DVDs Surge as Back-End TV Market

Oct 31, 2005  •  Post A Comment

By Kevin Brass

Special to TelevisionWeek

The tremendous ongoing sales boom in TV shows released on DVD has begun affecting every aspect of the TV industry, from production to marketing.

Suppliers are rushing to mine the vaults. Actors, writers and producers are demanding a piece of the pie. Networks are developing “DVD-friendly” shows. And the phenomenon has sparked new cooperation between television and home video divisions.

“Honestly, a decade ago I don’t think I could have picked anyone from the home video division out of a lineup,” said Gary Newman, president of 20th Century Fox Television. Now he stays in regular contact with his sister division, involving it at every level, including series pitches.

Fox’s “Prison Break,” an hour-long drama, might not have made the cut without the prospect of a life in the DVD market, Mr. Newman said.

“We used to ask ‘Is this something that will travel to Europe? Will it have syndication value?'” Mr. Newman said. “Now the question we ask is ‘Does this feel like a DVD property?'”

The success this fall of season packages of such series as “24,” “Lost” and “Desperate Housewives”-

released before the start of the new season, once unthinkable-has officially destroyed traditional video release windows.

Any concerns about possible negative impact on the long-term value of a property by releasing it on DVD during its broadcast run were steamrolled by the revenue numbers. The August release of the second season of “The O.C.,” for example, shipped more than 225,000 copies and generated retail revenue of $11 million, according to Home Media Retailing, an industry trade magazine.

After barely generating a blip of revenue in the heyday of VHS, TV programming is the fastest-growing sector in the DVD industry. This year alone consumers will spend more than $3 billion on TV programming on DVD, up from $2.3 billion in 2004, according to Merrill Lynch analyst Jessica Reif Cohen. With few blockbuster theatrical hits on the slate, TV on DVD may account for as much as 25 percent of DVD revenues this year, studio executives say.

For this holiday season there is actual buzz in the home video industry over the expected release of such titles as “SeaQuest DSV,” Steven Spielberg’s splashy underwater series from the early ’90s, and the first season of “The Rockford Files,” not to mention the coveted fourth-season set of “The Brady Bunch.”

The newfound TV money couldn’t come at a better time for the industry. Overall, DVD sales are slowing, showing the first signs of a mature market. With 75 million U.S. households owning at least one DVD player, 2005 might be the first year without a double-digit increase in player sales since the format’s launch in 1997, according to figures compiled by the Digital Entertainment Group, an industry organization.

Even more troubling for home video divisions, sales of theatrical new releases on DVD are flattening, according to industry analyst Tom Adams, president of Adams Media Research. As recently as 2002 television represented only 5 percent of the DVD business; by 2004 it was up to 18 percent, according to Mr. Adams.

Television programming is “a much smaller percentage of units [shipped], but the price is higher” than theatrical releases, Mr. Adams said. While the release of a new movie may command $20, a boxed season set of a top television series can easily fetch $150.

TV product “has really propped up the market quite a bit on the heels of a slow box office period,” said Ted Sarandos, chief content officer for Netflix, an online DVD rental site. TV programming now represents 15 percent of Netflix’s rental business, he said. Shows like the short-lived Comedy Central series “Strangers With Candy” have broken out as hits among customers who may not have heard of the show during its original run. “To them, it’s not an old cult show that aired five years ago; it’s brand-new programming,” Mr. Sarandos said.

From “Freaks and Geeks” to “The Oblongs,” DVD fans have shown a voracious appetite for TV programs that, in some cases, they barely watched on network TV.

“What we didn’t expect is for a show like ‘Sledgehammer’ to really jump out,” said Mark Ward, VP of acquisitions for Anchor Bay Entertainment. The indie supplier also found success with a season package of “Profit,” the Stephen J. Cannell production canceled by Fox after only four episodes aired in 1996. The disc includes four episodes that never aired. “DVD buyers are collectors,” Ward said. “VHS was looked at as a rental market.”

In the VHS era, the only shows that posted significant sales were cult science-fiction classics like “The Twilight Zone” and “Star Trek.” Few consumers were eager to shell out, say, $400 for a 20-tape collection of “The Monkees,” and even fewer were willing to devote the shelf space necessary to maintain their Monkees obsession.

But DVD is a perfect fit for TV programming, allowing multiple episodes to be indexed on one disc, with a much cheaper manufacturing cost. With high-volume runs, a five-disc set can cost as little as $5 to $10 in replication costs. “It doesn’t take much to make it worthwhile to put out there,” said Ralph Tribbey, a former MGM Home Entertainment executive who now publishes the DVD Release Report.

In the early days of DVD the studios approached TV programming with the same attitude of the VHS days, focusing on old science-fiction series and little else. But the meteoric adoption of DVD quickly changed the business.

“Once the market had enough installed base, if you were just partially successful you might sell 20,000 to 30,000 units,” Mr. Tribbey said.

The success of “Family Guy” was a landmark, providing a bright red flare that DVD was more than simply an aftermarket. Various releases of “Family Guy” sold more than 3 million units, according to industry estimates, a key factor in Fox’s decision to revive the long-dead series, which was also finding a new audience on the Cartoon Network.

As the market grew, suppliers quickly learned that DVD buyers are different from earlier video consumers. TV was a low-price impulse buy in the VHS era. But DVD buyers take TV seriously and want to buy complete series sets, not compilations or single episodes. “We found that one person’s ‘best of …’ is not necessarily another’s,” said Steve Feldstein, senior VP of corporate and marketing communications for 20th Century Fox Home Entertainment.

After initially releasing titles in drips, the industry has almost completely shifted toward series packages. In 2004 suppliers released 445 multidisc packages, compared with only 352 single-disc offerings, according to DVD Release Report.

“Late adopters are not like early collectors,” said Kate Winn, VP of sales and marketing for A&E Home Entertainment. “They like the idea of buying a big set to jump-start their collection. They like the idea of a library in a box.”

Like most suppliers, A&E spends a considerable amount of time these days interacting with TV fans, attempting to figure out what they want. For releases of “Kids in the Hall” and “Thunderbirds,” A&E allowed fans to vote online for their favorite episodes to be included on discs. When Fox released the series set of the quickly canceled “Wonderfalls” earlier this year, it staged the announcement on a fan site that had been clamoring for the release of the series. The series package sold more than 25,000 units in stores during the first two weeks, according to industry reports.

To appease the hardcore fans, the new generation of TV DVDs are full of the kinds of extras found on theatrical releases-commentaries, deleted scenes and outtakes. DVDs are now seen as extensions of the series. The DVD of the first season of the American version of “The Office,” released in August, included enough deleted and extended scenes to piece together two new episodes.

Fox is even shooting special scenes for the upcoming DVD editions of “24,” part of a newfound enthusiasm for integrating the series and
video releases.

Some suppliers have learned the hard way that TV buyers are fickle and attentive. Hardcore fans of “The Cosby Show” and “Alf” were outraged when discs were released with only the shortened syndicated versions of each episode. When Universal Studios Home Entertainment released the second season of “Quantum Leap” with different music than that of original airing, fans let them know they weren’t happy. Universal now includes a notice on boxes if the music has changed.

“With the Internet and blog sites, you can’t get away with anything,” Tribbey said.

Trying to determine which series will prompt a wave of obsessive buying has become one of the biggest guessing games in the industry. On TVshowsonDVD.com, the most requested series at the moment are “Beverly Hills 90210” and “JAG.” The third-most requested series of “The Adventures of Brisco County Jr.,” which starred geek icon Bruce Campbell.

With 75 million DVD households, even a show with a tiny cult following can find an audience. A season set of a modest classic series might ship 12,000 to 15,000 units, priced anywhere from $30 to $50, industry executives say.

“It’s not enormously expensive to market these things,” said Arny Schorr, president of S’More Entertainment, which is releasing Wally Cox’s 1952 classic “Mr. Peepers” and “Lotsa Luck,” the short-lived 1973 series starring Dom DeLuise. “These collectors are avid and they talk among themselves. It’s like a virus. It spreads.”

Mr. Schorr doesn’t rely on traditional brick-and-mortar stores, which account for about 60 percent to 65 percent of sales. “The only saturation point is in terms of shelf space [in stores], not the consumer,” Mr. Schorr said.

But there are now almost 3,000 TV releases on the market-including more than 700 in 2005 alone-according to the DVD Release Report. After exhausting season compilations, suppliers are turning to themed packages focusing on a particular story arc or a character’s best episodes to keep franchises alive in stores.

“What’s happening now is they’ve pretty much burned through the premium content and are getting low into the coffers,” said Jerilyn Kessel, an industry analyst.

Releases of current shows may be popular with renters, but they won’t spark the same buying frenzy, she believes. “People are still under the misconception that everybody is buying,” she said.