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Home Video Execs Discuss ‘Next-Generation’ Media At CEDIA

9/23/2005 12:16:00 PM Eastern

Indianapolis — Right before the beginning of CEDIA Expo earlier this month, executives from three major movie studios — Sony Pictures Home Entertainment, Buena Vista Home Entertainment and 20th Century Fox Home Entertainment — all agreed to participate in a panel here called "Direct From Hollywood — Next Generation Media."

At the outset, the panel’s moderator, Paul Gluckman, managing editor of Consumer Electronics Daily, reminded attendees that each studio is in the Blu-ray camp and that the event should not be considered an endorsement of that format over rival HD DVD.

For the most part, the three studio executives — Adrian Alperovich, executive VP/international of Sony; Patrick Fitzgerald, executive VP of sales, distribution and trade marketing for Buena Vista; and Peter Staddon, marketing VP of Fox Home Entertainment — successfully avoided most appearances of cheerleading for their format of choice, Blu-ray.

Here are a few of the exchanges between the executives during the panel:

What do you want to tell the CEDIA audience about how you operate and what you do?

Alperovich: In our day-to-day roles we think about the products themselves, talk to device manufacturers and think about how consumers handle and interact with our content. People at this show are important to figuring out the future ways consumers will set up their homes and how devices will talk with each other.

Staddon: We want to embrace new technology, looking at home networking. We want to understand the new technologies available and embrace it as a business model and grow the business.

Fitzgerald: We want to understand how consumers use our content, how early adopters use it too. We need to learn and take [the business] to a high level so [early adopters] can enjoy it and take it to the mass market too.

What are the differences between the music and film industries?

Alperovich: We have discussed [HDTV] for years. The music industry as a whole did not have enough time to react to new technologies and change the way they operate. The way they release product is different than film, namely one worldwide day. We have a windowed product distribution worldwide. What the time has afforded is the ability to look forward and see the technologies and see to be ahead of those uses.

Staddon: I thank the music industry for showing us how to embrace new technology. There are real changes in the works, not just with new [packaged] media for HDTV, but portable applications and Web-based streaming of content. We have to bring product in to meet consumer demand … [and] we have benefited from the music industry’s experience.

Fitzgerald: From the music industry we have learned that there is a whole new way of delivering entertainment. I like a physical CD ... but the crystal ball is our teenager kids. Greater bandwidth is coming, and [teenagers] want it quicker and want it their way. In the future, one-to-one marketing relationships will be the key.

Is Hollywood as "technophobic’’ as you are perceived?

Staddon: We have to work out content protection with no revenue stream coming back to the studios. We need return on investment and we are getting closer. We are not technophobes, but we are "economicphobes." We are looking on how to make money with these new technologies. At the end of the day our content cannot be pirated.

Fitzgerald: We want to embrace new formats, but home entertainment revenue is key for us. We have the ability to do movies budgeted at hundreds of billions of dollars. If we can’t figure out a way to sell movies and TV shows safely, we can’t produce blockbusters like that. This is the golden age of Hollywood, but we have to look at ways to combat piracy, and other ways of bringing content to market.

Alperovich: Home video is the largest market we have, but better protection is needed to have connected growth in other areas. Electronic distribution is coming and our content has to live in that world, but in a protected way.

What are the prospects for mainstream HD packaged media and other forms of content distribution?

Fitzgerald: In the current rental market downloads are a viable option. But what we have seen is that consumers do want a physical product as a choice. That gives them the opportunity to view it in the car, around the home. Electronic distribution is viable and everyone is exploring it. Eventually it will come.

Staddon: Electronic distribution was going to kill DVD during the past three years, but DVD has taken a good step beyond just the movie. It provides background information and enhanced the experience.

Alperovich: Packaged media will be the heart of the HDTV system, like DVD is the heart of [today’s] home theater. To power new, better systems packaged media [for HDTV] will be the product of choice.

Fitzgerald: High-definition video and audio are great. But it has to be better than that. Interactivity is important. Video games are a good example, since you can play them anywhere you want and customize the game. We say this has to be part of the solution. DVD resonated because it’s so much better than VHS. Same is true between a new, next-generation format and DVD. It can’t just be a bump in the road.

How do you provide content protection yet allow consumers to use your content in unconventional ways?

Fitzgerald: How does the consumer want to use packaged goods? If they want to spread it around the house, that’s fine. Make copies for 10 friends? No, we have a problem with that. Consumers should be able to utilize content in and around their home, but not give it away to other people.

Staddon: Consumers must be able to use our content without letting the genie get out of the bottle. If it does the overall market declines, the studios’ ability to make movies declines and that is an ugly scenario.

Alperovich: We have acknowledged that we have to come up with a solution that is user friendly. We have to allow devices to talk and share content, which is very complicated. Interoperability is the key.

How can you compare DVD’s initial rollout and success and a next-generation rollout?

Staddon: There is a concern that consumers will stop buying DVD when next-generation media rolls out. The DVD/VHS format situation was handled very well. They were marketed on top of one another until DVD became ubiquitous and there was a focus on DVD over VHS. I would like to see the same thing happen with next-generation media and DVD.

Fitzgerald: DVD’s rollout was slow with niche product early one. Then the business model changed and [studios] embraced the format. Next-generation media will get the early adopters and be adopted by mass retailers a lot quicker than before. There will be a more solid front on content than [with DVD]. There will be differences you will see. If done right, adoption rates will be better for next-generation than DVD.

Alperovich: This should be similar to the beginning of DVD — only difference is that the issue of the business model. With DVD it changed from rental to sell-through. That won’t change this time, and there will be a lot of cooperation between hardware and software providers. Consumers have shown they will adapt to new technology quicker. With government pushing HDTV, next-generation media is really competing against broadcasts. Packaged media is the best way to show the best elements of [HD] content. We wish that Blu-ray was introduced last year, or the year before.

Fitzgerald: Your customers are hungry for this and so is the mass market. We have to tell the news about the great product, from a consumer-centric basis ... the best [HD] experience possible.

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