..Gary Dretzka
..Noah Forrest
..Leonard Klady
..R.J. Matson
..David Poland
..Douglas Pratt
..Ray Pride
..Michael Wilmington

LAS VEGAS -- Four years ago, the Video Software Dealers Association could have held its annual convention in a phone booth, and there still would have been room left over for the Yellow Pages. What once was one of the most exciting and entertaining events of the year had devolved into a mere adjunct to a simultaneous gathering of purveyors of adult video products.

The moms and pops, who, a quarter-century ago, had built the industry from scratch, now were forced to fight for scraps left behind on the negotiating table, where the major studios and giant video chains cut their sweetheart deals. It was a formidable alliance, and many retailers saw little point in gathering each summer in Las Vegas, if all they were going to do was commiserate with each other.

Disney’s gala thank-you banquets were a distant memory, and even the stars of straight-to-video titles no longer could be counted on to show up for autograph sessions. Only Playboy seemed willing to throw the kind of party worth the effort expended on a second, late-afternoon shave and shower.

The long faces of the relative few retailers in attendance belied the fact that their industry’s legs were only getting longer.

In 2001, sales of DVD hardware and software were booming; prices for sell-through titles remained affordable; consumers enjoyed bonus features enough to purchase enhanced versions of titles they already owned; Netflix was still in its infancy; downloading was a time-consuming hassle; and the marketplace still had plenty of room to grow. And, grazing just around the corner was another cash cow ready to be milked: TV-to-DVD.

The VSDA convention of old was on life-support. Two years ago, however, organizers elected to downsize the event … concentrate on the business of making money from video software, rather than promote the sideshow. Distributors abandoned the no-longer-viable exhibition floor of the convention, electing to set up shop upstairs, in hotel suites, where entire floors were transformed into something resembling an open house, crossed with a flea market.

The studios mostly took a pass on the convention, which was just fine for the distributors of niche DVDs and art-house titles. Foot traffic increased -- especially in the wings of the Venetian devoted to adult video -- and retailers were encouraged to think beyond the big-release-of-the-week rut into which the industry had fallen.

The just-completed VSDA extended that formula -- this time at the Bellagio -- by adding a party or two, and offering a decent slate of seminars. After an absence of four years, the major studios also were back in force, albeit in meeting rooms on two of the four floors not entirely accessible to general attendees. The total list of exhibiters topped 200, including 60 first-timers.

For lovers of foreign, independent and documentary titles, the news was very good, indeed. Hundreds of festival entries, which had not been picked up for domestic distribution, were now being made available to the public. Even if only a few of them will show up in our friendly neighborhood video stores, they’ll almost certainly find a home at Netflix, Facets or Movies Unlimited.

Just knowing that these niche movies were out there, somewhere, was a comfort for those of us not waiting with bated breath for the DVD launch of The Wedding Crashers … which, in this era of miniscule release windows, should occur in about two weeks. Adventurous consumers may have to hunt and peck their way through on-line catalogues to find the niche product, but that’s half the fun of being a cineaste.

The only black cloud hanging over the convention was the one puffed up by deep thinkers in the media, who saw single-digit growth in video revenues as something resembling a death knell. Hollywood Cassandras and Wall Street bears seem only too happy to feed the pessimism of a press corps already salivating over data that suggest the movie industry suddenly is headed for the trash heap. Otherwise, what would there be to write about every Monday morning … the progress of Britney’s pregnancy?

In his state-of-the-industry address, VSDA president Crossan R. Andersen tried to allay such fears by pointing out, “Last year, our industry grew by a remarkable 8.5 percent, remarkable especially because it was on top of similar growth for the last couple of years. Sell-through grew by an amazing 15 percent, and consumer spending on packaged home video now exceeds $24 billion a year. …

“Yet what has the attention of the leaders of our industry is that the meteoric growth of DVD sales and rentals has slipped in 2005, as DVD players are brought into the final 20 percent of American homes. Perhaps, only in modern times, when everything moves at the speed of electrons, does an industry worry when its rate of growth slows from an historic pace to merely a rate of growth that other industries would be delighted with.”

Apparently, everyone in the industry -- with the possible exception of the consumers -- has bought into the dubious notion that, someday, very soon, everyone with a PC will elect to skip the middle-man and download their favorite movies directly from the source. Or, they will leap at the opportunity to save a buck or two by joining hands with their local digital pirate.

Here’s a few tips for those industry worry-worts and media pundits: 90 percent of all PC users have neither the technical know-how, nor the desire, to download movies; before downloading will be a feasible option for the masses, more wide-screen, higher-def televisions must be sold … a lot more; the vast majority of DVD enthusiasts would have an easier time locating a heroin dealer, than a video pirate; and, Americans will return to the local multiplex at approximately the same moment that Hollywood publicists and marketing wizards stop treating them like morons.

Compounding this faux misery was a widely publicized statement from Blockbuster chairman and CEO John Antioco, in which he declared, "Overall industry decline and continued poor theatrical performance had a negative impact on the second quarter, and has created uncertainty about the balance of the year.

"[Blockbuster is] taking aggressive actions in the back half of the year to address continued weakness in the rental industry."

Now, what could this possibly mean? That Blockbuster will tighten its inventory to exclude any title that hasn’t grossed $100 million in theatrical release, or doesn’t star someone who either was a Saturday Night Live cast member or a guest host on the show? Will shelf space be further reduced, in order to add more candy, magazine, soda pop and video-game kiosks?

Tuesday, Blockbuster reported a loss of $57.2 million in the second quarter, compared with earnings a year ago frame of $48.6 million. The loss of 22 cents per share was steeper than analyst projections of a loss of 10 cents a share. In addition to the previously mentioned reasons for the poor showing, Antioco cited the company's decision to stop charging late fees at its owned-and-operated stores, even though the policy was a big hit with customers.)

Meanwhile, everybody in the media and industry conveniently forgot that Netflix -- another business that, by now, was supposed to have been devoured by Blockbuster, Amazon and Wal-Mart -- had almost simultaneously predicted a different view of the future.

As reported by the AP on July 27, “(Netflix) revenue for the (second) period totaled $164.5 million, a 37 percent increase from $119.7 million. The sales were just slightly above the average analyst estimate of $163.5 million …

“Emboldened by the second-quarter surprise, Netflix management predicted it will finish this year with a profit of $2.4 million to $11.9 million, a reversal from just three months ago when the company warned it might lose as much as $15 million with Blockbuster hot on its trail.”

So, what is it: feast or famine?

Probably, a little bit of both, and a whole lot of neither.

Any VSDA attendees hoping to be enlightened on the future of high-def DVD probably left disappointed, as well.

“Two high-definition DVD formats are planned for release to the market,” Andersen said. “I suppose no one here fails to recognize that concurrent distribution of more than one format is likely unsustainable. The launch of a single format is unquestionably preferable to a ‘format war’ that could cause consumer confusion and lead to a reluctance to embrace either format.

“I promise you that the consumer media – as the Los Angeles Times has already done – will tell consumers to purchase neither.”

I must have missed that edition of the paper. Or, perhaps, the suggestion was tucked into last week’s blockbuster (no pun intended) news that TV-to-DVD titles are making lots of money for the studios.

That’s the great thing about the Times: you can always depend on it to tell you something you already know.

August 10 , 2005
- Gary Dretzka