Home Media Magazine - July 29-August 4, 2007 - (Page 26)

NEWS Blockbuster Total Access Costs $50M Netflix Drops Prices as Its Subs Fall Continued from page 1 www.homemediaretailing.com while domestic same-store rental revenue dropped 0.6%. Numbers include online rentals. Matching a similar move by online rival Netflix, Blockbuster announced price cuts to several of its Web-based pricing programs. The company cut $4 from its online-only Blockbuster By Mail plan to $4.99, and slashed $8 from its Total Access Premium online rental, in-store return program to $16.99. Blockbuster reduced its entry-level Total Access program from $9.99 to $7.99. The company’s most popular threemovies-out-at-a-time Total Access plan, which includes five in-store rentals, is unchanged at $17.99 per month. Subscribers can now pay $1.99 for each in-store movie rented above their monthly plan’s limit. Blockbuster said it added 600,000 subscribers in the quarter for a total of 3.6 million subs in the Total Access program. Revenue from Total Access increased $74 million to $132.7 million, compared to $58.3 million last year. “The significant contribution from Total Access mitigated most of the in-store rental declines this quarter,” said CFO Larry Zine. However, costs associated with marketing and supporting Total Access topped $50 million in the quarter, compared to about $35 million in the first quarter, Zine said. Secondquarter gross profit declined significantly as a result of a 7.8% decrease in rental margin, due to the popularity of Total Access, he said. Keyes said Blockbuster will try to find “better ways to offer value to our customers without having to rely on such aggressive in-store pricing.” He said Blockbuster is losing money on the heaviest Total Access users (about 20% of the subs). The plan is to derive additional economic value from these customers without alienating them. “We certainly don’t want to continue to subsidize that kind of usage,” Keys said. Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles, said that could mean rental price increases. “They are trying to train their subscribers to be disciplined and not do more than five in-store transactions,” he said. Continued from page 1 subscribers at the end of the second quarter, a 1% decline from nearly 6.8 million subscribers at the end of the first quarter. “We expect to return to positive sequential [subscriber] growth in the second half, even assuming no relief from the competitive environment due to higher seasonal growth in the second half of the year compared to the second quarter,” Reed Hastings, CEO of Netflix, said in a call with investors. He said the ongoing battle with Blockbuster has helped grow the online DVD rental business “quite remarkably.” Hastings said total online subscribers — including competitors such as Blockbuster — increased 3.7 million over the past 12 months, compared to 2.5 million subscribers during the previous 12 months. Hastings noted projections of the total online DVD rental business call for an increase of more than 4 million net subscribers by mid2008. “If online rental stays on the 4 million in- crease for three years, that would be more than 20 million net subscribers by mid-2010,” Hastings said. “Within the next few years, much of the DVD rental market would likely be online rentals.” Buoyed by a $4.1 million patent litigation settlement against Blockbuster, Netflix posted income of $25.5 million, compared to $17 million during the same period last year. Revenue for the quarter totaled $303.7 million, a 27% increase from the same period last year, but a 1% drop from revenue in the previous quarter. Separately, citing its ongoing turf war with Blockbuster’s Total Access online rental, instore return program, Netflix cut $1 from the monthly price of two of its four rental plans. The $9.99 monthly plan, which allows for one rental out at a time and nine hours of streaming on a PC, dropped to $8.99. The $17.99 plan for three movies out at a time and 17 hours of streaming dropped to $16.99. The $4.99 and $13.99 plans dropped by $1 in February. Microsoft Cuts HD DVD Price Target Giving Blu-ray Format a New Endcap Continued from page 1 Continued from page 1 included the giveaway of 10 special edition 300 Xbox 360 consoles by Warner Bros. Home Entertainment at the 300 DVD launch screening at Petco Park July 27. Microsoft will begin offering 300 in HD Aug. 14 through its Xbox Live Video Marketplace download service. Microsoft also is offering a free HD download of NBC’s “Heroes” pilot episode for a limited time to promote the Heroes: Season 1 HD DVD release. Trailers, scenes and other promotional materials will also be available for free download. “With the price reduction to $180, the Xbox 360 HD DVD player continues to be the most affordable way to enjoy high definition,” said Microsoft’s Jeff Bell.” Comic-Con a DVD Showcase Continued from page 1 I DVD producer Charles de Lauziri- World’s End. Crowds lined up to walk through the ship and its display of costumes, props and original set photos taken by producer jerry Bruckheimer, while outside a horde of costumed pirates posed for photos with guests. It was all to announce the third installment of “Pirates” on DVD Dec. 4 as well as Blu-ray Disc (see page 24). Other announcements: I Microsoft’s Robin Cole showed off the special features for the HD DVD of Hereos: Season 1 at the NBC booth on the convention floor. I Walt Disney Studios Home Entertainment revealed a Blu-ray offering of “Lost’s” third season will be available with the Dec. 11 DVD release. I Paramount Home Entertainment will release the remastered Star Trek: The Original Series — Season One on HD DVD/DVD combo disc Nov. 20. ka previewed material from the upcoming final cut of Blade Runner and the complete series set of “Twin Peaks.” I During a panel on the history of Hanna-Barbera, the upcoming Tom and Jerry: A Nutcracker Tale was previewed. The DTV title is due Oct. 2 from Warner Home Video, I Starz Home Entertainment is producing a new Ray Harryhausen movie, the DTV Ares: God of War. Ray Park, who played Darth Maul in Star Wars: Episode I, is attached as a villain. I Funimation Entertainment will be the first major U.S. anime distributor to enter the high-def format arena, releasing on Blu-ray Nov. 13 two of its better-selling “Dragon Ball Z” action titles: 1993’s Dragon Ball Z: The Legendary Super Saiyan and 1994’s Dragon Ball Z: Second Coming. and retailers can no longer wait for us to figure this out.” Target for now does not sell any high-definition disc players in its stores, although a Toshiba HD DVD player is for sale on the Target Web site for $299. Target does carry HD DVD software in its home video sections alongside Blu-ray Disc titles. In the race for a packaged-media successor to DVD, there is no clear winner. The studios are divided, with Sony, Disney, 20th Century Fox and Lionsgate exclusively releasing films on Blu-ray Disc, Warner and Paramount releasing titles on both next-generation formats, and Universal sticking solely with HD DVD. Bishop is hoping the Target move will give the format even more of an edge than it already enjoys. Having Blu-ray Disc titles on the endcaps along with the players gives the format a significantly higher software presence at Target than HD DVD, and “will clearly communicate to the consumer” that Blu-ray is the format to buy. “We think this is a big step in clarifying the decision to the consumer,” Bishop said. Ken Graffeo, EVP of HD DVD for Universal Studios Home Entertainment, downplays the significance of the Target move. “All they are announcing is they are merchandising an endcap with Blu-ray, which is normal merchandising at any retailer,” he said. “Just like HD DVD has a dedicated endcap at Best Buy, and a dedicated endcap at Circuit City, and dedicated space and fixturing at Wal-mart. “Target is not making any statement about the format. They are merely providing an endcap, with a cost associated with it. Knowing that HD DVD is the most affordable high-definition format, it will be very interesting to see how the Sony player will appeal to Target guests.” Target spokesman Brie Heath said that Target is “simply merchandising Blu-ray hardware as the initial foray into this exciting category. As with all our merchandise, we will track guest feedback and adjust as necessary. “We are not proclaiming one format versus the other as the preferred consumer technology,” she added. “Software will continue to be available to our guests in both the Blu-ray and the HD DVD formats. Target is committed to providing our guests with exceptional technology solutions. Blu-ray is one of many solutions that our guests will find at Target.” ‘Forgotten’ Coasts to Festival Attendees of the July 24 screening of Echo Bridge Home Entertainment’s The Forgotten Coast at the 5th Annual Huntington Beach Surf Theatre Film Festival had the opportunity to meet the stars of the film. (L-R) Emily Kate Harper, Home Media Magazine’s Judith McCourt, Steve Vols, Brett Schwartz, Ben Knight, Brandon Tipton, Micah Byrne, Travis Potter and Gina Portman, VP of marketing for Echo Bridge. HOME MEDIA MAGAZINE (ISSN 1934-9882) is published 52 times per year 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. Single copies (prepaid only): $6.99 in the United States, $8.99 in Canada and Mexico, $13.99 all other countries. Back issues, if available: $9.99 in the U.S.; $15.99 in Canada and Mexico; $26.99 for all other countries. Include $6.50 per order plus $2 per additional copy for U.S. postage and handling. Periodicals postage paid at Duluth MN 55806 and additional mailing offices. 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Table of Contents Feed for the Digital Edition of Home Media Magazine - July 29-August 4, 2007

Contents News News News News Commentary TV DVD Reviews Pipeline Research Top 20 DVD Sellers Top 20 Rentals and Top 10 Charts Just Announced

Home Media Magazine - July 29-August 4, 2007

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