Video Invasion : B Film Makers Battle A-List for a Place on Shelf

The always tenuous business of arranging financing for films is getting tougher for producer Michael Meltzer, veteran of “The Hidden,” “The Hidden II” and “Dead Heat.” He can no longer count on the direct-to-video market, the traditional safety net of film financing.

“The video stream is a way to get movies made and that stream is dwindling,” said Meltzer, who recently completed “Sometimes They Come Back . . . Again,” an “under-$3 million” sequel for Trimark Pictures that might be slotted for a direct-to-video release.

Even as the major studios break sales records with a new generation of direct-to-video titles, the traditional makers of B films are suffering hard times. By some estimates, sales of the B films that bypass theaters and head straight to video stores have fallen by 50% in the last year.

“If I went out to raise money for a film based on video sales, the checkbook is much smaller these days,” Meltzer said.

In some respects, the direct-to-video industry has been turned head over heels. Major studios, after years of treating direct-to-video like an inferior stepchild, are making big-budget, heavily promoted titles produced specifically for the videocassette market. They have created a whole new genre--the blockbuster direct-to-video title, priced to sell, not rent, tapping into the public’s booming interest in owning movies.

At the same time, the erotic thrillers, action flicks, low-budget horror screamers and other staples of the direct-to-video rental market are being squeezed off shelves by a consolidating retail industry.

Last year Prism Entertainment and Hemdale Entertainment filed for bankruptcy protection, citing, in part, weakness in the video market. Faced with a glut of product, several major suppliers are cutting back on direct-to-video fare.

“It’s a shame,” said Steven Einhorn, president of New Line Home Video, which is grudgingly reducing its direct-to-video slate. “I think we were making good money for retailers and ourselves.”

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Traditionally, direct-to-video titles have been the financial backbone for independent studios, generating almost $1 billion a year. With small marketing budgets and production costs, they offered high profit potential with little risk--a scantily clad woman on the cover and a catchy title practically assured profitable sales.

“In the early days of the video business, everyone made money,” said Trimark Pictures Executive Vice President Tim Swain. “You couldn’t make a lot of mistakes.”

Some said the industry shot the proverbial golden goose--or, more accurately, buried it in an avalanche of cheap action films and tawdry thrillers.

“I think customers are kind of getting sick of them,” said Carmine Capobianco, a former B-movie producer who now owns four stores in Connecticut. “All the titles are blurring together--’Night Eyes,’ ‘Black Eyes,’ ‘Blurry Eyes.’ It’s kind of a joke.”

The problems of the so-called B titles are a sharp contrast to the unprecedented success being enjoyed by the major studios, led by Walt Disney Co. and MCA/Universal, which are taking a completely different approach to the direct-to-video market. Instead of using direct-to-video only for “Oops” pictures, mistake movies that were deemed unworthy of theatrical release, they are producing big-budget titles for video based on their most valuable franchises.

It started in 1994, when Disney produced and released a sequel to the mega-hit “Aladdin” specifically for the video market. Backed by the full weight of the Disney promotional machine, “The Return of Jafar” sold 10 million copies.

“I think across the board that got everybody’s attention, including the non-video people at Disney,” said Kirk Kirkpatrick, vice president of WaxWorks, a Kentucky-based distributor.

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In addition to another sequel to “Aladdin,” Disney has 10 direct-to-video projects in development, including a follow-up to “The Lion King” and its first live-action, direct-to-video title, a sequel to “Honey, I Shrunk the Kids” called “Honey, We Shrunk Ourselves.”

Although Disney executives won’t confirm it, Pixar Studios said talks are underway for a direct-to-video sequel to the current hit “Toy Story.”

MCA/Universal has mined its animated hit “The Land Before Time” for two direct-to-video sequels. The first, released during the year-end holiday season in 1994, sold more than 3 million copies.

This new-found enthusiasm for direct-to-video releases is, in part, a product of the rising costs of theatrical releases. The production and advertising costs for a video title are a fraction of those associated with a theatrical release.

In addition, theaters are already jammed with movies--the major studios released 224 films to theaters in 1995, according to a recent Motion Picture Assn. of America study.

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“We have an aggressive theatrical schedule planned without including sequels,” said Ann Daly, president of Buena Vista Home Video, Disney’s home video arm. “It would have taken years to get animated sequels [to ‘Aladdin’ and ‘The Lion King’] to theaters.”

The Disney and MCA/Universal animated direct-to-video blockbusters are priced for sellthrough, usually less than $20, targeting family shoppers at supermarkets and mass merchants. (Retailers pay about $90 per unit for rental titles.) In

the last two years, the sell through business has developed into a $6-billion market, growing by 15% last year alone.

“There really is a base of consumers to make [direct-to-video sellthrough] a viable business now,” Daly said.

The success of the highly promoted, big-budget, direct-to-video fare contrasts with the troubles in the traditional direct-to-video market.

Dozens of companies are producing B films for video. Showtime, the cable network, recently signed a deal with Paramount Home Video, Republic Entertainment and Hallmark Home Entertainment to distribute a whopping 30 pictures a year to home video, after short stops on cable.

Dozens of companies are producing B films for video at the same time that a wave of consolidation in the retail industry has further intensified the competition for shelf space. Fueled by public stock offerings, Dothan, Ala.-based Movie Gallery, Moovies of Greenville, S.C., and Oregon-based Hollywood Entertainment have been aggressively expanding, gobbling up smaller chains. With fewer chains controlling more stores, there are fewer buyers of direct-to-video products. Most of the big public chains, looking for immediate returns, focus on the quick-renting hits. Some lure customers by guaranteeing the availability of top titles.

As a result, an erotic thriller with a minor star and a catchy title that once would have sold 20,000 units for rental is now lucky to sell 10,000, studio executives said.

“It’s been proven customers want to see the product,” said Jeff Fink, senior vice president of sales for Live Entertainment. “The problem is getting retailers to bring it in.”

Retailers complain that they can’t afford to pay $90 to bring in little-known direct-to-video titles. While suppliers routinely offer multi-buy discounts, they have been reluctant to lower costs, fearing any increase in volume would not make up for the loss of revenue.

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The direct-to-video suppliers are countering with bigger budgets and name actors, trying to compete with the theatrical product. A typical video title now carries a $2-million price tag, a dramatic increase from the days when movies made for less than $1 million routinely hit the shelves.

However, bigger budgets translate to bigger risks. The success stories--like “The Babysitter,” a film from the early career of teen star Alicia Silverstone, which sold 60,000 units for Republic Pictures last year--are becoming more rare.

“In a year, there are going to be significantly less producers of straight-to-video product,” New Line’s Einhorn said. “And those of us who survive will find it a much more profitable, but smaller business.”

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The Sequels Game

Nothing succeeds in direct-to-video like a sequel. The following were listed recently in Video Store Magazine’s list of Top 100 selling direct-to-video titles:

* Leprechaun III

* Puppet Master 5

* Bloodfist 6: Ground Zero

* Witchcraft 7: Judgement Hour

* Children of the Corn III

* Ghoulies 4

* Trancers 5

* Night Eyes III

* Phantasm III

* Relentless 4

* Kickboxer 4

Keys to Success

With a glut of titles on the market, the success of a film in video release depends entirely on the studio’s ability to persuade retailers to put the title on the shelf. These factors may help:

* Theatrical release. Even a small box-office gross is enticing to retailers because of the marketing and visibility that accompanies a run in theaters.

* Name actor. It doesn’t have to be a major star. Brian Bosworth and Shannon Tweed can sell videos.

* Scandal: If you can’t get a big name, settle for name recognition. Last year, Prism marketed a direct-to-video film featuring former O.J. Simpson girlfriend Paula Barbieri, and Live Entertainment released a film starring Hugh Grant’s girlfriend, Elizabeth Hurley, shortly after Grant made headlines for his dalliance with a prostitute.

* Creative packaging. Many studios commonly offer two sets of video box art--a sexy cover and a tamer version for more conservative chains that don’t handle racy fare.

* Sequels: It’s always easier to sell a recognizable title. Last year New Line sold 60,000 units of “Poison Ivy II,” starring former TV star Alyssa Milano.

* Genre: Retailers feel comfortable on familiar ground. Action-adventure and horror are among the perennial favorites.