Revenue Sharing On DVD... A Payoff?

"The reason we moved so slow is that Blockbuster, more than anyone else, can best promote DVD. Knowing that, we wanted to get paid." - Summer Redstone, CEO Viacom, from the July 25th edition of Video Store Magazine.

Doesn't this sound exactly like a statement that could have been prepared a few month ago, had Blockbuster actually jump on the DIVX band wagon? But it never happened, and we'll never know if the rumors were true. Someone does, but not the general public. Perhaps this is why when recently asked about this rumor DIVX, Circuit City, Viacom and Blockbuster had no comment.

Mysteriously, the statement was still released. It was in an article titled, "Blockbuster to back DVD after getting freebies." Thus, in a collective sigh of relief, many DVD fans rejoice... DVD has become main stream. It's nice to know that the independent retailers, who have supported the format from day one, will be able to re-coup their investment, now that the public will run like rabid wolves and snap up DVD machines creating a solid rental product... well, that's if they can survive long enough.

What wasn't stated in the article was who gave Blockbuster the freebies, which were both machines and software. Also, what wasn't stated, was the payoff that the studio's enticed Blockbuster with. It was revenue sharing. Everyone was stunned when Warren Lieberfarb, from Warner Home Video, stated that revenue sharing would  have to become a part of DVD's future. At least we know why the statement was made. It wasn't just because DIVX was dead, which was definitely part of it, but they had a major player, who would be willing to join in on the revenue sharing.

Before I go any farther, let's see the current odds from Vegas as to what studios and manufacturers were the industry sluts that have likely given, or will give, Blockbuster their product.

Warner Home Video - odds: even.
As many fans of DVD know, their recent support of DVD has been mediocre at best. Their announcement of revenue sharing was just another slap in the face of the DVD enthusiast.

Toshiba - odds: even.
Toshiba is basically Warner, and since their machines are still getting a pretty bad rep for being glitchy, they have to dump the old machines somehow.

Columbia Tri-Star - odds: 2 to 1.
Essentially agreed with Warner on their statement about revenue sharing, but has never treated DVD owners like idiots, unlike Warner.

Paramount - odds: 2 to 1.
Hell, they are Blockbuster after all... but they probably don't believe in losing money, see their recent public offering made for Blockbuster. They've pretty much treated DVD well over the past few months. At least they've listened to consumers.

Universal - odds: 3 to 1.
One of the staunchiest supporter of DVD, but they also have Matshusta/Panasonic breathing down their neck, to sell hardware.

Matshusta/Panasonic - odds: 3 to 1.
See Universal above.

New Line - odds: 5 to 1.
Only this high because big brother (Warner)  has probably slapped them into submission.

Fox Video - odds: 10 to 1.
They would be higher odds, except that Mr. Mechanic has been very wishy washy in his support for the format. He wants D-VHS to win.

Buena Vista Home Video (Di$ney) - odds: 50 to 1.
Disney doesn't give anything away, and their home video division can't afford to give their toys away. Besides, they wanted DIVX so they wouldn't have to share their profits with anyone.

Dreamworks - odds: 100 to 1.
One word, Speilberg. He's been a flake, and his company is still in the red. You don't give product away.

Artisan - odds: 1000 to 1.
How may titles do they actually own that people will rent?

MGM - odds: none.
It's still open to debate if they count as a major studio anymore. James Bond does not make a studio,  it just helps it survive.

That about cover the odds for the major players, I didn't list some of the manufactures, because they don't feel the need to give their product away, it sells.

What does it all mean? For independent rental stores, it will be the end of the one advantage they've had over Blockbuster. Independent retails will have to diversify into other products, since Blockbuster will essentially hold a monopoly in the video rental business.

For internet stores? Well, Netflix is done, I can't imagine their turning much of a profit on their rental scheme at this time now, what will happen when the costs go up, and they have to split their profits with the studio. DVD Express and Reel? For one thing, the discounts will go down. Besides what kind of a deal will 40% off be, when this discs cost sixty to seventy dollars? Hell, in truth, their deep discounts should be lowering after this Christmas, unless investor's continue to be stupid (which many new investor are).

Side note: If a company reports record revenues each quarter, but their losses also continue to mount, at a n exponential rate, is that really a sound investment? Logic tells me no. Something will have to give.

For the consumer? Probably not much, we'll become accustomed to the typical pattern for rental and sell through. This will not, in theory, affect old catalog releases, but it will be annoying, just the same. More people will rent, and less will buy their titles.

The Studios? It will definitely hurt their sales. How many of you, myself included, would have bought Sphere if you had rented it first? Let's see that makes a total of what six thousand people? Wing Commander? Oh bad example, no one bought it. For that matter, I don't know if it's even renting. The studios will always be able to sell the good titles. Why do you think we've seen ten different optical disc forms of 2001 and Goldfinger? The bad titles will probably get their due, and not sell. Even good titles don't sell after a long period of time, How many think Paramount's being overly optimistic about selling two million copies of Titanic on DVD. I do, then again, most people I deal with have DVD and LD.

When revenue sharing finally arrives on DVD, it will do nothing but benefit Block-ho and Hollywood Video. How should the independent retailers feel about revenue sharing and this Blockbuster freebie deal, totally fucked. Those that bought into the Warner pre-pack deals should be demanding a refund from them. In all honesty, it wasn't a deal anyway. My store sell hardware as well as software, and we were able to calculate the benefits of the deal, there were none. Why the hell would you need with four copies of the Fugitive and Blade Runner for rental? Hell, if we can rent more than two copies of a new title, it's a bonus.

Will the VSDA come to the rescue for the independent video retailer? No, they haven't done a damn thing the past three years as revenue sharing has destroyed the marketplace. It's ironic, since the VSDA was shouting the merits of DVD to it's dwindling members, now they'll ignore that too. Their crusade will no longer be needed, since their two largest members are supporting the format. Besides, at the end of this year, how many more independent stores will close? The VSDA won't have any members left.

Dan Linzmeier, FIT Production
Fitprod@aol.com
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