Is this a preview of reel-to-reel combat to come in home video? Maybe. The video business isn’t picture-perfect these days. And escalating agitation over the length of windows is just one of the troubling scenes. The mature home-video industry no longer posts the whopping yearly revenue gains it enjoyed when consumers were enchanted with their new VCRs. So far this year, video rentals have slipped by 3 percent to 9 percent, depending on whose numbers you believe. Another sign of the times: Blockbuster is stumbling big-time, a victim of the broader market pressures and its own mammoth missteps.
Digital threats: It isn’t just audience ennui that’s putting home video on pause. The business is facing a potentially profound threat from satellite TV, which offers movie viewers CD-quality sound, sharper pictures and scores of flick channels. And digital cable services, with similar improvements in picture and sound, are now starting to appear here and there. Then there’s movie-packed basic cable, not to mention the new digital video discs - movies on a CD-size platter - that are now arriving in stores.
Not that the black plastic cassette is likely to vanish any time soon. Americans remain relatively video-voracious - only now they feed the habit at a more levelheaded pace. Annual video rentals are holding steady at roughly $8 billion to $9 billion. Industry officials blame the rental decline earlier this year on slim video pickings. They say rentals are already rebounding thanks to hits like ““Jerry Maguire.’’ Also, renters increasingly are becoming buyers, building video libraries. Rental dollars may have peaked, but studios are reeling in video sales, now totaling $7 billion to $8 billion a year, at a double-digit pace.
Balancing act: Still, the rival formats are starting to bite. And this battle for the eyes of couch potatoes puts Hollywood in a tricky position. Movie studios derive more than half of their revenues from video, so they can hardly turn their backs on that market. Meanwhile, though, they must try to nurture the new formats, which could someday spell big sales, too. This balancing act is particularly dicey when it comes to those windows. A film is distributed through a sequence of exclusive windows - first in theaters, then video, pay-per-view, pay TV (such as HBO), basic cable and network TV. Video dealers complain that studios, desperate to quickly capture revenues to cover the high cost of moviemaking, are slamming the video window shut much sooner, especially on hit movies. ““The studios are trying to satisfy Wall Street’s demand for the next quarter’s earnings,’’ says Jeffrey Eves, president of Video Software Dealers Association. That strategy threatens ““the viability of the video store,’’ he adds, warning, ““a day of reckoning is quickly coming.’’ As with ““Evita,’’ Eves vows, video dealers will begin slashing orders on certain movies.
The studios seem eager to placate their biggest customers. ““We hear the rental community loud and clear,’’ says Benjamin Feingold, chief of Columbia-TriStar Home Video. He and his Hollywood counterparts say they have expanded the average window. They note that pay-per-view has yet to boom, suggesting the dealers’ concerns are overblown.
Some on Wall Street don’t think so. A study by media analyst Tom Wolzien of Bernstein Research and industry consultant Alexander & Associates found that subscribers to advanced satellite-TV services dramatically reduce their video rentals. Because studios make much less on a pay-per-view movie over satellite TV than on a tape sold to a video dealer, the study projects potentially deep declines in Hollywood revenues if such services spread. Or, as the video dealers might say, ““Don’t cry for me.''
