Consumer beware: These days, why its better to be a DVD procrastinator

After I read this article, I thought, "OK, besides 'Kill Bill,' how many versions of 'The Passion of the Christ' and the 'Star Wars' trilogy are they gonna put out?"

Post script: I read in a another article, that "Spiderman" is going to be released in two new versions on DVD, one with an exclusive audio commentary track by Toby McGuire (Suberbit format).
http://www.thedigitalbits.com/mytwocentsa86.html#spiderde

When will the madness stop?

-Kevin

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April 20, 2004
Studios Rush to Cash In on DVD Boom
By SHARON WAXMAN, New York Times
http://www.nytimes.com/2004/04/20/m...861ZS7w2j9+2aMdT8A&pagewanted=print&position=

LOS ANGELES, April 19 — The other day the chairman of 20th Century Fox, Jim Gianopulos, said he got a call from a lawyer friend. The friend said it was an anniversary of the firm and asked where he could get 100 DVD copies of the cult Fox movie "Office Space." The film made only $10 million at the box office but has become a hit on DVD. No one at Fox pretends to know why, but the film's success is another big drop in the river of DVD cash now flowing into Hollywood's coffers.

Not since the advent of the videocassette in the mid-1980's has the movie industry enjoyed such a windfall from a new product. And just as video caused a seismic shift two decades ago, the success of the DVD is altering priorities and the balance of power in the making of popular culture. And industry players, starting with the Writers Guild, are lining up to claim their share.

There's good cause. Between January and mid-March this year, Americans spent $1.78 billion at the box office. But in the same period they spent $4.8 billion — more than $3 billion more — to buy and rent DVD's and videocassettes.

Little wonder then that studio executives now calibrate the release dates of DVD's with the same care used for opening weekends, as seen by Miramax's strategic release of "Kill Bill: Vol. 1" a few days before the theatrical release of "Kill Bill: Vol. 2." (The DVD made $40 million its first day out.)

Studios now spend comparable amounts of money on DVD and theatrical marketing campaigns. Disney spent an estimated $50 million marketing the "Finding Nemo" DVD last year, said officials at Pixar, which made the film. It was money well spent. The DVD took in $431 million domestically, about $100 million more than the domestic box office. DVD has resuscitated canceled or nearly canceled television series like "The Family Guy" and "24," and has helped small art movies like "Donnie Darko" win rerelease in theaters. It is also beginning to affect the kinds of movies being made, as DVD revenues figure heavily in green-light decisions and are used as a perk to woo craft-conscious movie directors.

"There's not a sector of the entertainment industry to which DVD is not a significant, if not the dominant, contributor of revenue," said Scott Hettrick, editor in chief of DVD Exclusive, a trade paper, pointing to the movie and television libraries being released on DVD. Even in the ailing music industry, he noted, music DVD's are an area of growth.

"This is an unprecedented, huge influx of new money into the motion picture business," Dan Petrie Jr., president of the Writers Guild of America, West, said of the DVD boom. Union negotiators are demanding higher royalty payments in contract talks under way with the Alliance of Motion Picture and Television Producers, which represents the studios. Whatever deal is finally struck when the contract runs out on May 2 is expected to be followed by all the other Hollywood guilds.

While few dispute that DVD's are low-cost, high-profit items for the studios, the studios say they need every penny to survive in a time of dwindling profit margins, and with the menace of piracy looming large. The average movie now costs $64 million to make and another $39 million to market, according to the Motion Picture Association of America.

"In the last five years maybe 6 pictures out of 1,000 recouped their cost in the theatrical marketplace," said Nick Counter, president of the studio alliance. "Today the hits have to make up for all the losses."

For bigger-budget movies the DVD revenue has become critical. Nowadays, "basically the movies are commercials for the DVD's," observed John Lesher, an agent for the Endeavor talent agency who represents leading directors like Walter Salles, Paul Thomas Anderson and David O. Russell. Movies with budgets over $100 million now commonly just break even at the box office.

Stacey Snider, chairwoman of Universal Studios, said she had just asked her executives to analyze more closely the breakdown of profits in terms of the DVD revenues to figure out the changing model of the industry.

The old Hollywood model of needing to recoup three times the production cost at the box office to make a profit is long gone. But many are asking: What is the new model?

The answer to that may lie with a little-known movie called "Office Space" (1999). The satire by Mike Judge, co-creator of the animated television series "King of the Hill," cost 20th Century Fox about $10 million to make, and took in just $10 million at the box office. But on DVD the movie has become a hit, with the studio so far selling 2.5 million units, well over $40 million worth.

There are other examples of surprising windfalls. The Lion's Gate comedy "Van Wilder" was renamed "National Lampoon's Van Wilder" and has unexpectedly become a hit on DVD, where it sits alphabetically next to other National Lampoon movies.

A moderate hit like the DreamWorks comedy "Old School" starring Will Ferrell took in $73 million at the box office, but made an astounding $143.5 million on DVD.

Of course, even before DVD some films found larger audiences on video than at the box office; DVD has amplified the effect and the profits.

The format has another draw, a creative one. Directors now invest a lot of time into putting extra material into the DVD version, and the studios can improve their relationships with directors by creating special editions of their movies with hours of extra features. Peter Jackson added 43 minutes to the extended DVD of "The Lord of the Rings: The Two Towers" (New Line).

But that does not mean the studios do not wring every cent from each movie. Miramax is planning to release a half-dozen different DVD editions related to "Kill Bill."

"This is the beauty of having two volumes," said Rick Sands, chief operating officer at Miramax. " `Vol. 1' goes out, `Vol. 2' goes out, then `Vol. 1 Special Edition,' `Vol. 2 Special Edition,' the two-pack, then the Tarantino collection as a boxed set out for Christmas. It's called multiple bites at the apple. And you multiply this internationally." Mr. Tarantino has also cut an alternate version of the movie for Japan.

With the explosion of DVD advertising, it is easy to forget that the plastic plate, the digital versatile disk, has existed in the marketplace for only seven years.

Six years ago, before DVD mattered, Americans spent $18 billion on movie videocassettes. Last year, when the DVD ruled, they spent $22.2 billion on videos and DVD's, according to DVD Exclusive, adding some $4 billion of new consumer spending to the entertainment pot without visibly affecting sales at the box office.

One of the main changes is that consumers tend to buy DVD's, while they tend to rent videocassettes. (Studios sell their rental cassettes to stores like Blockbuster for far more than they do to consumers.)

The profit margin for studios is significantly higher on the laser disk format. A new study by Jessica Reif-Cohen, an analyst at Merrill Lynch, found that studios make an average of 66 percent profit margin on the DVD, compared with just 45 percent profit on the videocassette. She concluded, "We believe the perception of low returns on feature film production is no longer valid."

The guilds are not the only ones who are demanding their share of the new loot. Talent agents are also demanding that the studio abandon its long-standing formula of calculating profits, in which only 20 percent of revenues from DVD's and videos are used to calculate profit participation for directors and top actors.

The question has also become a principal focus of negotiations with actors being asked to participate in re-releases. Last fall the supporting cast of the hit television series "Seinfeld" balked at giving interviews for the DVD compilation until they were included in a share of the profits.

What no one knows is how long the windfall will last, whether DVD is a consumer bubble that will burst once the studios finish releasing the films and TV shows in their libraries, or whether it will remain a strong current in the entertainment industry profit stream.

"Right now the studios are making money hand over fist," said Mr. Lesher. "But in five years when you can download a movie as fast as a song, that will go away."

Mr. Gianopulos disagreed. DVD's will last "because of the uniqueness of that experience," he said. "It's no longer `I saw that movie.' It's `I saw that movie, now I'm going to see multiple dimensions of that movie.' That's why you want to own it."

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Right on the money, reissuing is definitely important for business.

 

As long as we're buying! I'm in it for the Movie first and foremost...the extra's are just that

 

I'm a fan of Superbit DVDs, and I'll be looking for Spidey when it's released.

 

Great article.

I don't want to sound conceited, but as an early adopter of the format, I knew it would be a big hit.

Got my first discs in late '97, early '98. I had to hunt for these things! I remember having a local store special order my first few titles, The Road Warrior and Eric Clapton: Unplugged. I just thought these new shiny discs were cheap like VHS, but had all the benefits of expen$$ive LaserDiscs. What was not to like?

 

Imho, whenever feasible, they should stop releasing different versions and include them on a single DVD instead - that is what the seamless branching option is for. Same choice - less space

 

Heck, at least six domestic editions on laserdisc.

 

And while we keep getting the newest, superbit deluxe collector's limited stunning editions of the same films over and over again, there's tons of great films just sitting in the vaults for one reason or another, completely untouched. Okay Fox, where's The Girl Can't Help It?

I still can't believe it's taken this long for the MGM Marx Brothers flicks to come out (13 days and counting...)!

 

Hah!
This guy goes in my personal 'wishful thinking' hall of fame... Piracy is going to eat their lunch like crazy in 2 years or less, IMO...watch out!

Apparently Miramax also has a sign in the boardroom that says "Soak 'em." Shameless...

 

I am reminded of the saying, "Fool me once, shame on you. Fool me twice, shame on me."
But, yes, I agree--it can be maddening!

 

It's a mistake to assume that one has anything to do with the other. I really don't think that multiple issues of the same film keep other flicks from materializing. Just because a studio reissues something doesn't mean it blocks or delays something else...

 

I didn't say to shoot the messenger, Ken, and you're right, his honesty is commendable. My issue is more with the practice in general, as well as (apparently) consumers' tendencies to fall for it...time and time again.

 

Found this on the web today. There will probably be many versions of the Kill Bill before he is done.

Tarantino to unleash 'the fused' KILL BILL: THE WHOLE BLOODY AFFAIR at Cannes.
Yesterday I (Mark O'Connell) attended an exclusive screening of Kill Bill: Volume 2 at the Empire Cinema, London. Afterwards, there was a press conference at the Dorchester Hotel. In attendance were Michael Madson, Darryl Hannah, David Carrodine and Uma Thurman.

After a Q and A session with the stars, I got the chance to talk to Quentin Tarantino live via satalite. I asked if he had plans to edit Kill Bill Volumes 1 and 2 back together. He went on to explain about the Japanese versions of both films that were released, which had all of the violent scenes in full colour (House of Blue Leaves etc). Quentin retained the distribution rights to both parts. He then exclusively revealed to me that he had already edited both volumes back together and would be premiering the complete film on the last day of the Cannes Film Festival this year! You heard it here first folks!

Stay tuned for more Kill Bill Coverage coming soon!