Archive for September, 2011

NATO Slams Sony for 3D-Glasses Charges

Reuters reports:

The National Association of Theater Owners slammed Sony Wednesday for its attempt to pass off the costs of providing 3D glasses on moviegoers and exhibitors.

The trade organization labeled the move “insensitive” given the economic woes gripping the country.

“Sony’s actions raise serious concerns for our members who believe that provision of 3D glasses to patrons is well established as part of the 3D experience,” NATO said in a statement.

NATO said Sony was reneging on a prior agreement to pay for the glasses.

But Sony spokesperson Steve Elzer said NATO gets it wrong.

“NATO’s statement that it has been ‘understood’ that distributors would always bear the cost of 3D glasses is incorrect, because there never has been any such agreement,” Elzer said in a statement. “In fact, we have been speaking with people in the industry for a long time about the need to move to a new model, so this certainly comes as a surprise to no one in the business.”

Elzer said that the studio invited theater owners to engage in a “collegial dialogue” with  about the issue at ShowEast next month.

Shares of RealD, the 3D movie company, dropped nearly 15 percent to trade at $10.42 on Wednesday after Sony announced its plan.

Sony has told exhibitors that starting in May with the release of its pair of 3D tentpoles, “Men in Black III” and “The Amazing Spider-Man,” it will no longer pay for the rose-tinted spectacles.

It wants exhibitors to work out the cost with moviegoers.

In it’s statement, NATO said press reports indicate that Sony wants audience members to buy their own glasses, but in reality, the studio wants to move the expense of providing glasses off their own balance sheets and doesn’t particularly care if the cost is borne by theater owners or ticket buyers.

At a cost of about 50 cents per ticket, 3D eyeware can eat up $5 million or more for a movie that grosses over $100 million.

Moviegoers pay a premium of around $3 for 3D films, and that extra gravy is then split between theater owners and studios.

In 2009, Fox tried a similar gambit with the release of its third “Ice Age” film, but bowed to pressure from theater owners and abandoned its efforts to push off costs.

NATO said that theater owners had agreed to take on the expense of overhauling their theaters for 3D movies with the understanding that distributors would handle the cost of providing glasses.

“Any changes to that understanding must be undertaken through the mutual agreement of both sides of the business,” NATO said.

NATO closed its missive with a warning. The group told Sony that the disappointing numbers for its premium video on demand trial with DirecTV — in which the studio and others offered movies to renters eight weeks after their debuts and over the fierce objections of NATO — was evidence that exhibition needed to be on board with any fundamental business changes.

“Sony would be well advised to revisit its decision,” NATO said.

Top 50 Channels on Youtube revealed

ComScore Inc., which measures Web traffic, gave a sneak peek of its rankings of the biggest players on Google’s YouTube several weeks ago.

Today the firm released the full ranking of video-content “channels” on the world’s No. 1 video site. Some highlights: No fewer than 997 YouTube video creators get at least 100,000 viewers per month on their channels, comScore said. (Click here to see the top 50 channels.)

Some well-known names were among the top 50 in terms of number of viewers, including theAssociated Press (5.7 million), Discovery Communications (2.8 million), the BBC (2.2 million), and (1.8 million). Also on the list: pioneers of original Internet video such asRevision3 (6.6 million) and comedians including Andy Samberg’s The Lonely Island (3.3 million).

The biggest name you may not have heard of: Machinima, which creates 24 shows about video games and other content of interest to young men. It also produces live-action series with high production values, including sci-fi mystery show “RCVR” and zombie thriller “Bite Me.” The Machinima channel recently feature Warner Bros.’ Mortal Kombat: Legacy, the first episode of which has gotten 14.3 million views.

Machinima’s channel, started in 2006, ranked third in August with 17.7 million viewers, comScore said. More importantly, it kept the average viewer watching videos for more than 70 minutes.

ComScore’s rankings “help with the advertising world,” said Allen Debevoise, chief executive of Machinima, which has 120 employees and is based in West Hollywood. “When advertisers look at numbers that are superior to those of cable TV, it starts to bring attention to it,” he said.

As previously reported in the Wall Street Journal, YouTube is looking to spawn dozens of Machinimas for different interest areas, such as Hollywood gossip or sports, and it’s willing to pay multimillion-dollar advances to content creators to do so, people familiar with the matter have said.

Some of the other YouTube channels in the top 1,000 include singer Rebecca Black, of “Friday” fame, who checks in at no. 70 with 1.3 million visitors last month. At no. 880 is Let’s Make it Up!, which gives tips to girls on makeup and hair styles, garnering 119,000 viewers, nearly as many as alternative rock band Radiohead’s channel (146,000 viewers, ranked 742th).

What about Google’s own channel, where it hosts promotional videos for its services? That channel got 606,000 viewers last month, earning a ranking of 157, just above the channel for PBS, which came in at no. 175 with 553,000 viewers.

source: Wall Street Journal

Visual Effects Bill of Rights draws a line in the sand

The Visual Effects Society, the industry’s organization of visual effects artists and technicians, today released a Bill of Rights designed to call attention to problems affecting its membership and Hollywood. The document follows an open letter to the entertainment industry by the VES, which cited a downward spiral of working conditions and benefits as well as earnings for effects pros around the globe.  “In the VES open letter, we said it was time to step up as the voice of the visual effects industry by talking to all parties regarding their concerns,” said exec director Eric Roth. “At this time we have engaged in a vigorous dialog with key stakeholders at all levels and believe our Bill of Rights lays out the vital concerns of each segment of the industry. Our next step is to focus on bringing all parties together to seek solutions.”


While training and education are crucial to supporting the VFX and Animation industries here at home, what this bill of rights actually reveals is that much of the labor continues to be outsourced to India and China, where working conditions are not regulated and wages are minimal.  Every U.S. industry faces this harsh reality. Despite the fact that we remain the leader in creation of filmed entertainment, producers are content to have the work done in sweatshops around the world, rather than maintain a talent base here at home.

Scott Arundale

Netflix’s DVD Split Is Yet Another Self-Inflicted Wound

Update: 10-10-11 from the New York Times, Brian Stelter reports:

Abandoning a break-up plan it announced last month, Netflix said Monday morning that it had decided to keep its DVD-by-mail and online streaming services together under one name and one Web site.

The company admitted that it had moved too fast when it tried to spin-off the old-fashioned DVD service into a new company called Qwikster.

“We underestimated the appeal of the single web site and a single service,” Steve Swasey, a Netflix spokesman, said in a telephone interview. He quickly added: “We greatly underestimated it.”


How many self-inflicted wounds can a company take before its mortality is threatened? When it comes to Netflix, the question is taking on increasing relevance. The company that could do no wrong for the past two years first shot itself by announcing an onerous price increase without any real attempt to explain itself or soften the blow. The initial consequences of that decision came last week in the form of a 1 million subscriber downward revision and a 50 point drop in its stock price. Now Netflix has followed up with another bewildering move, announcing a re-branding and separation of its DVD by mail business as “Qwikster” complete with an independent web site. In my view this is another self-inflicted wound with even more serious implications.

When Netflix announced the price increase and discussed its intent to charge separately for DVDs, it offered a nonsensical and incomplete explanation for why it was doing so, and why now. In a new and contrite blog post from CEO Reed Hastings (and accompanying video), the more explicit explanation is “We realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently and we need to let each grow and operate independently.”

Of course there are different economics and operational facets to streaming vs. DVD by mail. But guess what – subscribers don’t care. Netflix’s business is delivering entertainment as easily as possible, over any viable means and at the most attractive price. Rather than separating streaming and DVD, Netflix should be doing the exact opposite – integrating them as tightly as possible. Netflix has given a “we can’t walk and chew gum at the same time” explanation that is irrelevant to most subscribers, and only ends up forcing them to make unappealing decisions such as paying more, getting less or doing without.

For a team that made so many smart moves, it’s hard to pin down what’s going on here. Hastings offers a hint though in his post, saying that “Companies rarely die from moving too fast, and they frequently die from moving too slowly.” My sense is that Netflix has too quickly fallen in love with streaming, and forgotten how critical DVDs still are to their current and future success. I’ve been a broken record in pointing out that Netflix’s key competitive advantage relative to other pure streaming services (e.g. Hulu, Amazon, Vudu, etc.) is the CHOICE that the deep DVD catalog offers plus the complimentary CONVENIENCE that streaming has introduced. Without DVDs Netflix is going to going up against far bigger competitors without much of an advantage. As to Qwikster’s prospects, marketing a DVD only service in the digital media era? Good luck with that.

Worse still is that Netflix’s access to high-quality streaming content has never been more challenging. The Starz situation is illustrative of the conflicts and reluctance big media companies have in dealing with Netflix. The awakening of Amazon, Google, Walmart and Dish to the streaming businesses means far more vigorous bidding for streaming content going forward (and by the way these Netflix blunders are only going to drive up Hulu’s value given its exclusive lock on broadcast TV programs). Meanwhile pay-TV operators’ focus on TV Everywhere, and their willingness to pay retransmission consent fees, puts a further squeeze on Netflix acquiring streaming content out of the cable ecosystem. That Netflix didn’t understand these near-term content acquisition dynamics and therefore feel the need to keep DVDs well-integrated with streaming is an epic failure of strategic thinking.

Beyond the churn in the existing subscriber base that the price change and now the Qwikster introduction will bring, the other big issue is how they will affect new streaming subscriber acquisitions. As I pointed out last week, a thin streaming content offering will make it tougher for Netflix to acquire streaming subscribers at the same rate it has. That in turn could cause a material hiccup in Netflix’s financials that could frighten away prospective content partners concerned about Netflix’s ongoing viability, especially as the company shoulders huge payments for licensed content from Epix, Relativity and other current partners. A serious downward spiral could ensue.

Long-time Netflix skeptics are no doubt feeling some sense of vindication these days. But the reality is that Netflix’s current woes have less to do with external forces than with its own executive decision-making. Netflix increasingly looks like a company that has completely lost its focus and is lurching from one ill-considered decision to the next.

by Will Richmond

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