Category: The Front Line

Digital Downloads: The Great Gold Rush of ‘10

There’s something magical about the 99-cent price point. First, it was iTunes. Then Redbox followed. Now, Best Buy is joining the ‘dollar store’ crowd by offering selected movies at a per-night rental rate of 99 cents, through its CinemaNow service.

Information on this offer was in your Sunday newspaper Best Buy circular. (Did you toss it? Tsk, tsk…)

According to a story on the Home Media Web site, the selected titles will include The Bounty Hunter and Kick-Ass, two films that scored modest takes at the box office but certainly underperformed to studio’s expectations.

CinemaNow, of course, competes directly with Netflix’ ‘all you can eat’ flat monthly rate subscription service for streaming, and at equivalent picture quality. And BB isn’t the last to jump on this ship. It will be interesting to see if consumers prefer an ‘a la carte’ movie menu and pricing, or the buffet-style offerings from Netflix.

Fujifilm Debuts its Newset FinePix REAL 3D Digital Camcorder

Last night in New York City, Fujifilm took the wraps off its second-generation 3D digital still camera. The Fujifilm FinePix REAL 3D W3 looks exactly like its predecessor, but is now priced under $500 and can record 720p 3D videos to its internal SD memory card.

Fujifilm’s FinePix REAL 3D W3

Here are the key specifications:

– Two 10-megapixel CCD sensors

– Dual FUJINON 3x optical zoom lenses (35-105mm)

– 75mm interocular distance

– Mini HDMI 1.4 connector for 3D TV playback

– Synchronized shutters

– 3.5-inch autostereoscopic LCD display with lenticular surface

The REAL 3D W3 can also be used as a 2D camera. You can shoot close-up and wide angle views of the same subject simultaneously. Or, you can shoot one view in color, and the other in black and white. Or, shoot one scene with normal light sensitivity and the other with higher sensitivity. Pretty cool!

I had a chance to test-drive one at the event, held at the American Museum of Natural History. Fuji handed out cameras to numerous journalists and we wandered among the skeletons of prehistoric mammals, trying for interesting perspective views. I also set up some of the press people in different perspectives to try and get a 3D feel. (All photos were taken with the FinePix REAL3D W3)

Veteran consumer electronics journalist Ken Sander takes the FinePix REAL 3D W3 for a test drive

My best effort was to switch to 3D video mode and walk from the main hall all way the way back to the Astor Turret, where several LCD 3D TVs were set up for viewing our efforts. This long “unsteadicam” shot provided the best 3D effects as I moved the camera over people’s shoulders and around them, dodging around pillars.

I have to say I was more impressed with the 3D still photos than the 3D video clips. The 3D effect was much more pronounced in still mode, but of course the resolution of left and right eye images was much higher. In video mode, I didn’t see as much depth and in fact spotted some crosstalk during the clip.

(Unfortunately, we had to give the cameras back. (Oh, well…) However, we did get to keep our 4GB Fuji SD memory cards loaded with left and right eye views, as well as our video clips.

Fujifilm set up five LCD 3D TVs so we could check out the results of our shooting

The FinePix REAL 3D W3 is an intriguing product, although I suspect buyers will wind up using it more for its 2D camera features. The dual-perspective mode should prove to be very popular – you just won’t miss the shot.

As of this writing, the specs weren’t posted on the Fujifilm Web site, but you should be able to find them soon at The camera should be available at Best Buy in September, with other major retailers to follow shortly.

HBO, Showtime…and Netflix?

More bad news for DVDs. Netflix and Epix are discussing a five-year, $1B deal that would give Netflix exclusive rights to stream movies from Paramount, MGM, and Lions Gate as part of its ‘Watch It Now!’ service.

Netflix already has an arrangement in place with Starz to stream movies from Disney and Sony Pictures, so this deal could be a real momentum-generator for streaming. According to the terms of the discussions, Netflix would have access to these movies several months after they are released on DVD.

According to the LA Times story,  the agreement would also allow Paramount, Lionsgate and MGM to sell and rent their movies via digital stores such as Apple Inc.’s iTunes, something HBO doesn’t allow.

Epix has been struggling to become profitable and also operates a streaming video subscription service. Its CEO recently predicted that Epix would reach between 3 and 4 million homes this summer. In contrast, Netflix has over 15 million subscribers.

So, how does this arrangement threaten the DVD market? Simple. Movies with short tails (in and out of theaters quickly) depend on DVD sales and rentals over several months to make back their budgets and even turn a profit.

But a lot of those movies are impulse rentals, as there isn’t much demand for them. These films are often found in discount bins at retail stores and Blockbuster, several months after their release. (Disney’s The Sorcerer’s Apprentice, which has grossed $111 million worldwide in four weeks but had a production budget of $150 million, will depend heavily on packaged media sales and rentals and pay TV just to break even.)

So a subscriber to Netflix would probably be content to just wait a few months and catch up with these less-than-compelling titles online, if they haven’t already rented them for $1 a night at a Redbox kiosk.

What’s next for Netflix? I predict the service will eventually turn into a full-blown broadband TV network, creating and streaming its own original programming. With 15+ million viewers, that’s more than enough critical mass to pull it off. Netflix is already planning to stream TV shows, so why not develop its own content?

Of course, that will put Netflix at odds with traditional pay TV service providers, such as Comcast and Time Warner. And it may lead to more cord-cutting, a trend that that pay TV companies dismiss now, but is likely to cause some real financial pain in the near future.

Another real possibility is that one of the major Hollywood studios and media conglomerates will buy Netflix in the next two years. Don’t bet against it! That would be a strong defensive move against losing pay TV subscribers and would instantly make the purchaser the 800-pound gorilla in streaming.

No Fizz In The DVD Biz

If you needed more proof that the DVD business is declining, look no farther than today’s Scranton Times-Tribune story about more layoffs at Cinram’s optical disc replication plant.

The plant, located in Olyphant, Pennsylvania (near Scranton) was originally owned by Time Warner and operated as Warner Atlantic Media Operations (WAMO). Toronto-based Cinram International bought the facility from Time Warner in July of 2003. Peak employment was reached in 2005. Since then, the company has laid off 683 employees.

Today’s announcement states that an additional 310 employees will be let go by December, bringing employment to about one-fourth of what it was seven years ago. Cinram also announced it would cut loose 482 employees from a DVD distribution facility near Nashville, Tennessee.

The company lost a contract to replicate Warner Home Video DVDs this past July. Instead, Technicolor will replicate Warner DVDs at a facility near Guadalajara, Mexico.

Ironically, Cinram’s income from home video sales increased in the first quarter of 2010 by 6.6 percent to $240.6 million, but compact disc revenue dropped 14.5 percent to $31.7 million.

It’s apparent that distributors of packaged media have to cut costs drastically to fend off the threat of direct downloads and streaming, along with video on demand. So Cinram’s announcement wasn’t entirely a surprise.

The question now is how much longer Cinram can afford to keep the Olyphant facility in operation. The Warner Home Media contract represented 28% of Cinram’s annual revenue stream, and that will be difficult to replace.

Redbox: A “Blu-race” to the bottom?

Don’t look now, but Blu-ray is coming to your local Acme. Or Walgreens.

Redbox, the “buck-a-night” DVD rental company, will soon be stocking Blu-ray movies at the end of the checkout counter. And you can rent ’em for $1.50 a night.

Redbox stated in a recent press release that it would initially offer Blu-ray discs in 13,300 of its kiosks, expanding across its entire network of 23,000 kiosks by the fall. Each Redbox kiosk holds 630 discs , or about 200 movie titles.

Redbox is on a roll financially, according to a story in Media and Entertainment Daily. The company’s revenue stream grew by almost 44% Y-Y for the second quarter. And they’re getting most of that revenue at the expense of traditional brick-and-mortar video rental stores (read: Blockbuster).

NCR, another player in the DVD kiosk business with the Blockbuster Express brand, hasn’t announced yet when they will be adding Blu-ray discs to their lineup.

At $1.50 per night, it really doesn’t make sense to buy a Blu-ray disc of any movie. The typical BD release is priced around $25 retail, or 16 times the Redbox rental cost. Not that there will be a huge demand for BD movies out of the gate – while the best estimates from The Digital Entertainment Group (DEG) have market penetration of Blu-ray players, Blu-ray drives in PCs, and Blu-ray equipped consoles (like PlayStation 3) at 19.4 million homes so far, there’s simply no reliable way to know how many of those PS3 consoles are being used to watch Blu-ray movies.

To put things in perspective, Netflix has over 14 million customers now. Comcast has slightly more, as does DirecTV. And any subscribers to those services can access video on demand (VOD) or streaming, if their TV and/or set-top box is so equipped. (PlayStation 3 is, and can even stream from Netflix!)

Given that some BD players are now available for less than $100, this could be an incentive for families to finally try out the BD format. Or maybe they will put that PS3 console to work to watch recent releases like The Bounty Hunter or The Book of Eli in full1080p HD…that is, if they have a HDTV screen large enough, and of the correct resolution.

Of course, if the BD movie title they want isn’t available, they’ll probably just rent the red laser version for a buck and be done with it. Redbox is a convenience service, based on a low-cost impulse purchase decision. If the movie is for a kid’s party or to keep the children otherwise entertained, it makes no difference whether it is a conventional DVD or a blue laser disc.

The question is how many videophiles will make use of the Redbox service. My theater at home is set up for HD, with a 92-inch Da-Lite projection screen and Mitsubishi HC6000 projector. So I’m definitely interested in $1.50 BD rentals!

The only problem is, I’ve been watching so many time-shifted TV shows on my 42-inch 1080p plasma in my family room (plus the occasional red laser DVD-by-mail) that the theater hasn’t been used much lately. Picture quality from an OPPO DV983 upscaling DVD player is so good that it isn’t worth bothering with Blu-ray playback on that plasma screen. I should know better, you might say…but I do, and you can’t see much of a difference between the two formats. At least, nothing to nit-pick about. That’s how good the OPPO scaler is.

In a nutshell, this move by Redbox promises to deliver additional revenue to studios, but probably not as much as they would have liked. No one in Hollywood is happy about the bottom falling out of the DVD rental market, but what other choice do they have?

The question is whether enough customers will prefer the improved quality of a BD movie over red laser DVDs and Netflix streaming to justify Redbox’ additional costs in stocking Blu-ray movies. If this doesn’t help the format take off, then nothing will.