Tentpole fourth
Q4 SPECTACULAR: Studios line up biggest end-of-year slate ever
By Jennifer Netherby -- Video Business, 8/25/2008
AUG. 25 | Q4 SPECTACULAR:Thanks to a superhero-powered summer movie slate, studios and retailers are gearing up for what many expect will be an up year for home entertainment.
Warner Home Video's The Dark Knight, projected to hit $500 million in box-office revenue—the movie already is the No. 2 theatrical release of all time—leads a packed holiday lineup that also includes summer heavyweights Iron Man, The Incredible Hulk, Hancock and WALL-E, among others.
The holiday blockbuster DVD season will kick off the month before the fourth quarter, in September, with Warner's Sex and the City on Sept. 23, followed by Paramount Home Entertainment's Iron Man on Sept. 30. October brings Sony Pictures Home Entertainment's You Don't Mess With the Zohan (Oct. 7) and Paramount's Indiana Jones and the Kingdom of the Crystal Skull (Oct. 14). Pixar/Walt Disney Studios Home Entertainment's WALL-E is expected to debut Nov. 18, followed by the studio's Chronicles of Narnia: Prince Caspian on Dec. 2 and 20th Century Fox Home Entertainment's Dr. Seuss' Horton Hears a Who! on Dec. 9.
Paramount is expected to release Kung Fu Panda in November, while The Dark Knight and Universal Studios Home Entertainment's Mamma Mia! are expected in December. Dates have yet to be announced for other $100 million-plus box-office takers, including Warner's Get Smart, Sony's Hancock and Universal's Wanted.
Altogether, the cumulative box office of releases in the second half should top 2007. And even better, there are fewer sequels this year, which could mean bigger sales on DVD. “New films on video convert from box office to video better than sequels,” says Ron Sanders, president of Warner, which will boast one of the strongest slates of any studio this holiday. Dark Knight alone will help push the box office of Warner's fourth-quarter DVD slate up 30% over last year, he says.
Expectations vary, but studios believe the industry will be flat to up slightly this year. Most execs say standard DVD sales are likely to be down but that Blu-ray Disc growth will compensate, bringing the overall business up slightly.
Home entertainment titles “will still be one of the premier categories, if not the premier category, at retail in the quarter,” says Simon Swart, executive VP and general manager for Fox.
Retailers who have slogged through a slow summer are hopeful.
“Overall, the DVD business continues to grow, and customer response to Blu-ray has been positive,” Amazon spokeswoman Tammy Hovey says. “We anticipate this holiday season to be a strong one for DVD.”
Studio bottom lines, meanwhile, are benefiting from higher margins thanks to new formats. Steve Beeks, president of Lionsgate, which had a record first half, says home entertainment margins are improving, with the average DVD release doing 115% of its box office in 2007, compared to 107% in 2005. Beeks attributes the increase to higher-margin Blu-ray and digital sales, the latter of which are still so miniscule that most studios won't quantify them. “Home entertainment is becoming more profitable for all studios,” Beeks says.
Lionsgate will debut Toby Keith comedy Beer for My Horses this fourth quarter, though the mini-major tends to release its biggest slate in the first quarter.
Studio margins should continue to improve as digital and Blu-ray sales grow.
Execs from the majors expect Blu-ray sales to close in on the $1 billion mark this year, with the audience starting to broaden beyond the early adopter demo.
Disney will push Blu-ray to the family crowd with Sleeping Beauty and WALL-E, while Universal is eyeing women with the December release of Mamma Mia!.
“Because of who we are, … we're focusing on demystifying technology for the entire family,” says Lori MacPherson, Disney general manager for North America. MacPherson predicts new features, such as the chat feature on Sleeping Beauty, will lure in kids. “I think we'll see kids asking for Blu-ray,” she says.
New, lower-priced Blu-ray players also should help broaden the audience.
Retailers are adding space for Blu-ray, mostly at the expense of music and accessories rather than DVD. Execs say space devoted to home entertainment software has increased on average 5% to 7% this year.
“I really feel bullish about the Blu-ray component of the business,” Sony president David Bishop says. “New machines will start to roll in around October. Right now, they have the problem of not being able to satisfy demand in the marketplace.”
Bishop and others say so far the economy doesn't seem to be hurting growth, with consumers continuing to invest in home entertainment and flat-screen TVs.
“Everybody talks about the economy, and certainly it is a difficult economy, but home entertainment is one of those really resilient categories,” MacPherson says. “It is a cost-efficient way for people to get entertainment for the family.”
Rental has been the biggest beneficiary, up 0.5% during the first half of this year, with some rentailers reporting bigger increases. Video Buyers Group members report business is up 6%.
“As the economy stays tough, we'll clearly see rental stay stronger,” Universal president Craig Kornblau says. “People seem to be nesting. … Research shows people still want to invest in the home. They're giving up restaurants, trips to the store; they're not giving up on upgrading their home entertainment.”
Retailers report more of a mixed climate. Newbury Comics buyer Ian Leshin says consumers seem to be cutting back on impulse purchases. “Movies that sold before because they were inexpensive, people are walking past instead of picking them up now,” he says.
New release sales have been softer, which most blame on a lackluster slate. But catalog sales are up, particularly TV catalog.
“Theatrical and TV catalog is what's really shoring up the total industry,” says Sanders. “It speaks to the value nature of what consumers see us as.”
Studios are trying to make DVDs more appealing, including digital copies on many tentpole releases for the holiday season. Fox and Warner are both including Apple- and Microsoft-supported copies. Sony is offering copies for the PlayStation Portable on most of its fourth-quarter releases.
“It puts packaged media at the center of the digital universe,” Fox's Swart says. Fox, with Apple, will be promoting fall releases that include digital copies. The studio says research shows consumers like the feature.
But not every consumer. Leshin says his college-age DVD buyers aren't willing to pony up more money for a digital version.
Maybe their parents will buy them the digital-copy DVDs as gifts.
| Title | Studio | Street |
| Announced | ||
| Sex and the City The Movie | Warner | Sept. 23 |
| Iron Man | Paramount | Sept. 30 |
| You Don't Mess With the Zohan | Sony | Oct. 7 |
| Indiana Jones and the Kingdom of the Crystal Skull | Paramount | Oct. 14 |
| Chronicles of Narnia: Prince Caspian | Disney | Dec. 2 |
| Dr. Seuss' Horton Hears a Who! | Fox | Dec. 9 |
| Expected | ||
| WALL-E | Disney | Nov. 18 |
| Kung Fu Panda | Paramount | November (TBD) |
| The Dark Knight | Warner | December (TBD) |
| Mamma Mia! | Universal | December (TBD) |
| Get Smart | Warner | TBD |
| Hancock | Sony | TBD |
| The Incredible Hulk | Universal | TBD |
| Wanted | Universal | TBD |
| Source: VB research | ||
