Legacy Content

Kenversations: Disney’s Changing Playing Field (Part 2 of 3)
Page 1 of 3

by Ken Pellman (archives)
February 14, 2007
Ken continues his three part series taking a detailed look at Disney's recent history in theme parks, animation and other areas.

Disney’s Changing Playing Field (Part II)

In part one of this set of Kenversations™, I wrote about the changes in the structure of the corporations with which Disney both competes and does business, changes in Disney’s live action film strategy, changes in the animation business. But the last several years have brought plenty more changes we should note.

The cinema, Disney’s longest running place of business, hasn’t been untouched by major change. The rampant growth of multiplexes and mergers left the cinema companies owning thousands of screens, many of which are small enough that they are being rivaled by some home entertainment systems. There was a time when Disney made noise about taking a stand against advertisements played before the feature film, but now that is standard for cinemas as they look for new sources of revenues. As I wrote in part one, cinemas keep only about half of the box office total, and so rely on concessions and now advertising for their revenue.

The cinema chains perceive threats to their established place in the entertainment industry as film studios have been toying with alternatives for distributing their movies. Bob Iger has been one of the executives who have advocated the simultaneous release of feature films in home/personal viewing formats along with the release in the communal cinemas. Some films have already been released this way. If this practice were to catch on, cinemas will be forced to change or die. They have already been trying to thwart pirates who distribute films in home viewing formats while they are still fresh in theaters. IMAX and 3-D versions are one way of trying to draw viewers out of their homes, many of which now have high definition televisions, and keep the communal cinema business alive. Showing outtakes and adding extensions to scenes are DVD-inspired techniques that the studios are using to help out cinemas.

Already faced with the glut of screens and financial difficulties, cinema chains have countered the increased power of merged film studios with consolidations of their own. AMC was the only large North American chain that avoided bankruptcy during in the earlier part of the decade. Instead, it bought other chains that didn’t fare as well - General Cinemas in March of 2002, and it merged with Loews on January 26, 2006. Loews, which had merged with Cineplex Odeon in 1998, had a history going back to 1904 and had been part of MGM. It split from MGM in 1954 after the U.S. Supreme Court decided that a company should be able to control only two out of the three steps in the film industry: production, distribution, and exhibition. This notion now seems quaint given that film studio companies like Time Warner now own cable systems and television channels. Regal Entertainment Group, a majority of which is owned by Philip Anschutz, includes Regal Cinemas and bought up other chains in 1999, and now includes Edwards Theatres, United Artists Theatres, Eastern Federal, and Signature Theaters.

Speaking of home viewing of feature films, there have never been more options. In January 2006, Disney spun off MovieBeam, offering an alternative to cable, satellite, Blockbuster and other rental stores and Netflix for viewing movies at home. (Blockbuster, by the way, was part of Viacom from 1994 to 1999.) Viacom, Sony, NBC Universal, and Time Warner have backed Movielink, a web-based video on demand service. There's also CinemaNow. Plus, telecom companies such as AT&T and Verizon are offering an alternative to cable as well.

In September of 2006, Disney started to sell its feature films on Apple's iTunes after having released "High School the Musical" there in March of 2006, and ABC TV shows there starting in October of 2005. Also in September 2006, Steve Jobs introduced Apple's iTV, a book-sized device that attaches to a television and receives movies and television shows from a home computer. That means you get the programming away from your monitor and to your TV screen… while there is still a difference between the two. More feature film, music, and TV show companies are using services like iTunes and their own websites to distribute their content, and services like YouTube (which Google recently acquired) and MySpace (owned by Fox parent News Corp) to market themselves and distribute their content. AOL and Amazon.com started offering movies online in 2006, and Microsoft has Xbox Live Video. Feature films can also be viewed upon demand from a cable provider, as shown with Disney's recent deal with Comcast.

Of course, you can still outright buy feature films on DVD in numerous online and brick & mortar places (in addition to Blockbuster) such as Wal-Mart, Amazon.com, Borders, Barnes & Noble, Virgin Megastores, and any Wherehouse stores that are still open. Tower used to be included in that list, but the chain was recently sold and liquidated – another sign of the changing times.

Speaking of DVDs, the battle over the next generation of DVDs may have been ended before it really had a chance to get underway. Old folks like me remember the Betamax vs. VHS war in VCRs, which played video tapes. Recently, the battle has been between Blu-ray and HD DVD, and people who’ve already replaced their video cassette or laserdisc collection with a DVD collection are a little leery of having to decide in which of these systems to invest. These DVDs will also, of course, be used to sell you entire seasons of your favorite TV series, and can hold more information than the older generation DVDs. The film studios, as with the old VCR war, were fretting over the choice of supporting one or both formats until the market decided on a victor.

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