How the moguls came to love retail

The Universal Studios ninth-floor conference room offers a spectacular view of the San Fernando Valley. Yet the more remarkable sight is what takes up one entire wall: a 2005 calendar jammed with more than 100 cards, each representing a new DVD release, all vying for a slice of Hollywood’s newfound $21.2-billion windfall.

For years, movie studios expended most of their marketing muscle on a movie’s vital opening weekend at the local multiplex. Now that DVDs account for as much as 60% of show business profits, the more momentous battle is being waged during a film’s first few days on the DVD shelf, a make-or-break week that usually spells the difference between a movie’s profit or loss.

Thanks to such economic and competitive pressure, the timing and promotion of new DVD releases has turned into a sophisticated marketing matchup -- and calendars are but a fraction of the game plan. Thanks to retailers’ high-tech tracking devices, distributors now have almost instantaneous feedback on how well a single title is doing, say, at the Wal-Mart Supercenter in Pascagoula, Miss. What’s more, complex algorithms project an entire week’s retail volume mere minutes after a new title goes on sale.

To spark consumer interest and rise above the clutter, DVD makers have borrowed nearly every page from the theatrical debut playbook, launching new titles with star-packed premiere parties, multimillion-dollar advertising campaigns, extensive consumer research and even press junkets.

“It’s just like theatrical, but there is just much more competition,” Craig Kornblau, president of Universal Studios Home Entertainment, said as he surveyed his sweeping calendar, where nearly every week holds several major releases. “Our job is to take something big, and make it huge.”

Yet Kornblau and his home video peers have precious little time to turn a box office blockbuster into an even larger DVD sensation. While theater owners might give a movie several weeks to generate audience interest, video retailers tend to grant DVDs mere days to prove themselves.

The reason has more to do with toasters and diapers than the movies themselves.

“The number of titles coming into the market is growing faster than the market,” said Stephen Einhorn, president of New Line Home Entertainment. “If you miss the first week, you’ve got a problem.”

Just as movie theater owners can make nearly half their income on popcorn and other concessions, mass merchants exploit popular DVDs to drive traffic to other (and more profitable) parts of their stores. Kornblau says that although shoppers in mass-merchant stores tend to spend about $80 at the checkout when they buy a DVD, the shopping basket for non-DVD buyers totals half of that.

“That’s why DVDs are often sold below [wholesale] cost,” says Tom Lesinski, president of worldwide home entertainment at Paramount. “The whole thing is about getting people through the turnstiles.”

Consequently, a DVD that isn’t flying off the shelf will lose its prominent store display, ending up in a dark corner with so many exercise tapes. “Instead of trying to hold theaters, we are trying to hold shelf space,” explained David Bishop, president of MGM’s Home Entertainment Group.The opening week stress springs largely from a lopsided retail environment.

Home video executives estimate that just three giant mass merchants -- Wal-Mart, Target and Best Buy -- account for more than half of all DVDs sold. As much as 60% of a new title’s total sales come in the first six days (up from about 30% three years ago), with some 20% of the overall volume often arriving on Tuesday, the first day new releases typically are available. A hit movie, on the other hand, collects about a third of its overall gross in its first weekend in theaters.

Moviegoers, though, are deciding only which movie they want to see and generally are picking among only two or three new national releases on a given weekend. When they steer their shopping carts down the DVD aisle, however, home video shoppers are choosing in an average week from among as many as half a dozen new movie titles, scores of repackaged TV series, and countless reissues of older films.

“You know when there’s a new big release on a Tuesday, because you can’t get a parking spot” at the store, said Peter Staddon, executive vice president of marketing for Fox Home Entertainment.

On a recent Tuesday at the Target in Pasadena, the store’s strategic end-of-the-aisle “new releases” section included the movies “Sideways,” “Spanglish,” “After the Sunset” and “Elektra”; television series “The West Wing,” “The Greatest American Hero,” “Queer as Folk,” “Murder, She Wrote,” “The Pretender,” “Doogie Howser, M.D.,” “Pimp My Ride,” “Kojak,” “The Hardy Boys/Nancy Drew Mysteries,” “Batman and Robin” and “The Flintstones”; and direct-to-video titles “The New Scooby-Doo Movie” and “Hot Wheels: Acceleracers Ignition.”

Last year, more than 10,000 DVDs were released, according to the DVD Release Report. With such a surfeit of options fighting for attention, slower-selling DVDs quickly lose prominent store displays to what Staddon calls “the wall of death,” where only the spines of hundreds of DVDs are exposed like library books.

“Store display is one of the most critical issues,” Staddon said.

Adds MGM’s Bishop: “Fifty percent of the purchases are impulse-based. That’s where the in-store positioning is really important.”

A HEALTHY SHELF LIFE

DVD companies try to play every card they have to keep their movies front and center during and after the critical first week, even if sales are flagging.DreamWorks says it won’t hesitate to use some friendly persuasion to keep its “Father of the Pride” prominently displayed after the 14 episodes of the failed animated TV series land in stores June 7. After all, DreamWorks’ “Shrek 2” sold 40 million DVDs worldwide, and its next animated movie, “Madagascar,” should arrive on DVD later this year.

“Retail is our theater,” said Kelly Avery, the head of DreamWorks Home Entertainment.

But given such steep competition, how do you even establish yourself in that first week?

Although almost every Tuesday on Kornblau’s wall-sized calendar was crowded, few looked as potentially deadly as this Tuesday.

Universal had long planned to release its record-breaking comedy “Meet the Fockers” on DVD this Tuesday. But Universal’s research indicated that at one point no fewer than four other big DVDs might also land in stores that same day: “National Treasure,” “Ocean’s Twelve,” “Blade: Trinity” and “Lemony Snicket’s A Series of Unfortunate Events.”

It would seem that no right-thinking person would throw a high-profile title like “Meet the Fockers” into such a destruction derby, especially a movie sharing similar demographic appeal with the other four films.

Yet Kornblau refused to move “Meet the Fockers” to safer ground. “My staff told me we had to move, but I said, ‘Wait, wait. The others are going to move. We have the big gun. They have to run,’ ” Kornblau says.

Sure enough, “National Treasure” is now set for May 3, “Lemony Snicket” and “Blade” for April 26, and “Ocean’s 12” was released Tuesday.

“The date is probably as critical as anything else,” says Paramount’s Lesinski.

Once a title goes on sale, the almost real-time sales data helps DVD companies realize whether they need to crank up duplication and shipping. By 8 a.m. on the first day that “Saw” went on sale, Lions Gate Entertainment knew it would have to overnight thousands of discs to meet demand.

“We have to be a lot more sophisticated than we were even two years ago,” says Steve Beeks, Lions Gate’s president.

THE DVD DIFFERENCE

Home video executives for years have sat in on studio greenlight meetings, where new productions are authorized, offering their estimates of a movie’s likely DVD sales. Their opinions quite often can decide whether a movie is made. .

But now that a DVD release date has taken on such consequence, a studio sometimes will pick a time for a film’s theatrical debut by working backward from its projected DVD launch, which often follows the theatrical debut by three months.

“In many cases, the theatrical release date is adjusted because of the DVD release date,” Beeks says.

At the same time, studios will huddle with DVD retailers a year before a movie is released theatrically, showing Wal-Mart and its brethren screenplays, artwork and even early footage to get them excited about carrying a title. “We are pre-selling the retailer,” MGM’s Bishop says. Adds DreamWorks’ Avery: “We want to make sure [a title] can fit into their agenda.”

Home video executives don’t enjoy the fawning media and industry attention of their movie management peers, and are considered more packaged goods sellers than creative moguls. But they have their pride, and darkly joke that a film’s theatrical release is just an extended coming-attractions trailer for its DVD. It is not meant entirely in jest. Domestic home video revenues (counting DVD and videocassette sales and rental income) outstrip domestic theatrical receipts by more than a factor of two.

Without a theatrical debut and the exposure it provides, of course, new movies would hardly sell millions of DVD copies. The theatrical release offers DVD distributors another key benefit: enormous market research about what kinds of people went to see a specific movie, and why. It’s essential information, because about half of all DVD buyers didn’t see the film they are buying while it played in theaters.

“Our challenge is to bring [the movie] back into the culture, to make it an event,” Kornblau says. “If you do it right, the payback is huge.”

RIGHTING WRONGS

DVD distributors frequently sit in on the postmortem of a theatrical release, where studio executives analyze a movie’s performance. By examining what did and didn’t work, the DVD team can overhaul the marketing campaign.

When Universal’s “The Chronicles of Riddick” hit theaters last June, the studio’s marketing department pushed the film’s ensemble, shying away from overemphasizing star Vin Diesel, who the studio feared was losing his allure. The movie promptly tanked, so the DVD’s marketing focused more heavily on Diesel. The result: “Riddick” immediately sold a robust 4 million DVDs, about what would be expected from a movie that grossed $100 million in domestic theaters, not the $57 million “Riddick” took in.

A study of “Meet the Fockers” ticket buyers demonstrated that the film played unusually well with Latino moviegoers, so Universal crafted an entirely separate “Fockers” DVD campaign targeting that audience.

Another beneficial DVD marketing tactic is called “drafting,” where a studio tries to profit by piggybacking a DVD title on a new theatrical release, even when the new film in theaters is released by another studio.

Two weeks before Fox’s next “Star Wars” release lands in theaters on May 19, MGM will be out with a DVD of the spoof “Spaceballs.” To draft off the popularity of Academy Awards nominations for Miramax’s “The Aviator” this year, MGM put out a special edition of “Aviator” director Martin Scorsese’s “Raging Bull,” while Universal reissued Howard Hughes’ “Hell’s Angels,” which figures prominently in the film. “Raging Bull,” which normally sells 25,000 copies a year, sold 250,000 copies.

Distributors also will tie a new DVD to a particular holiday. New Line released the tear-jerker “The Notebook” around Valentine’s Day. To help ring in Father’s Day, Universal will rerelease “Casino,” because in the strange world of DVD marketing, research shows that nothing says “I love you, Dad” more than mob torture.

John Horn can be contacted at Calendar.letters@latimes.com.