[IP] Will Mark Cuban (Finally) Revolutionize Hollywood?
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From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Date: October 24, 2005 10:30:28 PM EDT
To: Dewayne-Net Technology List <dewayne-net@xxxxxxxxxxxxx>
Subject: [Dewayne-Net] Will Mark Cuban (Finally) Revolutionize
Hollywood?
Reply-To: dewayne@xxxxxxxxxxxxx
the hollywood economist
Will Mark Cuban (Finally) Revolutionize Hollywood?
His plan to break the video window.
By Edward Jay Epstein
Posted Monday, Oct. 24, 2005, at 10:12 AM PT
<http://slate.msn.com/id/2128631>
I recently demonstrated my high-definition projector by showing
scenes from the beautifully shot Eternal Sunshine of the Spotless
Mind. First, I played an HD recording made by the TiVo-style digital
recorder that Time Warner Cable provides. Next, I played the same
scenes from a DVD. The HD recording was so clearly visually superior
to the DVD that one guest asked: "Why would anyone ever rent a DVD if
they could record it in HD?"
He had a point. Not only is an HD recording sharper—it has about five
times the information as the DVD format (which has a slightly better
picture quality than conventional TV)—it is much more convenient.
There's no trip to the video store, no credit card hassle, no concern
about late fees, no scratched disc, no labyrinth of setup menus. Why
would anyone choose to make two trips to the store or, as with
Netflix, to the mailbox? The studios are aware of this. That's why
they have created an artificial barrier called the video window,
which prevents cable operators and TV stations from showing movies at
the same time as their release on DVD. In the case of pay-per-view,
the window is 45 days; with subscription cable such as HBO, it is at
least four months. If someone wants to see a new movie when it
arrives in video stores, he does not have the option of recording it
with a TiVo or similar device. Because most people rent movies the
week of their release—indeed, more than 80 percent of rental earnings
in 2004 came within the first two weeks of release—most would-be
renters have already seen a new release by the time the 45-day window
has elapsed. If that barrier were removed, a large part, if not all,
of the DVD rental business would disappear.
The reasons for maintaining this barrier may be more political than
economic. If the studios did not give DVDs a 45-day head start and a
large number of DVD renters switched to pay-per-view to get the same
movies, the studios would make much more money. Electronic delivery
not only would eliminate the manufacturing, warehousing,
distribution, sales, and return cost of DVDs—which averaged about $6
per title in 2004—but it would cut out the video stores, which at
present get about 40 percent of the rental money. It might also
greatly expand the audience for renting movies so that, depending on
how electronic delivery is priced, the lost sales of purchased DVDs
would be offset.
What has prevented the studios from closing the video window is
simple: Wal-Mart. The company, which is the single biggest seller of
DVDs, has made it clear that it does not want to compete with home
delivery. Wal-Mart executives told Viacom's home entertainment
division in no uncertain terms that if any studio does away with the
45-day video window for a single title, they would risk losing access
to Wal-Mart's shelf space for all of its titles. Wal-Mart provided
studios with more than one-third of their U.S. DVD revenue in 2004.
In the face of Wal-Mart's retail power, the studios have not dared
(yet) to do away with the protective video window.
Enter Mark Cuban. Along with his longtime business partner Todd
Wagner, Cuban became a multibillionaire selling his Internet company,
Broadcast.com, to Yahoo for $5.7 billion. Cuban and Wagner then
created an entertainment conglomerate that includes controlling
interests in a movie production company (HDNet Films), a distributor
(Magnolia Pictures), an art-house chain (Landmark Theatres), a
television and video library (Rysher Entertainment), and a high-
definition television network (HDNet). Cuban believes that
Hollywood's distribution system requires radical change. He wants to
do away with artificial windows so that consumers can buy a movie, as
he notes in his blog, "How they want it, when they want it, where
they want it." He argues that movies should be made available
simultaneously on cable television, DVD, and in movie theaters,
letting consumers decide whether they prefer to see it at home (even
if it means paying a premium for a new release) or in the theater.
[snip]
Edward Jay Epstein is the author of The Big Picture: The New Logic of
Money and Power in Hollywood.
Weblog at: <http://weblog.warpspeed.com>
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