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Sunday, July 31, 2011

Dinner OR a Movie ?

 "Popcorn and Soda Please"
The cost of going to the cinema keeps rising.  According to the National Association of Theatre Owners (NATO) during the second quarter the average price of a movie ticket skyrocketed to $8.07 and motored past the first quarter's $7.97 average.

Unfortunately, the increase was accompanied by ever decreasing attendance figures.  Through June the box office gross was down 8% year-over-year. Worse yet, the 627 million tickets sold was the lowest January-June period since 1996 !  To the industry's chagrin, the Studios' strategy of more money from fewer moviegoers is working out rather nicely, but is shortsighted, ill-conceived, and unsustainable.

The cost of moviegoing - particularly at the large, megaplexed circuits - is downright steep.  With a  $10 regular admission the new normal (and $12-$15 for a 3D feature) coupled with eye popping concession pricing (and perhaps a baby-sitter and parking) the once affordable movie date is now an out-of-home entertainment experience which can easily exceed $70.

Too Expensive?  Well it appears that way, as moviegoers become no-shows and cinemas rack up attendance figures that can only be measured on the performance scale under the "frighteningly bad" classification.  U.S. cinema admissions reached a record in 2002 at 1.56 billion and have been plunging since. Last year's admissions totalled 1.34 billion or a whopping 220 million below the 2002 peak!

This drop in attendance can be laid at the feet of the Studios and large cinema circuits and it cannot be sustained, nor can its' negative effect be off-set by continued higher admission and concession pricing.  The large theatre circuits with their highly leveraged operations will suffer first and foremost.
For their part, the Studios are doing gangbusters internationally which offset any domestic attendance shortfalls and they see no reason not to play the "get it while you can"  strategy.

Best and Happy Movie Going!
Jim Lavorato

Wednesday, July 27, 2011


Graze at the all-you-can-eat internet buffet while you can because the unmetered use of the U.S. internet is coming to an endAT&T and Comcast, two of the largest U.S. ISPs (internet service providers) have already imposed bandwidth caps on subscribers.  Time/Warner is going to institute meter usage shortly.  The days of the unlimited usage contract is over. The problem stems from the fact that our hunger for more bandwidth has grown to the point that it is overwhelming the system.
For the time being the ISPs are setting a high cap - 100 to 250 gigs/month, but above that limit, users will pay a per gig charge (which will be expensive). For example, the Canadian internet governing body has already imposed usage caps. In Canada , what was 200 gig/month (or unlimited) is now limited (capped) at 25 gigs.  Usage above that cap costs $2/gig.

Given that networkers will be using more and more gigs for video downloads the cost of service will increase and it will also eliminate the frivolous use of voice, text, and video downloads that now permeate the internet.

Common downloads and bandwidth use are:
  • Music CD - .03 gigs
  • 30 Minute TV Show from Hulu in standard definition - .15 gigs
  • 20 minute HDTV Show - .42 gigs
  • Movie streamed from  Netflix in HD - 3.40 gigs
  • Movie Blu-ray quality - 22.0 gigs
  • Streaming 3 movies in 1080p HD - 41. 6 gigs
          Source: Wired Magazine, August 2011

Best and Happy Movie Going!
Jim Lavorato

Tuesday, July 26, 2011

Look Ma No Glasses !

Just about everyone agrees that watching 3D would be much better if you didn't have to wear those annoying glasses.  Viewing 3D glasses-free in cinemas may never happen and the same may hold true for home viewing as well. 
Viewing 3D sans glasses or "autostereoscopicly" (AS3D) on small screens, like the Nintendo 3DS or some SmartPhones, (like the LG pictured), makes folks believe that viewing 3D in cinemas or at home on 3D-TVs without glasses is coming soon - NO WAY!
Jim Chabin, President of the International 3D Society, recently stated, " I think the idea that we are going to be moving any time soon to a practical home autostereoscopic screen is still a couple of technological breakthroughs away."   Currently there are two AS3D display types: lenticular (which uses tiny lens to separate left and right images) and parallax (which incorporates a filtering mask on the screen that diverts left/right images to the eyes).  However, both require that the viewer be located in a sweet-spot or as the TV manufacturers call a "designated viewing area" to obtain the 3D effect.
3D Image on 2D Screen

For cinemas, the large screens and seating configuration make it almost impossible for 3D to be viewed without glasses.  What it all boils down to is that most people's eyes are about 6cm apart and for 3D you need to present each eye with a discrete image so the brain can merge them.

"If a cell phone is being held in your hand, only a few inches away from your eyes, the angle from the display screen that the two images need to diverge is fairly large. But if a viewer is 8 feet away (such as in a home) or 30 or more feet (as in a cinema) the angle that is needed to separate the two images gets smaller and smaller. This makes it very difficult to get the correct image to the appropriate eye" says David Hoffman, a specialist in 3D viewing, from UC Berkley.  So, for the home, glassless 3D viewing is years away, and for cinemas it will probably never happen.  If that wasn't bad enough, the experts say, AS3D is age dependent as research has found that people in their early 20's and younger can more readily accept the AS3D effect, but people in their late 20's and older find it very annoying to watch.

The folks at the Media Lab at MIT have recently tested a new type of glasses-free 3D imaging called HR3D (High-Rank 3D), which uses a pair of layered LCD panels that allow each eye to see a different image. The MIT team admits, however, that a viewer needs "to be the right distance away from the screen for the 3D image to pop."

So, for the majority of us, that hate wearing those pain in the butt 3D specs either at home or at the cinema, the dream of  glasses-free 3D viewing will continue to be a nightmare.

Best and Happy Movie Going!
Jim Lavorato

Sunday, July 24, 2011

WEEKLY CineBUZZ REPORT - 26 July 2011

The "INSIDE" - an Omen of Things to Come!

Because of its importance, this week's CineBUZZ Report has only one talking point: the use of the internet for movies tied to social media.

For over 10 years I have been beating the same drum, harping on the same premise - that cinemas would have to change their business model if they were to survive in a digital world.  Label me a killjoy or spoilsport but that time in now upon us and the omen of things to come is a concept that I didn't even see coming - let me introduce you to:

Inside is the first on-line movie whose first episode will air on Monday, July 25th.  Inside is being billed as a "social film experience". Its prime movers (and backers) are non-other than Intel (world's largest Chip maker) and Toshiba (the giant electronics manufacturer).  Their goal: to professionally produce a film which provides social networkers an opportunity to interact and even appear in the movie.

The film centers around a woman, Christina , played by Emmy Rossum (Mystic River, Poseidon, and Showtime's hit series Shameless) who is locked in a room with only a Toshiba P775 PC (with back lit keyboard and a facial recognition screen), which she can use to reach out to real people.  So far, hundreds of people have auditioned through a YouTube casting call site  which is now, unfortunately, closed due to the high response. If your thinking runs - this is just another internet product promo, think again.  Inside is a social media/movie concept that was developed and produced by Hollywood professionals.  Directed by D.J. Caruso (Disturbia, Eagle Eye) and filmed by, Oscar winner, Mauro Fiore (Avatar, Training Day) Inside is a quality production.

For Intel and Toshiba it provides an avenue to strengthen and reinforce their brands with a forum to showcase their newest products.  The concept for Inside is a true innovation.  The film will run in short episodes of about 8 minutes each over the course of several weeks - but no end date has been set as that will depend upon the feedback from the social media participants adjusting the plot and solving the mystery.  Johan Joevoe,VP of creative services at Intel, states, "This is a very first attempt of a film to include direction from the audience.  This is where we are in uncharted waters".

Whether social films will become a trend in movie making depends (like all movies) on the quality of the product and its viewership values.  The creators of Inside believe the social experience it provides will be compelling, as well as, entertaining and draw in tech savvy adults.

A Shot Across the Bow

Cinemas should view this development as an omen of things to come and what their competition will be going forward. 

Best and Happy Movie Going !
Jim Lavorato

Saturday, July 23, 2011

ONE (actually 3) BAD APPLES in the BUNCH

What can be worse than piracy of a product or movie? Well, how about a whole retail store (or for that matter, a cinema) full of counterfeit products (or films).  Reaching a new height in spivery, at least 3 Apple stores were opened in the business sector of Kunming City, China (a well known bastion for a cornucopia of copycat luxury products and pirated media, from Gucci bags to BluRays) which are entirely fake and filled with fake Apple products - Macs, iPods, iPhones, iPads, etc.

So convincing was the scam that the store employees (all clad in signature blue T's and wearing Apple logo'd name tags around their necks) believed they worked for Apple !

Photo of bogus Apple store, Kunming, China

The giveaway came when a would-be customer noticed unpainted walls, and a store sign that read "Apple Store" vs. the iconic fruit logo used in real store signage.  Another no-no was that several store displays used a whole apple and not the bitten Apple logo.

Apple currently has four "real" stores in China, two in Beijing and two in Shanghai plus a number of official resellers. Plans are to open two more stores this year, another in Shanghai and one in Hong Kong.  When queried, Tim Cook, Apple's COO stated, "we have no official comment on the fake stores", and added, "China is very key to (Apple) sales plans and presents an incredible opportunity".

A fake store (although amusing for its utter brashness) is a very serious brand issue. If customers believe they are purchasing a real Apple product at a bonafide establishment and it does not function properly or does not match product specs this seriously tarnishes the Apple brand.

Piracy and product counterfeiting is bad for China. In the long-run it dampens China's efforts to attract new technologies as companies are reluctant to bring advanced products and designs for fear of piracy or patent infringement.  The Chinese government is becoming acutely aware of this and I think there will be widespread crackdowns on piracy and product copycatting in the future.

Remember: Don't buy any whole apples unless you're going to eat them.

Best and Happy Movie Going !
Jim Lavorato

Thursday, July 21, 2011

The MOOLA REPORT - July 2011

SHAZAM - Harry Potter's Afterlife

Entertainment/Media franchises, like Harry Potter, don't come down the pike very often, so I thought it might be fun to see how an E&M juggernaut like Potter is squeezed for every morsel of profit and what the future holds for one of the most lucrative Hollywood products ever.  For Warner Bros. the real magic starts now, after HP7-Part 2   concludes an 8 installment movie saga.

The task before TimeWarner, Inc. (Warner Bros. parent company) is to see to it that Harry doesn't fade away into old age.  So far, WB has turned J.K.Rowling's books into a revenue machine that includes: movies, video games, toys and consumer products, a theme park, home entertainment, and more, and amassed over $20 billion for the studio and WB wants to keep the good times rolling and turn the HP franchise into what's known as an evergreen property - an asset that just keeps on giving.

WB asserts that it has no idea as to whether Rowling will pen another installment to the Potter saga and without another book there will be no new movies. However, without a new book the brand could become stale. For WB to keep the revenue stream flowing it needs to keep the brand relevant while not over exposing it.

So far, WB has taken a reserved approach to licensing the Potter brand and has not gone into souvenirs or fast-food tie-in products. That policy won't be easy to maintain as WB tries to keep the flames burning. WB has several on-going marketing concepts. One, a revamp of the Leavesden Studios, where the 8 Potter films were shot, into an 85,000 sq.ft. tourist attraction. It is scheduled to open next April just ahead of the London hosting of the summer Olympic Games.  More significant is the second scheme, the theme park business - which is a "tentpole" (to borrow a phrase) of WB's post film strategy.  In 2010, WB opened the Harry Potter theme park at the Universal Orlando Resorts, in Florida, the plan is to expand the theme park endeavor worldwide.

How Much is Harry Worth to Warner - A LOT

In 2010, Potter related businesses added $1.1billion to WB operating income, which is roughly 20% of the studio's income.  Naturally, the other studios are closing watching how WB handles the Potter franchise as they believe - given the huge production and marketing costs associated with film making - that nurturing a franchise is an avenue to sustainable profits.  The only other franchise that comes close is Star Wars, lessors would be James Bond, Batman, Pirates of the Caribbean, Spiderman. We hope WB can work the magic!


To get a better read on the cinema industry I added four stocks to the Moola Chart this month: Amazon, Comcast, Lions Gate, and Viacom.  This brings the chart to 20 stocks and provides a very good reflection of the cinema industry.

                  Name                      Share Price                         I/(D)             
                                             1/1/11         7/21/11            $                 %   
Amazon (AMZN)                $180             $212             $32             17.8
Ballantyne Strong (BTN)          8                   4                (4)           (46.2) 
Carmike Cinemas (CKSC)        8                   7                (1)           (13.5)
Cinedigm Digital (CIDM)         2                   2                 -                 -
Cinemark Holdings (CNK)      17                 20                 3              16.4
Comcast (CMCSA)                  22                 25                 3              12.6
Disney (DIS)                            38                 41                 3                8.3
Dolby (DLB)                            67                 44              (23)           (34.2)
DreamWorks (DWA)               29                 21                (8)           (29.8)
Enter. Property Trust (EPR)     46                 50                 4                8.2
IMAX Corp. (IMAX)               28                 28                 -                 -
Lions Gate Enter. (LGF)            7                   7                  -                 -
Natl' CineMedia (NCMI)          20                 15               (5)            (23.0)
Netflix (NFLX)                       176                277             101             57.4
Rentrak (RENT)                        30                  19              (11)          (38.1)
Regal Entertainment (RGC)      12                  12                -                 -
RealD (RLD)                             26                  18               (8)           (29.7)
Technicolor (TCLRY)                 4                    6                2              60.7
TimeWarner (TWX)                  32                  36                4              12.3
Viacom (VIA)                            40                  51               11             29.5

As can be seen, the Chart depicts a rather lackluster performance from most of the stocks.  The equipment and cinema tech stocks, such as Ballantyne, Dolby, and RealD are big losers, as are the in-cinema advertisers. 

DreamWorks, closely associated with the Hollywood 3D effort has suffered as the public has started to turn their backs on the 3D format.  The other studios represented in the Chart by Disney, Lions Gate, Warners, and Viacom have performed better - Viacom being the unstander with a 29% return over the last 7 months.

Time Warner - Moola Stock of the Month

TWX  posts a clean balance sheet with $40 billion in goodwill and intangibles making up 2/3s of its assets - which is troublesome to some extent but built into the stock price as TWX's enterprise value is about $39 billion.  Liabilities are $33 billion split 50/50 between short and long term borrowings. Its debt to asset ration is about 25%.  Cash and short-term investments total $6 billion. Return of equity is 7.9%

WB hits have included Harry Potter, Hangover, Green Lantern, Horrible Bosses. As of July, WB's box office gross and ticket sales were led only by Paramount.

TWX is an entertainment & media company which is divided into 3 operations: Networks (cable TV), Filmed Entertainment (feature films, TV, and home video products/ distribution), and Publishing (primarily magazine publishing).

Warner Brothers studio, HBO, and Turner Broadcasting (consisting of CNN, TNT,TBS,and the Cartoon Network, to name several, and various internet .com sites (NBA, PGA, & NASCAR.coms) are the stalwarts of the company.

TWX is a partner in UltraViolet, a consortium of tech and media companies that includes: Sony, Microsoft, Cisco, Adobe, Disney, Comcast, AT&T, PBS, and 25 of so others.  The goal of UltraViolet is to launch a digital movie locker system that will allow consumers to purchase movies and store them for viewing at a later date on any web-enabled device.


TimeWarner appears solid but like all the other media companies is under attack from the relentless progression of the internet, which is going to change the way people obtain and view their entertainment. One false step, one missed technological wave, and it will be difficult to recover.  Additonally there is always the threat of a buyout from a tech or telco company hungry for professional content, ie.Comcast just purchased Universal)!

Best and Happy Movie Going
Jim Lavorato

Sunday, July 17, 2011

WEEKLY CineBuzz REPORT - 7/19/11

The Best of Hollywood
Harry Potter and the Deathly Hallows, Part 2 (Warner) brought an end to a ten year long whimsical saga, and the end was the best of the seven previous episodes.  Potter blew the doors off  2011's box office and grossed an all time domestic opening record of $169 million which ranked 6th in overall attendance for any movie in history.  Its worldwide gross totalled $476 million, opening on 20,000 screens in 59 countries. In keeping with current trend the majority of U.S. moviegoers opted for 2D viewing as the 3D version only accounted for 43% of the total gate.

In retrospect, over the last decade we watched and anxiously awaited each installment as Harry and his cohorts transform from naive children to young, courageous adults.  In the process, we learned a new vocabulary and were gleefully mesmerized by the wizardly and magical musings of J.K. Rowlings, which were skillfully adapted to the big screen.

The Harry Potter series - the franchise has grossed over $20 billion to date - represents modern film making at its best. Great story. Great acting. Great visually, Great sound. All wrapped in a great morality play which could only be fully appreciated at a cinema!

Even with Potter's stellar performance, as of Sunday total box office gross for 2011 at $5.75 billion is still  7% below 2010's  $6.17 billion and 3% lower than 2009's $5.92 billion.  3D is not working as well as Hollywood would like, as the majority of moviegoers continue to opt for the 2D film versions.

Current On-line Streaming Players
Netflix and Hulu have been discussed in other posts so I won't dwell on these two.  Hulu charges $7.99/month for movies and TV shows. Netflix, $15.98 for mailed DVDs and streaming, but only $7.99 for streaming only.

Amazon Instant Video - current TV and recent films on pay-per-view basis, from 99 cents to $3.99.  Selections must be viewed within 24 hours. Content is also available for sale. Amazon Prime is a free shipping service which cost $79.99/year but includes unlimited access to 5,000+ movies and video titles.

Apple iTunes - movies and TV shows can be viewed via AppleTV (a $99 device), as well as on, Mac PCs, and all of the other "i" devices - phone, pad, pod from 99 cents to $3.99. Selections must be viewed withing 24 hours.

HBO Go  - Free with HBO subscription. Brings HBO content to iPads, iPhones, iPod Touch and all Android devices.  HBO costs about $15.99/month through cable or satellite provider.

Advertising spending points to cinemas' need to adjust business model ! A PriceWaterhouse Cooper's (PwC) Global Entertainment & Media Outlook predicts that advertising revenue related to entertainment & media (E&M) content will grow at a compound rate of 5.7% over the next 5 years and reach $1.9 trillion on a worldwide basis by 2015.  For the U.S. the growth rate is anticipated to compound at 4.6% and by 2015 reach $555 billion.

Digital devices are the drivers of the E&M's growth, as this industry is being forced to create multi-purpose/multi-platform experiences.  Triggered by the unrelenting and swift consumer migration to digital devices (over 1/3 of adult Americans now have SmartPhones), advertisers are seeking a greater involvement with each consumer's overall entertainment and media experience.  Key advertising sectors being: the internet, TV, video games, and the cinema.

Cinema exhibitors, just like other content providers, need to address five key moviegoer requisites: convenience, experience, quality, participation, and value and incorporate these must-dos into a viable business model. One that offers advantages that out weigh the attractiveness of obtaining the same content (movies) less expensively or free (in the case of pirated content).

Best and Happy Moving Going!
Jim Lavorato

Tuesday, July 12, 2011


WebTVs Ready to GO
TVs that can connect to the internet vastly broaden one's entertainment and communication choices - movies, games, search, social networking, etc. - all without the need of a computer. TVs with connectivity (which are also WiFi enhanced) provide access to additional streaming content - TV programming, webcasts, internet radio stations like Pandora or Slacker, photo-sharing sites like Flickr and Picasa, and social content providers like YouTube.

WebTVs are currently available from most of the major TV manufacturers. Ranging in price from as low as $700 to over $3500 depending primarily on size, many are also 3D enhanced.  Some models come with wand-shaped remotes that allow navigation of the on-screen menus with gestures.  Others feature remotes with slide out keyboards, while others have touch screens.

All WebTVs are HD and most WiFi capable.  I believe that consumers will transition to internet connected TVs quickly, as the temptation to use a device with a large screen and high quality sound for communication and entertainment will prove irresistible.  I'm ready for one. I could be posting this on a 42" Panasonic 3D WebTV for under $900 with WiFI as a standard feature.

Box Office Recap
Transformers, Dark of the Moon (Paramount/Dream Works) scored a big second week, easily out-grossing new rivals : Horrible Bosses (Warner/New Line) and Zookeeper.
Sony/Columbia). Transformers' 13 day domestic gross at $267 million, made it this year's highest grosser, unseating The Hangover Part II (Warner).  It should reach the $300 million mark by week's end and breezed through the $600 million mark worldwide.

Horrible Bosses, which took in a very good $32 million clinched second place; while Zookeeper racked by $23 million and took third.  Cars 2 (Disney) and Bad Teacher (Sony/Columbia) - which has now grossed over $80 million - rounded out the top five at 4th and 5th place.

Released this week will be Harry Potter and the Deathly Hallows Part 2 (Warner) which will hopefully pull this year's gross within reach of 2010's results.  July needs to tally up and additional $1.25 billion to reach 2010, and that's quite a major hurdle.

Netflix U.S. Customers Nudged To Use Streaming Option
As you know I have been keeping a very close watch on internet content streaming technology, as I believe it is going to have a major impact on the movie exhibition business.

Today, Netflix raised the monthly fee it charges for mail and on-line movie rental.  The price hike is a move to get more subscribers to opt for the on-line streaming vs. DVD by mail service.  Under the new price regime, subscribers that want both services will pay $15.98/month vs. the current $9.99/month charge.  The $15.98 fee will entitle users to rent one DVD at a time plus unlimited streaming.  The new fee structure takes effect immediately for new subscribers and September 1st for current customers.

As predicted, Netflix will be focusing on its streaming service and downplaying its DVD mailing service - one, to keep up with technology and its on-line competitors, such as Hulu and Amazon; and two, to save on costs (it only costs 5 cents to stream a movie).

What Netflix hopes is that the $6 price rise  to $15.98/month for both the DVD and streaming service, will steer customers to the $7.99 streaming only plan. Additionally, this would be in line with it international expansion into Canada and Latin America where only a streaming service is offered.

Best and Happy Moving Going
Jim Lavorato

Sunday, July 10, 2011


Texas Instruments (TI) developed the driving technology for Digital Cinema. It will now provide the next step in movie content delivery.

10 years ago TI's Digital Light Processing (DLP) chip technology was introduced commercially to the cinema exhibition industry. Since that time, and through many iterations of projector development, the DLP chips remain at the heart of D-Cinema Projection Systems -  that is now going to change !

TI announced on July 5th that it has developed a new on-chip security feature - called M-Shield.  It is a security layer that unlocks the encoded video which can then be played back on Smartphones, tablets, or TVs connected via a HDMI (high-def multimedia)  port.

The purpose of this technology is to provide end-to-end security for protected video contentTI stated that "its OMAP chip had been certified to unlock full 1080p movies from Netflix for smartphones and tablets based on Google's Android 2.3 operating system".  The on-chip security feature minimizes the ability to copy content.  Currently it is easy to access memory where the stream is temporarily stored and then write the movie to another device - M-Shield  enhanced chips will prevent this!

Fred Cohen, the TI spokesman for this project, stated " we have implemented an on-chip firewall. The technology is to provide a security layer so devices get access to HD movies " without copy capability.  Ergo:  this should have a big positive impact against movie piracy. Intel has also implemented a similar on-chip security feature called Insider on its Sandy Bridge chips for PCs and notebooks - which began shipping out this year.

Netflix provides different levels of security-certification depending on features such as video quality and resolution. Currently, the M-Shield is certified to work on devices incorporating TI's OMAP4430 chip (a dual-core which brings 1080p HD video playback to mobile devices) and which can also run on Google's new operating system - Gingerbread.  In the future, the M-Shield will be incorporated on all chips used in Google systems, such as the Android 3.1 and the upcoming, and very powerful, successor to 3.1 the Ice Cream SandwichWhere do they come up with these names? The TI and Intel on-chip security features will eventually be incorporated on many, if not all, streaming accessible devices.

Digital Cinema is a dead-end technology, and it is very apropos that TI is one of the companies that will be responsible for its demise.  Cinema exhibitors seem to be in a state of denial about the future (which is starring them in the face).  They need to take their anger and frustration and direct it.  Begin to restructure and prepare for the inevitable fact that  movies are going to be streamed day-and-date worldwide to all accessible points of distribution including movie theatres. That's the future-prepare for it !

Best and Happy Movie Going!
Jim Lavorato

Thursday, July 07, 2011


Like it or not there are a number of technologies that are going to impact the cinema in a BIG way.

If you are a regular to Cinema Mucho Gusto, you know that I have been adamant in the belief that streaming content will have a huge impact on cinema exhibition and the urgent need for cinema operators to adjust to this inevitable event.

Hulu and Netflix are two companies which currently represent this threat to cinemas so it is important that we follow their progress and goings on.

Lets take Hulu first. Thing got pretty hot for this ad-supported on demand streamer of TV shows, movies, and webisodes.  Owned jointly, at 30% each by NBS (Comcast), Fox (NewsCorp), ABC (Disney), and Providence Equity Partners, a venture group, which owns the remaining 10%, Hulu went up for sale last week - well sort of.  Its suitors: none other then tech giants, Google, Microsoft, and Yahoo. Their motivation: to position themselves in the looming and huge on-line content streaming market. Hulu has rights to numerous TV shows available from its big media owners and has over 600 advertisers - from McDonald's to Toyota.

Hulu's advertising revenue and subscriber fees will exceed $500 million this year. That puts the price tag for Hulu north of $2 billion and what it offers is professionally produced content and 28 million monthly viewers.

However, Hulu's owners are in a pickle.  They want to provide content to Hulu but are under pressure from the TV cable and satellite companies to limit what TV programming Hulu streams.  Big media gets over $30 billion annually in affiliate fees from the cable and satellite firms.  But, by last week's end, Disney was having second thoughts about selling.  Why?
First, because a large non-studio getting into the content game would eventually demand exclusive streaming rights. Second, Disney does not want to be in a position where other content providers are supplying exclusive content competing against Disney's non-exclusive content.
On the other hand, by selling, Disney would net a cool $450 million and allow it to nurture its new relationship with Netflix, which started to stream ABC Family content last December.

Speaking of which, we've blogged a lot about this movie-by-mail turned internet content streamer over the last year.  Netflix is growing and growing fast. Last September it set up shop in Canada and has been signing up subscribers at a torrid rate (in May it signed up over 800,000). It is now moving South.  According to Jessie Becker, VP of Marketing, Netflix will be offering, " unlimited streaming of movies and TV shows" in 43 countries throughout Latin America and the Caribbean in three languages (English, Spanish, and Portuguese) on a full range of connected devices for the equivalent of their current U.S. per month charge of $8.

  • Content streaming will continue to grow at a rapid rate on a worldwide basis. 
  • More and more content will be made available for streaming because consumers will demand it.
  • The movie studios will eventually provide first-run movies to the streaming providers, there is just too much money involved and it would virtually eliminate film piracy.
  • Cinemas need to move to a new business model which is much more retail oriented and consumer friendly.
This story is just unfolding. There will be many of twists and turns. Lots of deals and collaborations. But in the end it will  completely change the way we currently consume entertainment, including movies.

Best and Happy Movie Going!
Jim Lavorato

Monday, July 04, 2011


Box office Recap
Wow - as we wrote in last week's CineBUZZ Report, Transformers and Harry Potter had to be mega-hits for this July to be the 6th July in a row as the highest grossing month in the year and Transformers-Dark of The Moon (Paramount / DreamWorks) can through- BIG!  Aided  by the long holiday weekend it grossed over  $181million (to be fair it was a Wednesday - Monday tally) which made for a breakout box office and elated the folks at Paramount  who are estimating a global take of over $398 million. Opening in 58 overseas markets the international box office accounted for $217 million with Korea, Russia, the UK, Australia, and Germany leading the pack in that order. Propelling the grosses were the 6 out of 10 viewers attending the 3D version of the film and 7 out of 10 in the international market. This was one film moviegoers wanted to view in 3D.
Next at bat is Harry Potter And The Deathly Hallows-Part II (Warner) Our crystal ball says: a three run homer!

Cars 2 (Disney) came in second over the 4th of July holiday grossing a very respectable $32 million in its second week of release - it has now grossed over $123 million domestically.  Bad Teacher (Sony/Columbia) one of my three big sleeper picks for this summer (the other two being Horrible Bosses(Warner/New Line) and Crazy Stupid Love (Warner) came in third, grossing an additional $18 million in its second week of play - it has now taken in $63 million.  In other news, Pirates of the Caribbean: On Stranger Tides (Disney) surged passed the $1 billion mark worldwide, with the international box office accounting for $775 million of the total.

As predicted (and it was really no surprise) Larry Crowne (Universal) was a box office dud.  What was this movie's target audience - middle aged losers?  Tom Hanks (who also directed) and Julia Roberts probably made more in salary than this busted film grossed in its debut. Even with its heavy marketing budget (Hanks and Roberts were on all of the late night and afternoon talk shows) the film only managed to tally a paltry $16 million over the extended holiday weekend.  Universal reported that 80% of the audience was over 35 and 64% female (read 50 and 75%).

What's Wrong At Home?

As the grosses are tallied up, you quickly realize the importance of the international box office to Hollywood.  On average, a mega-hit takes in from 60-70% of its gross from the non-domestic markets.  This trend has been developing over the last decade and is going to continue as the rest of the world becomes more affluent and middle classes grow. This is the reverse of what is happening here at home.  Ticket sales is the U.S. have been in a down trend since peaking in 2002 at 1.5 billion admissions.  In 2010, ticket sales were over 200 million below the '02 record level !

What's wrong with this picture? No pun intended, but the reality is that many people no longer feel that attending a movie provides a value based, out-of-home entertainment experience.  And this trend is likely to continue.

Best and Happy Movie Going
Jim Lavorato

Sunday, July 03, 2011

CONNECTIVITY: Help Or Hindrance To The Cinema?

Informa Media, a media & IT consulting group is predicting (and we have no reason to doubt their prognostications) that web-connected TVs will out-sell video gaming consoles in the U.S. this year - 52 million connected TVs vs. 37 million game consoles (X-Box, PlayStation, Wii). 

They further forecast that by 2016 sales of all internet streaming devices will reach 1.8 billion units (TVs, SmartPhones, tablets, BluRays, etc.) equating to a 800% increase over current sales and representing 70% of all video devices being sold.

The consumer's desire to access content via streaming services such as Netflix, WebTV, iPlayer, Hulu, and many others yet to enter the game will mainstream content delivery.  This will not be a plus for cinema exhibition, and as we have stated in the past: cinemas need to change their business model if they are to survive and prosper.  The genie is out of the bottle and there is no putting it back.  Many cinemas have converted to Digital Cinema for projection of movies, many still have not. If you have not converted, don't - D-Cinema, as a digital delivery system is now obsolete as content streaming via connected to the web devices will be the mode of content delivery and playback will be via commercial video projectors (in 3D or not) which cost a fraction of the investment of a D-Cinema platform.

Entertainment Equipment Corp., the company I manage, will be there to assist cinema owners and operators at what EEC does best: consult and train.  Content streaming is developing fast. Cinemas need to move forward in understanding how this will impact their operations and what strategic decisions they need to make to cope, use, and take advantage of this coming technological wave.

In less than 15 years, the internet has changed the way the world works, communicates, learns, informs, entertains, socializes, and we are (to my mind) at Day One in this process - there is still a long way to go.

Best and Happy Movie Going!
Jim Lavorato

Knowing YOU Better Than Yourself

As a followup to the last post on branding I wanted to discuss new marketing trends that are evolving.  Using demographics as a way to target market potential buyers has been around for decades.  But today, social networks, behavioral data from search providers, and lifecycle forecasting have relegated demographic based marketing to the history bin. 

The demographic marketing model's goal was to amass the most possible viewers to your advertising and convince them that they were just like everyone else in their demo-delineated category.  Businesses marketed by generational statistics - for example to the 80+ million baby boomers. Gen-classification marketing was easy and effective - but it is now passe !

Like so many things in a digital world, from television programming to  tweeting, fragmentation is the new marketing God.  With social networks and on-line purchasing, consumers self-select into groups so fragmented that no all encompassing demographic based marketing model based upon gender, age, race, or other trait is of any value.

Psychographics is the new marketing religion. It target markets based upon  each consumer's behavior and lifecycle.  Amazon has been a pioneer in psychographic marketing. It invented the "recommended products" and the "users like me also bought" sales techniques. It mines and granularizes previous purchases and search  data on users and predicts what they are most interested in and apt to purchase in the future.

What enables psychographics to be such a powerful marketing tool is the myriad of data and personal information gathered on millions of people worldwide.  Social profile data, behavioral data, and lifecycle data is available for individualized marketing.
Social Networks
All of the data fields that users fill in, as well as, those where permission for use is granted can be used to determine: relationship status, interests, occupation, level of education, etc. etc.  Facebook user information can provide invaluable marketing information on, not only, intent to purchase but what a user may be likely to purchase.

Behavioral Data
Most of the current web based advertising follow consumers around but don't really target them.  In the future, users' web behavior: which sites do they visit, what information are they searching for, what are their purchasing preferences will be used in tandem with the aforementioned social profiling data to super boost the sales process.

Lifecycle Data
Social profile and behavioral data can be used to predict consumer lifecycle as well.  Key purchases like, buying college text books or maternity clothes, a change in a shipping address, buying upscale kitchen appliances, indicate lifecycle  changes and provide companies opportunity data.

Knowing You Better Than Yourself
Broad-based demographic supported marketing is morphing into individualized socially based marketing.  Predicting your purchasing preferences and needs before you know them will become the new normal of product and service marketing.

Jim Lavorato

Friday, July 01, 2011

What's In A NAME ?

What is a Brand?
Branding and forming an identity for any business is crucial because if you don't the marketplace will brand your business anyway. There have been hundreds of books published and thousands of corporate seminars given on corporate branding.  But, what is a Brand?  Well, if you get right down to it, a brand is a promise ! 

The brand of any business signifies that it will perform in a certain manner and deliver its product or service in a particular way or fashion. Branding provides a means to differentiate but it also brings the ability to mark up price without customer resistance - this is what is termed brand equity.  Brand equity is the extra money people are willing to pay for the same product.

Marketing and Branding
All businesses no matter how small should brand and form an identity.  Large corporations spend millions on branding because a branded product or service sells better than an unbranded one.  A company with a well conceived identity and public persona realizes the results in higher sales and gains competitive advantage.

The best brands create an emotional connection. For example, drinking Coke brings happiness and refreshment.  Or some equate to core values. The latest trend being environment sustainability, ie. it's good to be green.  However, a company must be careful as the brand (promise) and the reality of how the business operates must be consistent and authentic or else the promise will be broken and it will be very difficult to get the marketplace to trust that business (brand) again.

The Value of Brands
Harris Interactive recently published its annual poll of the most valuable brands in the world in terms of dollar value and the most reputable businesses.  The findings are below.

Branding is a win/win. Differentiating and positioning your business in the marketplace are prerequisites for success.  You need to evaluate your brand positioning, it should meet the demographic, attitudinal, and usage qualifications, and act as a blueprint for determining and selecting the brand strategy to be followed.  Look at the lists below and think about the strategy these companies used in forming their brand and brand equity positions.

Top 10 Most Valuable Global Brands (in dollar terms)*
6.Coca Cola
9.China Mobile
10 Most Reputable Businesses in the U.S.*
2. Johnson & Johnson
4.Berkshire Hathaway
7.Kraft Foods
9.Disney Co.
10.General Mills

*Polling complied by the Harris Corporation's Annual Corporate Survey.