Sunday, October 30, 2005

The Cuban Revolution

I really enjoy Slate, the online magazine (www.slate.msn). They have interesting articles AND they re-run Doonesbury cartoons going back thirty years.

Last Monday, Slate ran an interesting story by Edward Jay Epstein about the delivery of films. Essentially, there are three modes of delivery for a first-run film: You can go to the theatre to see it, you can rent/buy the DVD or you can do pay-per-view at home. After that point, the film becomes available on subscription cable and, eventually, on television.

Epstein claims that there is a "video window," an artificial barrier "which prevents cable operators and TV stations from showing movies at the same time as their release on DVD." He says that the delay for pay-per-view is 45 days, and that the delay for subscription cable like HBO is at least four months.

Interestingly enough, Epstein says that this decision by Hollywood studios to delay access to films is not primarily an economic one. He claims that it would be to the studios' economic advantage to encourage viewers to switch to an electronic delivery system. In EXACTLY the same way that e-books eliminate much of the expense of hard copy print books, pay-per-view and cable are much cheaper means of product delivery for films (eliminating "the manufacturing, warehousing, distribution, sales and return costs" of the hard copy DVD). He adds that electronic delivery directly to the consumer's home would eliminate video stores which now get about 40 percent of the rental money.

So why are the studios essentially shooting themselves in the foot? In a single word, the answer is: Wal-Mart. In addition to being the biggest company in the world, Wal-Mart is the single biggest seller of DVDs. Epstein says that Wal-Mart "has made it clear that it does not want to compete with home delivery." Fearful of ticking off the mega-company which, by the way, provided studios with "more than one-third of their U.S. DVD revenue in 2004," Hollywood maintains the artificial barrier that protects Wal-Mart's DVD sales.

Along comes Mark Cuban. Cuban is well-known to Texans like me because he lives here and he owns the Dallas Mavericks basketball team. He is also very involved in the film/television business. Some TV watchers may remember his short-lived reality show, "The Benefactor." He also owns a chunk of Landmark Theatres and a film company, Magnolia Pictures. He was the executive producer of the current well-received film "Good Night, and Good Luck."

With his typical bravado, Cuban thinks that the video window should be eliminated so that consumers can purchase a film "how they want it, when they want it, [and] where they want it." As an aside, he was thrilled by the news that ABC would be making program content available on the new video iPod. In his 10/13 blog, he offered to show the hit TV progam "Lost" in Landmark Theatres as an experiment. He plans to make his own film releases available simultaneously in theaters and on his HDNet TV station.

It will be interesting to see how long it takes the Hollywood studios to follow suit.

If you've read my early blogs on this site, you will recall the 9/17 blog entitled "Where Have All the Flowers Gone?" At the time, I was talking about the pressure put on bookstores by the deep discounts offered by chains such as Wal-Mart. I quoted a statistic as follows: during a three-week period in which WaldenBooks sold 4,888 copies of a best-selling thriller, Borders and B&N each sold about 4,000 copies. During that same period, Wal-Mart sold 47,671 copies. That's right, I said 47,671 copies.

If Wal-Mart has the retail clout to impact film studios, wonder how they use that influence in the publishing arena?

Just musing . . .

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