Monday, December 22, 2008

BCI Eclipse and the Inevitable.

"Be water my friend."

Formerly known as Brentwood, the Navarre-owned BCI label is being shut down as, according to CEO Cary Deacon, its “operations have been unprofitable for the past two years.” There’s a lot of news out there already about this story, so I will not go into much of a rehashing of the general history regarding this development and simply dive right in to the commentary.

For someone who has been in this business as long as I have, to look at “unprofitable operations” for two years begs the question of just what the hell kind of operations were they running to begin with. The answer is an obvious extrapolation we can make from the outcome, they were home media operations and nothing else.

Marital arts libraries in particular tend to be full of titles that, even when bundled together in groups of up to 10 for the price of one, just don’t sell. Also, if you are getting licenses from Toby Russell there are all kinds of other things you may want to worry about (the guy George Tan was working with before Toby, went and got himself cut in half for playing musical licenses with a movie made by a certain group of film aficionados called the Triads).

Moving back to the point at hand, although this may only be compared to the fall of Geneon in America in a bit of an abstract way, the final realization that playing follow the leader with a blind person in front has brought you to a “cut your losses” moment, falls into that general category of business shenanigans. This was a case of a Hollywood mentality being applies to a New York business model, and that’s always a recipe for companies following suit of some “ground breaking” market freeze-frame, without any model which will guarantee continued profits via contingency if the primary goal proves unsustainable. Has the same happened with anime, yes. Will the results be the same… not really. Modern martial arts productions are not really going to slow down. They have a big domestic market (an increasingly media-friendly China), cost very little to produce, and do not depend on international licensing for putting gas in the tank.

The demise of this entity is yet another example of opportunity lost when it comes to older niche material which has exhausted a single product lifecycle (DVD/Home media in this case), but exists in a large library owned by a company with some substantial resources. Unlike many other products, entertainment media need not simply become a drag on resources once it has had its turn as a home media product which fails to cover its own costs (especially this classic martial arts stuff)… There is light at the end of that tunnel and that is where having the right licenses comes in. As I am currently actually involved in such project, I won’t be going into detail of what should be done, because that concept is worth money and is proprietary (to me). Sufficed to say that it doesn’t take a vast array of licenses to produce a vast array of commercially viable material. If you want me to come in and save your assets and make them profitable now without having to lay out much new capital, then let me know, there’s a little piece of paper in the Library of Congress that says I own the way to do it.

"Running water never grows stale, so keep on flowing."
-Bruce Lee


Steve Harrison said...

Well, I go into this some at my blog. I contend that the problem wasn't the product itself (niche, boutique titles) so much as the lack of B & M stores carrying them, combined with lackluster advertising support.

Consider: BCI is losing money for about two years? Just about the amount of time since the closing of Musicland Group's stores and Tower, plus the downsizing of the DVD area that Best Buy has been doing.

Online stores just don't do the job for niche titles, because people don't know they're out, and the solicitations are poorly composed, and the minimum wage folks doing the data entry can't see past just typing what's on the page and nobody oversees to properly 'flag' titles for easy searching.

Want a good example of how this works? Go to Best Buys website, do a search for 'The Ultimate Warrior' (a '70s Dystopia film from Warner Bros)...unless something has gotten fixed, you won't find it.

Yet it was released as a double feature, a BEST BUYS EXCLUSIVE, coupled with 'Battle Beneath the Earth' (and both barebones but nicely done). If you do a search for Sci-fi double feature you will find it, along with the other exclusive reelases.

Now, how am I, a general average person, supposed to know that?

Then there was the amusement of BB listing Mediablaster's release of Latitude Zero under the JAPANESE title, which I shake my head and wonder how they did that because I'm pretty sure MB didn't even mention it in the solicitations...

it's just mindblowing sometimes.

The Angry Otaku said...

It was seeing the post you made that was kind of my inspiration to do this one. I didn’t want to come off as adversarial but I wanted to through my hat into the ring regarding the demise of a home media label that had a 200+ library of classic martial arts titles ...something that still gives me flashbacks to this day.

Not getting facings in B & M accounts (or simply the lack of those accounts like the late Musicland and Tower) can be a bit of a blessing for niche titles, especially if those facings are going to depend on advertising for sell-through. But if those two were actually the make it or break it accounts keeping things in the black, then that was a recipe for inevitable disaster anyway, given where the home media business was so obviously headed at the time. There’s also the question of diverting advertising on the solicitation of accounts which usually exhausts any marketing dollars set aside in addition to the actual mastering and replication budget.

A big order from a company like Best Buy or Hastings is not a good thing unless there’s high sell though because there is always that damaclesian shadow of serious returns until the bills are paid 90 days after the street date (in a perfect world at least). That’s a lot of manufacturing and shipping for an account that may not give a crap about your SKU and only unpack a few units. Back in the days of the DVD retail explosion, classic martial arts got a lot of real estate on shelves in all these places and faced less competition from online retailers and even then, labels ended up not being able to recoup the fixed costs of enough releases and cover what it takes to make and distribute a commercial DVD. The SRPs that the market demands no more than $14.99 and more often $9.99, make these titles almost unviable as an exclusive home-media product. Without revenue coming from the same license from another source, going with DVD alone is a losing proposition.

The fact is that in dealing with classic martial arts, unless the title has some serious star power behind it which has to resonate not only with the consumer but with the retailer as well (there aren’t many of those), a B & M account order is likely to be a drag on resources and they can send enough of the ordered product back to put the entire exercise into the red. The post-distribution net that a label can expect to make on the barebonesiest of DVD releases with an SRP of $10 is low enough to have made DVDs a loss-leader in most of the categories that weren’t strong in the later VHS days (and when you only have one product and it’s a loss-leader, you’re more or less screwed). The titles like Eclipse was releasing usually get a total I.O. (initial order) of less than 10K units and quite often less than 5K (there were a few that would get more, and one or two that went over 100k, but they just support the costs of the titles that don’t break even, and once a library is out of moneymakers, it’s over. Most indy labels have had to adopt a policy of not picking up anything that they think they can’t move 20k units of, and non-indy labels… well who gives a crap.

I’d argue that online stores help niche titles as much as they can in this Armageddon which is now upon the home media world. The core consumer/habitual buyer has a tendency to seek out a title they want (they also have a tendency to already own an import). Casual buyers and the ever mysterious impulse buy just don’t exist in enough numbers, so no matter how many facings in B&M retailers the sales just won’t happen without some major marketing to create more demand (and no matter how much you spend, there’s always the possibility of epic marketing fail).

As for the lack of a wiki-like matrix for classic titles like in the “Ultimate Warrior” Best Buy example, it’s a serious gamble to the chance that a consumer who is not already intently looking for that title is suddenly going to pick it up when they see it on a retail shelf next to so many other DVDs and a set of made in China headphones, batteries, a digital camera, or the food court down at the other end of the mall. You lose the gamble, and the returns will eat your earnings faster than radioactive hyper termites chasing down Pinocchio.

As for the Media Blasters title in BB, what was the SRP? A low one could indicate a liquidation… or maybe it came through Ingram.

Steve Harrison said...

Good points all, and you've gotten me quite interested, because there are aspects I admit I was clueless about.

And I can hear the frustration in your 'voice' because you want all these titles to have their chance, and the market just isn't allowing it.

I don't know much at all about the wide world of martial arts pics. I'm probably like most of the 'average' shoppers, who know a couple of major titles, maybe a handful of minor because they're namechecked by someone or some other movie, and that's about it. You know, the usual suspects. Five Fingers of Death, 36th Chamber, Five Deadly Venoms, stuff like that.

Yes, selling to B&M is a risk due to the returns. It doesn't help when Musicland Group did their little trick with ordering 5000 pieces, returning 4000 (or whatever the return allowance was) for credit, then ordering the SAME titles again, thus keeping deep catalog on hand for basically free.

Flipside is, there WERE sales, and the loss of the 2500 stores means that right off the bat an average 5000 units per release are no longer being ordered AT ALL, and internet stores haven't taken up the slack, AFAIK.

You are 100% correct on the MSRP issue. Price, esp. in Martial Arts films was a BIG issue, and so many of the customers I used to serve would not buy a title if it was over $14.99, and THAT was a teeth-gritting agony for them. They wanted lots of discs sub-$10.

Of course, part of it was that odd period when some companies decided that they wanted to exploit the 'urban' demographic, and they rather shamelessly calculated that hey, those guys are all blasting up before watching these anyway, so let's just crap the film on the disc and push it out there.

The example of Best Buy's handling of 'the Ultimate Warrior' was meant to show how a good idea can be utterly sabotaged by inept handling. BB wanted some exclusive titles to drive traffic, and Warner Bros has a large catalog of 'cultish' films with no place to really sell them and make them profitable. So the double feature thing was put together, and as I understand it, it was a one shot deal. Warners pressed x number of discs and sold them to BB as non-returnable. And there was a good bit of excitement out in the Sci-Fi world over the titles being released. there was good 'fill' in the facing, I would say an average of 6 copies per store which, I think you'll agree, is KILLER fill for a uber-niche catalog title.

but again, if you didn't know to look for the 'double feature' name when doing a search of the BB website, you'd think the thing was canceled or vaporware.

As to Latitude Zero, I assume it came thru their own (ex-musicland group'S) warehouse chain, it had the standard (former Suncoast) style tagging, and anything they get dropshipped from Ingram or other jobbers tends to just be stickergun priced. That wouldn't explain why on the BB website it wasn't listed as Latitude Zero but rather the Japanese name (which slips my mind at the moment and I'm too lazy to go grab the disc).

I'm one of those crazy people that thinks the way for indy video stores to fight the big box stores is by stocking heavy on deep catalog and daring to carry more than just new big releases, evergreens and rotating seasonal prepack dumps.

and I go on too much. :)

Anonymous said...

(I followed over here from Steve's BCI post on LiveJournal)

I don't come from a retail background and can't seem to find definitions for what appear to be common terms in home video retail. Some of the terms I can kinda come up with an idea of the meaning from context. Others, I am having a problem with. I guess only one term I had trouble with, and that would be "evergreens". If I were to guess, it would mean fairly popular titles that sell regularly.

All in all, it is a fairly fascinating thing, and also sad to see BCI go. I bought a number of their Filmation holdings more than anything else. I really hope that someone in charge of other companies figure out what is going on before they all tumble.