The Demon Barber of Fleet Street and a re-release of The Jack Ryan Collection. DreamWorks’ Transformers and Shrek the Third respectively shipped 19 million and 15 million net units of DVD and HD DVD, according to executives. Netflix ‘Firing on All Cylinders’ Continued from page 1 they are going to [have to] do something with it,” he said. “The business is treading water. We, as managers and companies in general, are not in the business of treading water.” McCarthy doubted Blockbuster has the resources to grow both its instore and online rental businesses. He said new CEO Jim Keyes has a retail background and could succeed Redbox Grows Continued from page 1 “As one of our core consumer benefits is convenience, Redbox seeks presence in retail locations that our consumers are already visiting, saving them a stop in their day,” said Gary Lancina, VP of marketing for Redbox. “Redbox’s agreement with Walgreens is an example of the companies’ shared commitment to providing convenience and value to our customers,” said Redbox CEO Gregg Kaplan. “Featuring the latest DVD rentals for $1 per night, Redbox provides Walgreens’ consumers with another great reason to visit their neighborhood Walgreens locations.” ‘Troopers’ at WonderCon Sony Pictures Home Entertainment and the cast of Starship Troopers 3: Marauder debuted the film’s trailer at San Francisco’s WonderCon Feb. 23. Pictured in between two Troopers are (L-R) Catherine Oxenberg, Casper Van Dien, director Ed Neumeier, Jolene Blalock and Sony’s Jason Allen and Staci Griesbach. at the store level. “If they don’t fix the store-based problem, they’re toast,” he said. “I don’t think they have the resources to do both.” Blockbuster reports fourth-quarter results March 6. McCarthy said Netflix had no conclusive evidence that bankrupt Movie Gallery’s store closures have a direct impact on online rentals. “[But] it is hard to imagine that the closures [have] slowed our growth,” he said. Citing reduced online competition and spending from Blockbuster, Netflix reported it expects to end 2008 with 8.9 million to 9.5 million subscribers, compared to a previous projection of 8.4 million to 8.9 million. The company reported firstquarter subs would increase from 8.16 million to 8.26 million, compared to previous estimates of 7.85 million to 8.05 million. The company projects quarterly net income to increase $1 million in the range from $10 million to $14 million, with annual profit ranging from $75 million to $83 million. McCarthy said the company’s PC- based instant movie-streaming service as a value proposition, as well as lower subscriber acquisition costs, or SAC, contributed to record sub growth in the quarter. “There aren’t many times in the company’s history when we are firing on all cylinders, and Q1 is one of those times,” McCarthy said. “I think it is going to shock some people.” He envisioned increased consumer adoption of HD packaged media, now that Blu-ray has been declared winner of the format war, but HD rentals remain a low-single-digit percentage of shipments. The CFO said stocking Blu-ray titles is more expensive than standard DVD, but the HD format represents a needed extension of the DVD life cycle. “It remains to be seen how much price erosion takes place over the next couple of years, but it seems apparent the content will cost us more,” McCarthy said. He remains impressed with the growth of the kiosk DVD rental market, which caught traditional store rental services by surprise. “By focusing on the online competitor, they missed the [kiosk] boat,” he said. HOME MEDIA MAGAZINE (ISSN 1934-9882) is published weekly 51 times per year (weekly except for one week at the end of December) by Questex Media Group, Inc., 306 West Michigan Street, Suite 200, Duluth, MN 55802. Subscription rates: $49.99 for one year in the United States and Possessions; $79.99 for one year in Canada and Mexico; all other countries $99.99 for one year (by surface mail). Add $75 annually for air-expedited service. 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