Film-Tech Forum ARCHIVE: Netflix does it again

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Posted by Claude S. Ayakawa (Member # 1401) on 04-09-2010, 01:03 PM:

It has been a joy to see THE BLIND SLIDE and SHERLOCK HOLMES available for rental from day one at Blockbuster while Netflix members would have to wait at least another month to rent them and all other new Warner titles because of the agreement between them and the studio. Netflix has also now agreed to have Universal and Fox titles delayed for rental for a month just like WArner titles. It seem the three studios and Netflix all agree this policy will encourage purchase rather than rental. Fat chance of that ever happening! When I went to Blockbusters, I was on the fence with THE BLIND SIDE. When I saw it on sale a the store for a few pennies shy of $20.00, I bought it rather than rent. I did this because I knew I would like it and the movie had all of the qualities that would make me want to watch it more than once. SHERLOCK HOMES did not and I rented that as well as future titles from Warners and now Fox and Universal with my Blockbuster membership.

As I had mentioned many times before, having twelve movies sent to me in the mail a month and the opportunity to return them three at a time every Tuesday morning and get brand new Blu-Ray titles on the first day of release is a bargain at $38.00. Not only is the online service fantastic . It is the same at my local store where I have been receiving nothing but the most courteous service from the management and staff

-Claude

Posted by Bobby Henderson (Member # 840) on 04-09-2010, 03:33 PM:

It's understandable why Warner Bros. as well as Universal and Fox would want a 30 day window on Netflix releases.

Viewers are paying considerably less per movie viewed with a Netflix subscription versus renting each title separately through a traditional video rental store. The other side of that argument is customers will rent few movies when then rent "al a carte" at the corner video store.

It's obvious movie studios really want to push the sell-through angle harder on DVD and Blu-ray releases. Warner Home Video has taken this to a new extreme with their video store specific movie discs. These "rental" marked discs lack the bonus features of the retail product. The ones I've seen have forced trailers and TV commercials you cannot chapter past; you can only fast forward through them. They may lack a scene selection menu or even chapter stops. So if you have to stop the movie and resume it at another time, you'll at least have to fast forward through all the commercials and trailers if not a good bit of the movie.

Needless to say, I'm making it a policy to avoid renting Blu-ray movies from Warner Home Video. Those rental oriented discs suck too badly to tolerate.

With the talk of rental windows on Netflix I'm surprised there isn't a greater effort to place 30 day (or longer) windows on all Redbox kiosks. Talk about a profit killer! Redbox is it!

Posted by Adam Martin (Member # 641) on 04-09-2010, 04:59 PM:

In all of these deals, Netflix is getting more copies of these movies at a better price PLUS better licensing for online streaming.

Redbox also signed the 28-day deal with Warner Bros. back in February.

What's Blockbuster getting for their deal with the studios? A lien against their assets. Sounds like a great business plan.

Posted by Mike Frese (Member # 4361) on 04-12-2010, 02:00 AM:

This is a great deal for Netflix. The overwhelming majority of the movies they ship are NOT hot new releases. So their customers will not notice much difference. We (video stores) have been seeing Netflix customers get Hot new releases from us for some time. They get more streaming content and lower cost units.

It is probably no big deal for Netflix customers.

Redbox: They are heavily reliant on HOT new release rentals. I do not know what will happen to them if they do not get product for 28 days. If they do sign more of these deals, it would have to be at much lower costs than they are paying now.

Redbox customers: Bad all the way around.

Blockbuster: Great for them and their customers. I would have done what ever it took to do this as well. IMHO no big deal to use their Canadian assets as collateral.

Posted by Adam Martin (Member # 641) on 08-27-2010, 09:37 AM:

quote:

Blockbuster tells Hollywood studios it's preparing for mid-September bankruptcy

After dominating the home video rental business for more than a decade and struggling to survive in recent years against upstarts Netflix and Redbox, Blockbuster Inc. is preparing to file for bankruptcy next month, according to people who have been briefed on the matter.

Executives from Blockbuster and its senior debt holders last week held meetings with the six major movie studios to discuss their intention to enter a “pre-planned” bankruptcy in mid-September, said several people familiar with the situation who requested anonymity due to the sensitivity of ongoing talks.

Blockbuster is hoping to use its time in Chapter 11 to restructure a crippling debt load of nearly $1 billion and escape leases on 500 or more of it 3,425 stores in the U.S. Maintaining the support of Hollywood's film studios during the process will be critical so that Blockbuster can continue to rely upon an uninterrupted supply of new DVDs.

Blockbuster has lost a total of $1.1 billion since the beginning of 2008 and has been severely hamstrung in efforts to grow its business due to interest payments on $920 million in debt. Earlier this month the company announced that most of its debt holders had agreed to a forbearance on interest payments until Sept. 30, during which time it would attempt a recapitalization.

Last week Dallas-based Blockbuster's chief executive, Jim Keyes, came to Los Angeles to hold individual meetings with executives at studios including 20th Century Fox, Paramount Pictures, Sony Pictures, Universal Pictures, Walt Disney Studios and Warner Bros. He was joined by a team of restructuring consultants hired to help turn around the struggling company, along with its senior debt holders who would likely end up owning a substantial portion of Blockbuster following bankruptcy.

Former Sony Pictures home entertainment president Ben Feingold, who is serving as an advisor to the debt holders, was present as well.

Though its plans are not yet set in stone, people knowledgeable about the discussions said the Blockbuster representatives presented a mid-September bankruptcy as the most likely scenario. It would enter what is known as a “pre-planned bankruptcy,” meaning most but not all creditors would be on board ahead of time, including senior debt holders and content suppliers.

One of the primary goals of the bankruptcy process, which the company said it hopes would last about five months, would be to escape costly leases for some of its worst-performing stores. Though Blockbuster hasn’t decided exactly how many locations it would seek to shutter as part of a bankruptcy, executives told the major studios it is looking at between 500 and 800.

Blockbuster closed nearly 1,000 stores in the last year alone, a reflection of consumers’ rapidly declining interest in renting DVDs from retail locations now that they can rent them from ubiquitous kiosks in grocery stores, in the mail, or via the Internet.

If it successfully exits bankruptcy, Blockbuster has told Hollywood studios, it hopes to grow through non-retail initiatives. Kiosk manufacturer NCR Corp., for instance, has already deployed about 6,000 Blockbuster-branded kiosks that, like Redbox, rent DVDs for $1 per night.

The company also hopes to expand its presence in the still nascent digital distribution space, through which a growing number of customers are downloading or streaming movies on computers, Internet-connected televisions, and mobile phones.

Most studios are believed to be supportive of Blockbuster’s efforts, as they want to see it remain in business as a viable competitor to Netflix and Redbox, particularly since the formerly second-largest DVD rental store, Hollywood Video parent firm Movie Gallery Inc., went out of business in April.

But there are still some issues to be resolved, including the company’s desire to continue offering movies from all the studios on the same day they go on sale. Fox, Universal and Warner have all instituted a 28-day window on rentals through Redbox and Netflix.

The studios would likely be protected from any significant losses on payments Blockbuster might owe them at the time it files for bankruptcy under the proposed plan. But they would lose revenue from any stores shut down.

The parties most impacted would be Blockbuster’s junior debt holders and the landlords of leases that would be canceled under the proposed bankruptcy. It remains to be seen whether they would attempt to challenge a plan that left them with a fraction of what they are owed.

If the company does not enter bankruptcy, it would need to find a new investor or convince its debt owners to significantly reduce its interest payments for the foreseeable future.

A Blockbuster spokeswoman declined to comment on the studio meetings. In a statement, she said, “The extension of our forbearance agreement is a strong sign of support from our senior secured noteholders as we work toward putting in place a more appropriate capital structure to support Blockbuster’s long-term growth. … Our discussions continue to be productive and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future.”

Blockbuster stock, which last month was delisted by the New York Stock Exchange because of its ongoing low price and moved to the over-the-counter market, closed Thursday at 11 cents. The company’s total market value is $24 million.

In 1994 it was acquired by former owner Viacom Inc. for $8.4 billion.

--Ben Fritz

Posted by James Westbrook (Member # 3690) on 08-27-2010, 05:49 PM:

Lubbock's last Blockbuster store just closed. Now we has none. [sleep]

Posted by Mike Blakesley (Member # 26) on 08-27-2010, 06:46 PM:

Netflix users, enjoy it while you got it...VOD direct from the studios will probably put them out of business, the same way they put video stores out of business.

Posted by Bobby Henderson (Member # 840) on 08-27-2010, 07:42 PM:

The Hastings Books, Music & Video location here in Lawton just cut its prices on Blu-ray rentals to $1.99 per night for new releases and $3.99 for 1 week. That's comparable to what Redbox plans to charge when it starts offering Blu-ray discs for rent. I'm not certain, but I think Hastings is also offering $1 per night rentals for DVDs. I don't know for sure since I don't rent DVDs anymore.

Hastings has a better selection of movies than a typical Redbox kiosk. So I'll probably keep renting movies from Hastings. I don't know how badly this price cut is affecting Hastings' bottom line.

Posted by Bruce Hansen (Member # 281) on 08-27-2010, 07:51 PM:

At $5 per movie, Blockbuster priced themselves out of the market. Maybe they should have stopped their idiot CEO from throwing away a BILLION dollars that they now have to pay interest on.

Posted by Claude S. Ayakawa (Member # 1401) on 08-27-2010, 10:00 PM:

Bruce,

In the almost two years I have been a Blockbuster member, I have never paid $5.00 per movie. With the kind of membership I have, my cost for movies average out to about $1.35 each and half of them are brand new Blu-Ray releases I have been able to rent them on the first day they become available without any problem at all. I do not know of any video rental companies that can provide the kind of service I have been enjoying at Blockbuster. Everyone here seem to be very partial to Netflex but how many here can tell me that they have been able to get their hands on popular releases week after week on the first day of release at Netflex and other rental outlets like I have been able to do at Blockbuster? I am almost sure you cannot.

-Claude

Posted by Ian Parfrey (Member # 5122) on 08-28-2010, 11:11 PM:

quote: Mike Blakesley
Netflix users, enjoy it while you got it...VOD direct from the studios will probably put them out of business, the same way they put video stores out of business.

Mike.

That's it exactly. The studios for a long time have viewed ANY link between their product and the consumer to be a drain on STUDIO profits. So, it's Goodbye to Blockbuster- and in the longer term, your local multiplex/Mum & Pop single screen cinema as well.

V.O.D.- 3 letters to be very wary of if one is in exhibition in any form.

Posted by Claude S. Ayakawa (Member # 1401) on 08-28-2010, 11:25 PM:

Unless VOD can provide picture and sound quality equal or better than Blu-Ray discs, I doubt it will replace outlets such as Blockbusters, Netflex and other venues. If people still prefer to see movies on a large screen with other people at a theatre, I think the motion picture exhibition industry will survive.

-Claude

Posted by Bobby Henderson (Member # 840) on 08-29-2010, 11:54 AM:

Unfortunately a lot of people place convenience (and the laziness that occurs from it) as a higher priority than image quality.

There absolutely is no dispute Blu-ray delivers the best picture and sound quality of any home video distribution format. Netflix' VOD service doesn't even measure up to standard definition DVD quality. The "HD" video quality with AppleTV is awful. The PPV movie quality from satellite and cable service doesn't compare well to Blu-ray either. Nevertheless, more and more people are gravitating to those lower quality rental sources out of convenience.

I have a feeling the traditional Internet won't be improved anywhere near as fast as I guessed earlier. I thought the Internet would probably be offering download speeds in excess of 30 million bits per second through much of the country in the 2012-2015 time frame. Now I think it may be more like 2020 before that happens. Right now it seems like most of the money being spent on Internet infrastructure is going to smart phones and their separate celluar networks.

quote: Ian Parfrey
That's it exactly. The studios for a long time have viewed ANY link between their product and the consumer to be a drain on STUDIO profits. So, it's Goodbye to Blockbuster- and in the longer term, your local multiplex/Mum & Pop single screen cinema as well.

I agree movie studio executives (and more specifically the executives running parent companies of movie studios) would love to cut movie theaters out of the situation. But such a move would be suicidal to the movie business.

I sound like a broken record on this, but the movie industry cannot work without movie theaters. Without movie theaters there will be no real movies. The only thing left will be made for TV shows. No studio is going to spend $200 million on the production of a 2 hour made for TV movie. At least some of the general public makes a psychological connection between movies that play in theaters versus those that only play on TV. Only legit movies have a stint in movie theaters. The public isn't going to care so much about a movie that only plays on TV and is first seen via PPV. Mini-series on pay cable channels like HBO would take over as the top dramatic attraction. But even that business isn't going to grow, and won't grow anywhere near enough to replace what would be lost from movie theaters. The public is increasingly divided between more and more forms of entertainment. Those parent corporations are trying to buy up as much of it as possible. But the more they tighten their grip on everything the more of it is going to go squirting between their fingers and be lost.

Posted by Adam Martin (Member # 641) on 09-25-2010, 12:21 AM:

quote:
Blockbuster Files for Bankruptcy After Online Rivals Gain

By Dawn McCarty, Linda Sandler and Tiffany Kary - Thu Sep 23

Blockbuster Inc., the world’s biggest movie-rental company, filed for bankruptcy after failing to adapt its storefront model to online technology pioneered by rivals such as Netflix Inc.

The company listed assets of $1.02 billion against debt of $1.46 billion on a Chapter 11 petition filed today in U.S. Bankruptcy Court in New York. The company said it reached a deal with a group of bondholders on a plan of reorganization and secured a $125 million loan to finance operations.

“To preserve its three-decade long developed brand value, Blockbuster seeks a restructuring that permits a significant deleveraging of its business so that it can move forward at the digital clip at which its industry and competitors are currently running,” Jeffery Stegenga, the company’s restructuring officer, said in a court filing.

Sales at Dallas-based Blockbuster, with about 3,000 stores in the U.S., shrank in recent years while Netflix grew by renting movies online and through the mail, and Coinstar Inc. put Redbox DVD vending machines in supermarkets and drugstores.

The $125 million in secured financing from senior noteholders represents new cash availability. On an interim basis before final approval, $45 million would be available. The financing is to have a lien ahead of existing debt. The financing also calls for converting $250 million of existing secured debt into a new loan with a lien ahead of existing debt.

Largest Creditors

Under the proposed plan, there will be no recovery by the holders of the company’s outstanding subordinated debt, preferred stock or common stock, according to the statement. Blockbuster anticipates it will pay something to unsecured creditors, court papers show. Blockbuster Video Italy Inc., Blockbuster International Spain Inc., Blockbuster Canada Inc. and nine other units also sought protection.

The company’s largest trade creditor is Twentieth Century Fox Home Entertainment with a $21.6 million claim, followed by Warner Home Video Inc. with a claim of $19 million and Sony Pictures Home Entertainment with a claim of $13.3 million, according to today’s filing. Among others waiting to be paid by Blockbuster are Coca-Cola Enterprises, which is owed $703,412, and the advisory firm Moelis & Co., owed $254,050.

The filing “provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future, as we continue to transform our business model to meet the evolving preferences of our customers,” Chief Executive Officer Jim Keyes said in a statement today. Keyes owns almost 1.4 million shares and options on another 7.8 million shares.

Icahn Bonds

Billionaire Carl Icahn bought about one-third of Blockbuster’s bonds as of Sept. 17, according to people with knowledge of the matter. Icahn, 74, a former director of the company, led a proxy fight in 2005 to put himself and two nominees on the board. Last March, he cut his stake in the company to 3.5 percent by selling stock. He left the board in January. He is working with a group of senior creditors in the reorganization plan, the people said.

Before deciding on a bankruptcy financed by senior lenders, Blockbuster said it spent “significant time” through the spring and summer this year discussing potential financing deals with other companies. They included two “large, financially capable strategic parties” and other investors. None of them offered sufficient money for the company to cut its debt enough, Blockbuster said in a court filing.

Bondholder Support

Blockbuster has support for its reorganization plan from a group of bondholders holding about 80.1 percent of the company’s 11 3/4 percent senior-secured notes, it said. The notes will be exchanged for equity in the reorganized company. The company has secured bonds with a face value of $630 million and unsecured bonds with a face value of $300 million, court papers show.

Blockbuster asked court permission in its first-day filings to pay studios on a priority basis, saying its ability to operate depended on the supply of copyrighted material that came from major movie studios. Blockbuster owes about $68.5 million to studios with a secured lien on its assets, and $49.6 million to studios with an unsecured lien, according to a court filing.

About 80 percent of Blockbuster’s annual revenue relies on material from Walt Disney Co.; Icahn buyout target Lions Gate Films Inc.; Paramount Home Entertainment Inc.; Sony Pictures Home Entertainment Inc.; Summit Distribution LLC; Twentieth Century Fox Home Entertainment LLC; Universal Studios Home Entertainment LLC; VPD IV Inc.; and Warner Home Video, Blockbuster said.

Normal Business

After it emerges from bankruptcy, the only debt expected to remain on Blockbuster’s balance sheet will be the $125 million loan, known as a debtor-in-possession loan, the company said. It will convert to so-called exit financing and a revolving-credit line of as much as $50 million.

Blockbuster said all of its U.S. operations, including stores, DVD vending kiosks, by-mail and digital businesses, will continue to operate normally. Domestic and international franchisees aren’t part of the Chapter 11 reorganization, according to the statement. The company said it will no longer provide funding to support its operations in Argentina.

Intana Management LLC, M.A.M. Investment Ltd., Prentice Capital Management LP, Michael Zimmerman and Goldman Sachs Group Inc. were all listed as directly or indirectly owning, controlling, or holding, with the power to vote, 5 percent or more of the voting securities of Blockbuster.

Accounts Payable

Blockbuster has about $57 million of accounts payable, excluding leases and debts to studios. Its global capital expenses are running at $30 million a year, it said in a court filing. Blockbuster’s weekly payroll for employees is $36.5 million. It expects to pay consultants $200,000 in the next 30 days, and officers, stockholders and directors another $178,000, according to court papers.

The company has hired Weil, Gotshal and Manges as its legal adviser, led by Steve Karotkin, was also was the lead lawyer on General Motors Corp. bankruptcy.

Rothschild Inc. was named Blockbuster’s financial adviser, and Alvarez and Marsal was hired as its restructuring adviser. Lawyers for lenders of the bankruptcy loan are Sidley Austin LLP. Judge Burton Lifland was appointed to handle the case.

The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York.

Posted by Geena Phillips (Member # 3726) on 10-01-2010, 01:58 PM:

I wonder how it will affect this "30-day" thing if Blockbuster goes under.

Posted by Manny Knowles (Member # 1171) on 10-01-2010, 02:03 PM:

If Blockbuster is going out of business, do I still have to return my copy of TWILIGHT ?

Posted by Mike Blakesley (Member # 26) on 10-01-2010, 05:15 PM:

Blockbuster's biggest mistake was probably keeping the name "Blockbuster." When they went into the on-demand business they should have come up with a new name like "MegaPixl" or something like that and disguised themselves as a "new" company, because people always gravitate to the new whizbang thing.

Posted by Kenneth Wuepper (Member # 1174) on 10-05-2010, 06:59 PM:

All of our local Speedway convenience/gas stores have new "BlockBuster" video vending machines outside the stores.

Speedway gives out free coupons for a video from the machine. Otherwise, they are $1 for one night (24 hours).

The machines seem to only take credit cards at this point.

When you put the disc back in it checks you off as returned with the bar code on the box.

Posted by Bobby Henderson (Member # 840) on 10-05-2010, 07:12 PM:

quote: Mike Blakesley
Blockbuster's biggest mistake was probably keeping the name "Blockbuster."

I think there's a lot more value in having a recognizable brand name than changing to some other name -especially if that new brand name is similar to so many others, uninspired or just plain sucks. For example, I think it's a big mistake for the DTS Theatrical spin off company to use the name "DataSat Digital." Blah. It's not easy coming up with a video store brand name that's actually really good. Blockbuster, the blue ticket logo, its lettering, etc. is recognizable.

The real thing Blockbuster absolutely must do is change its business model into something that makes sense and develop an advertising and marketing plan that supports it. Copying Red Box with lots of NCR-operated kiosks isn't going to be enough.

Kiosks have their drawbacks, such as lack of variety. The on-demand Internet streaming stuff sucks if you care at all about video quality. It's akin to heavily compressed SD satellite TV, hardly an equal for even DVD and terribly inferior to Blu-ray. Traditional stores can win on both of those counts if they can price things comparably and have the titles available. Some Hollywood studios are looking to give the traditional stores at least some chance with a 30 day window, but I don't know if that window will be maintained if all the traditional stores just cut their prices to match Red Box.

Posted by Mike Blakesley (Member # 26) on 10-05-2010, 07:26 PM:

quote: Bobby Henderson
Traditional stores can win on both of those counts if they can price things comparably

Well, there you go. That would mean $1 rentals, which isn't going to happen in most places -- there wouldn't be the volume to compete with the kiosks AND download/streaming. You have to remember that about 75% or more of people don't give a crap about quality.

Posted by David Stambaugh (Member # 1102) on 10-05-2010, 07:26 PM:

I've found NetFlix HD streaming to have pretty decent video quality most of the time, at least with some material. I'm watching it on a 54" plasma. Not saying it's as good as Blu-ray but it's better than DVD. I have Comcast for my Internet (using a DOCSIS 3.0 cable modem, channel bonding, and getting more b/w than promised). NetFlix usually connects at its best quality level. By comparison, NetFlix streaming is usually WAY better than the crappy HD video I commented on elsewhere for the new Hawaii 5-0 show. Talk about digital artifacting. I should grab some screenshot examples of how bad it was (but probably won't).

Posted by Manny Knowles (Member # 1171) on 10-06-2010, 09:45 AM:

I love Netflix streaming. For me, it solved the problem of having discs arrive after I'm no longer quite so interested in seeing them.

"How'd THIS get on my list?"

As for DataSat Digital -- yeah, what's up with that? -- sounds like a satellite company. And is it really necessary to add the word "digital" anymore?

Remember when everything was 2000 this or Millennium that?

I just saw ads for HD sunglasses and 3D toothpaste.

Ugh.

Posted by Daniel Schulz (Member # 1881) on 10-13-2010, 04:32 PM:

The DTS cinema division was bought by a company called Datasat Communications. So, Datasat Digital Entertainment it is. [Smile]