Home Media Magazine - March 30 - April 5, 2008 - (Page 8)

NEWS www.homemediamagazine.com Netflix Shares Hit Record High Analysts see a lot of room to grow for the online rental pioneer By Erik Gruenwedel RETAIL Life is good for online DVD rental pioneer Netflix Inc. Shares of the Los Gatos, Calif.-based service March 24 reached a record high of $39.65, due to ongoing praise from Wall Street, before closing up $1.93, at $38.17. Michael Olsen, media analyst with Piper Jaffray, described Netflix’s 2008 guidance as too conservative and raised the company share price goal to $40 from $36. In a research note, Olsen said catalysts driving shares of Netflix higher in the near-term included its Web site, which Piper Jaffray said had increased in traffic 18% over the past 90 days, compared to a 6% decline at Blockbuster Online. Ironically, a service outage rendered the Netflix’s Web site unusable throughout the day. (See story at right.) Analyst Olsen said the potential for DVD by mail represented less than 20% of Netflix’s current movie rental market share, which he said afforded the service a lot of room to grow. The report also said the Blu-ray format should prove to be positive as it indicated a continued BRIEFS I BLOCKBUSTER GIVES SHAREHOLDERS SAY Blockbuster Inc.‘s board has agreed to give shareholders a nonbinding vote on executive compensation starting in 2009. The new policy, which was voted on last year, will take effect at next year’s annual shareholder’s meeting. It allows stockholders to advise the board on compensation matters involving chairman and CEO Jim Keyes and CFO Thomas Casey. – Erik Gruenwedel I Netﬂix in Xbox 360? Netflix has confirmed it is surveying subscribers to find out how interested they are in streaming movies via the Xbox 360 Live Marketplace. The announcement comes on the heels of Netflix’s January agreement with LG Electronics to develop a movie delivery system via a third-party set-top box. Netflix already offers movies that can be streamed directly to a computer, but the new service would bring movies directly to the TV. I Site Glitch use of packaged media. Last week, New York investment firm Cantor Fitzgerald & Co. upgraded from “hold” to “buy” the fiscal outlook for Netflix. Michael Pachter, media analyst with Wedbush Morgan Securities in Los Angeles, said the current state of the U.S. economy combined with a lag at the box office would continue to bolster DVD rental. “Box office has stabilized, so DVD rental should be flat or up slightly the next several months,” Pachter said. By Erik Gruenwedel day after a March 24 “unanticipated outage” rendered its Web site unusable for 11 hours, Netflix Inc.’s site was back online while employees played catch-up, shipping Monday and Tuesday’s DVD rentals in one day. Netflix will apply a 5% credit to the accounts of those customers whose orders were delayed. “It was a rare anomaly for the company that has pretty much run 24/7 since the beginning,” spokesperson Steve Swasey said. He told The Associated Press the credit won’t have a material impact on the company’s financial operations. Swasey said the disruption, which occurred the day Netflix’s stock hit an all-time high, affected the company’s 52 national distribution centers, in addition to the Web site. Shares fell nearly a $1 in midday trading March 25 to $37.24, but were up nearly 2% at the end of trading March 26 to $37.86. Swasey didn’t comment on the company’s stock but said Netflix is delivering what it said it will deliver: growing subscribers (7.5 million and counting) and movie streams. I IRS SEEKS TO BLOCK GALLERY REORGANIZATION Movie Gallery Inc.’s path to exit bankruptcy by Q2 may have hit a snag when the Internal Revenue Service ﬁled an objection seeking more than $7.5 million in administrative expenses and other fees. The motion ﬁled with U.S. Bankruptcy Court in Richmond, Va., claims Gallery owes the IRS $3.3 million, and Hollywood Video owes $4.2 million in taxrelated expenses through Jan. 15, 2008. The IRS said it objected to language in Gallery’s reorganization plan that it claimed is in violation of the Tax AntiInjunction Act, which requires that a person or entity in dispute over a tax liability with the IRS must ﬁrst pay the full amount to the government before ﬁling an administrative claim for a refund. – Erik Gruenwedel LIONSGATE SECURES HIT AND XENON CONTENT By Thomas K. Arnold I ‘ROBOT CHICKEN: STAR WARS’ PUSHED TO JULY 22 Warner Home Video has delayed the DVD release of Robot Chicken: Star Wars to July 22. The move is timed not only to coincide with the 2008 San Diego Comic-Con International July 24-27, but also the Aug. 15 theatrical release of the CG-animated Star Wars: The Clone Wars. – John Latchem The quest for more content continues at Lionsgate, as the mini-major has secured distribution rights to HIT Entertainment’s family product and Xenon Pictures cadre of Latino and urban films. Lionsgate will start distributing HIT’s full slate of home entertainment releases in May. HIT properties such as “Thomas the Tank Engine,” “Barney,” “Angelina Ballerina” and “Bob the Builder” previously were distributed by 20th Century Fox Home Entertainment. Thomas and the Great Discovery, the brand’s first feature-length direct-to-video movie in three years, will be one of the first titles released in September. The multiyear deal covers DVD distribution and electronic sellthrough. It is estimated that HIT DVD sales generate about $125 million in consumer spending each year. Lionsgate president Steve Beeks calls HIT “one of the most treasured jewels in our family entertainment crown.” The addition of the line will make Lionsgate the No. 3 distributor of nontheatrical family home entertainment programming, with a projected market share of 15%, up from the current 9%. Lionsgate’s other family properties include Scholastic’s “Clifford the Big Red Dog,” American Greetings’ “The Care Bears,” SUPPLIER MGA’s “Bratz” and animated features based on Marvel Comics properties. In another important and long-rumored content deal, Lionsgate last week signed an exclusive multiyear distribution agreement with Xenon Pictures, a key player in the Spanish-language and urban film markets. Under the deal, Lionsgate will distribute more than 300 DVD titles from Xenon and the labels it operates in the United States, including Spanish-language market leader Televisa Home Entertainment. Lionsgate also will distribute a number of theatrical features Xenon has in the cards, including the hit Australian comedy Kenny, which opens in U.S. theaters this spring. Xenon will continue to produce, acquire and market films, with Lionsgate providing sales and replenishment services. Xenon was previously distributed by Vivendi Entertainment. Forty-one Xenon titles will remain with Vivendi until Jan. 1, 2009. “The Xenon library builds upon a Spanish-language foundation established with our acquisition of other libraries and formation of other distribution agreements with a strong Spanish-language component,” said Lionsgate president Steve Beeks. “The partnership with Xenon extends both our Spanish-language and urban lines of business, two very important growth markets for Lionsgate.” Xenon already has successfully released a select group of titles through Lionsgate, including Snoop Dogg’s Hood of Horror, said Xenon’s marketing VP Kristi Alires. Xenon Pictures is recognized in the industry for developing the nation’s first label for independent black cinema. In August 2002 Xenon partnered with Mexican media powerhouse Grupo Televisa to develop and distribute its domestic video brand, Televisa Home Entertainment. Most recently, Xenon brought to theaters the acclaimed Mexican film 7 Dias. The title is now out on DVD. CEO Leigh Savidge praised Lionsgate’s “thoughtful and thorough approach to the home entertainment space.” DVD TURNS 11 NEW RELEASE ACTIVITY: MARCH 1997 — MARCH 2008 There were no marching bands, balloons or the popping of champagne corks to celebrate another anniversary for the DVD format. Early March just came and went, and no one said a word. It just happened. After 11 years, the industry has piled up 87,220 unique DVD releases. But if you want to throw in unit counts from the adult industry, gray-market imports (NTSC set to region-zero encoding) and DVD-R titles (the piracy format of choice), then you are probably looking at more than 100,000 titles for consumers to plow through. — Ralph Tribbey 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 716 2,930 1,747 4,181 5,928 7,765 11,079 12,539 14,290 13,496 12,549 I THIS WEEK’S RELEASE ACTIVITY FOR DVD Titles in Release Through Week Ended March 21, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . Total Net DVD Titles Announced and/or In Release Through June 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . 84,643+248 85,273+273 I THIS WEEK’S RELEASE ACTIVITY FOR BLU-RAY As of Week Ended March 21 . . .Released I THIS WEEK’S RELEASE ACTIVITY FOR HD DVD Scheduled As of Week Ended March 21 . . .Released 412 Scheduled 23 Home Media Magazine March 30–April 5, 2008 http://www.homemediamagazine.com

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Home Media Magazine - March 30-April 5, 2008 Contents News Commentary TV DVD Reviews Pipeline Top 20 DVD Sellers Research Top 20 Rentals and Top 10 Charts Just Announced

Home Media Magazine - March 30 - April 5, 2008

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