Home Media Magazine - October 21-27, 2007 - (Page 6)

NEWS www.homemediamagazine.com Analyst Projects Good 2008 for Blockbuster, Netflix With Movie Gallery in bankruptcy, rental survivors will profit By Erik Gruenwedel He said the Gallery store closures could generate from R E TA I L Movie Gallery’s fiscal fall is apparently a gain $400 million to $500 million in incremental revenue for both Netflix and Blockbuster, according to Michael for Blockbuster. Pachter, analyst with Wedbush Morgan Securities. “It appears to us that new Blockbuster management is The outspoken Los Angeles-based media analyst said determined to operate the company’s Total Access plan improvements to the competitive environment in movie at a profit,” Pachter said in the note. rentals led to his upgrades of BlockHe said Blockbuster had curtailed buster stock to “strong buy” from “buy,” «IT APPEARS TO US THAT THE to five the number of free in-store and Netflix stock to “buy” from “hold.” movie rentals for Total Access memNEW BLOCKBUSTER Pachter issued separate research bers. Additional rentals are $1.99 MANAGEMENT IS notes less than one day before Gallery DETERMINED TO OPERATE THE per transaction. Marketing expendifiled Chapter 11 bankruptcy protection. tures for Total Access, which totaled COMPANY’S TOTAL ACCESS He projected Dallas-based Block$300 million since inception, have PLAN AT A PROFIT.» buster’s stock price to reach $8 per share been trimmed by nearly 60%. MICHAEL PACHTER, ANALYST in fiscal 2008 — up from a previous $6Pachter expects Blockbuster marper-share target. The Netflix note said the online rental pi- keting for 2008 not to exceed $125 million. A price inoneer’s stock could reach a $30-per-share target price com- crease to $19.99 for the most popular Total Access plan pared to previous guidance of $18 per share in fiscal 2008. could increase margins to 35%, according to the note. The note said reduced marketing costs associated with In turn, Pachter expects Netflix to cut its marketing Total Access, Blockbuster’s online rental, in-store return costs and lower subscriber acquisition costs, a metric program, coupled with projected 1,000-plus Gallery key to online investors. He also expects Netflix to raise store closures will result in fiscal-2008 revenue of $5.1 its most popular three-out plan from $16.99 to $17.99. billion, compared to the $4.9 billion previously forecast. Netflix is projected to add upwards of 750,000 subscribers Pachter expects between 4 million to 5 million movie during fiscal 2008. The report said the Alviso, Calif.-based renters will find their local Gallery or Hollywood Video company’s third-quarter revenue should top $292 million, location shuttered in the next 12 months. compared to previous guidance of $286 million. “We believe that as many as 10% of these customers The analyst remains upbeat on Blockbuster, despite will choose a Netflix trial,” Pachter said. See RENTAL, Page 25 BLOCKBUSTER NAMES ITS NEW GENERAL COUNSEL Attempts to transform itself into an entertainment convenience store took another step when Blockbuster Inc. last week named Eric Peterson EVP, general counsel and secretary. Peterson fills the vacant general counsel position formerly held by one of Blockbuster’s original executives, EdPeterson ward Stead. Stead was laid off in early 2006 in a cost-cutting move that included a lump-sum payment of more than $1 million. Peterson previously was general counsel with TXU Corp., a Dallas-based energy company, and voted “Best General Counsel” in 2004 by the Dallas Business Journal. Jim Keyes, CEO of Dallas-based Blockbuster, said Peterson’s resolution of TXU’s complex legal affairs with its European unit helped underscore the executive’s ability to handle companies in transition. “[Eric has] an extensive background in highly competitive, fast-moving industries,” Keyes said. “He is a seasoned executive who will contribute significantly to our efforts to transform Blockbuster into the most convenient source for media entertainment.” –Erik Gruenwedel Gallery Woes A Boon for Kiosk Cos.? By Erik Gruenwedel K I O S K S Movie Gallery’s bankruptcy filing underscores the waning of the brick-and-mortar DVD rental business model, said the chief executive of DVDPlay, a movie rental kiosk company. Charles Berger, president and CEO of Campbell, Calif.-based DVDPlay, said the company spent more than $30 million perfecting a databaseand network-supported proprietary Web-based kiosk capable of holding upwards of 80 titles and 500 DVDs. Units cater only to new studio movies. Titles rent for $1.49 the first day and 99 cents per day thereafter with a credit card. He said the kiosks are linked via wireless cellular modem or DSL connection to accommodate digital downloads and burning should that market develop. DVDPlay has 1,100 kiosks located primarily at supermarkets such as Safeway, Albertsons, Dominick’s, Tom Thumb, Vons and Genuardi’s. It plans to locate 2,000 additional units nationally in 2008. The kiosk DVD rental industry, which includes Redbox (4,400 units), The New Release (1,900) and DVDPlay, represents about 1% of movie rental entertainment revenue and is expected to grow to 25% of the business in 2011, according to Adams Media Research. “The overall trend in retail towards self-service automation, particularly in the DVD rental space, is driven by the fact that the economics at retail continue to be very challenging,” Berger said. He said there are few retail examples whereby the business caters to one narrow customer: the movie renter. He said traditional rental companies such as Blockbuster Inc. and Gallery are hamstrung dealing with escalating employee costs and significant retail footprints. “Our economics are quite strong because we only need five square feet of retail space and no on-site staffing,” Berger said. “And we can See KIOSKS, Page 25 Uni Resurrects ‘Mummy’ for Its DTV Lineup By Thomas K. Arnold P R O D U C T Having tapped into its “American Pie” franchise for three successful direct-to-video sequels, Universal Studios Home Entertainment now is casting its eye toward “The Mummy.” The Scorpion King: Rise of the Akkadian, a prequel to the third “Mummy” film, will be released sometime next year under the division’s DVD Originals banner. It’s the most action-adventure-focused release in the line, which in the past included comedy. Craig Kornblau, president of Universal Studios Home Entertainment and Universal Pictures Digital Platforms, said the film “expands on the DVD Originals strategy of creating and aggressively marketing highquality made-for-DVD sequels to beloved Universal franchises.” The Scorpion King: Rise of the Akkadian is a precursor to The Scorpion King, the 2002 summer theatrical hit that starred Dwayne “The Rock” Johnson as Mathayus, the fearsome warrior king of an ancient desert em- TRENDS IN MUSIC DVD RELEASES NINE-MONTH COMPARISONS: 2003-2007 An interesting trend is taking place in the music DVD category. In comparing ninemonth release patterns for the past five years, we find that back in 2003 the chances of finding a DVD/CD combo release were pretty slim — just 11 titles, or 1.4% of the overall music DVD release pie. Now roughly one of every four music DVD titles also includes a bonus CD. Likely reasons for this trend include creating an incentive to select packaged media over cherry-picking downloads, shelf-space issues in the big box arena and the shuttering of music-only retail outlets. — Ralph Tribbey Year 2003 2004 2005 2006 2007 DVD/CD Combos 11 55 221 362 255 Total Music 789 1,045 1,335 1,516 1,034 Percent 1.4% 5.3% 16.6% 23.9% 24.7% * DVD/CD combos include unique SKUs only. Where both DVD and DVD/CD versions of the same title is offered, only the DVD version is counted. I THIS WEEK’S RELEASE ACTIVITY FOR DVD Titles in Release Through Week Ended Oct. 12, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Net DVD Titles Announced and/or In Release Through March 31, 2007 . . . . . . . . . . . . . . . . . . . . . . 77,843+312 78,534+298 I THIS WEEK’S RELEASE ACTIVITY FOR BLU-RAY As of Week Ended Oct. 12 . . . . . Released I THIS WEEK’S RELEASE ACTIVITY FOR HD DVD Scheduled As of Week Ended Oct. 12 . . . . . Released 308 Scheduled 41 pire. The new production tells the story of how young Mathayus rose to become the Scorpion King. The film is being shot entirely in South Africa — principal photography began earlier this month in Capetown — and stars upstart Michael Copon (a former Power Ranger best known for his role on television’s “Beyond the Break”) as the young Mathayus. The film also features Simon Quarterman as Ari, Karen David as Layla, Ralf Moeller as the warrior Pollux and Ultimate Fighting Championship king Randy Couture as the villain Sargon. The film is being directed by Russell Mulcahy (Resident Evil: Extinction, Highlander) and was written by Russell McCormick (Speed 2, Titan A.E.). Universal Studios Home Entertainment is co-producing with Film Afrika and ApolloMovie. “The Scorpion King: Rise of the Akkadian is by far our most ambitious DVD Original production ever in terms of the scope and quality of the sets, the visual effects, the fight sequences and the stunt work,” said Glenn Ross, EVP and GM of Universal Studios Home Entertainment Family Productions. Home Media Magazine October 21–27, 2007 http://www.homemediamagazine.com

Table of Contents Feed for the Digital Edition of Home Media Magazine - October 21-27, 2007

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

Home Media Magazine - October 21-27, 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.