Posts tagged ‘cinemanow’

Best Buy is Exiting the Entertainment Business

As if I need to continue harping on the fact that entertainment retailers are dying, but get this: Best Buy is exiting the entertainment business.

Best Buy announced their plans to abandon their direct relationship with entertainment and has begun taking actions such as closing its entertainment distribution center in Indiana.  The spin doctors at Best Buy have done a nice job in downplaying this story, because the implications are huge.

What it means

Best Buy is handing over their entertainment business to a third-party provider that will essentially sublease the space in Best Buy stores. Sure, you can still buy CDs, DVDs and BDs.  But, a company called Anderson Merchandisers will run the CD/DVD/BD categories.

BIG news

Here’s why:

  • Best Buy was the only traditional US retailer that was involved in UltraViolet.   Now that Best Buy has ditched entertainment, I see no reason why they would maintain membership.  What’s the point of signing up for membership fees, operational costs and the list of issues that I have spoken of here?  Ultraviolet will lose the only US retailer that has a store presence to explain to customers what UltraViolet is all about.  That will be a big blow.
  • Anderson Merchandisers….They do the same thing for Wal-Mart stores!  Isn’t that rich.  So now Best Buy has not only left the business, but they have given it away to their mortal enemy.
  • With Best Buy out of the picture, the studios and labels have one less player in the mix to cut deals and use as leverage in negotiations with other companies.  I’d hate to be in a sales role for a studio or label.  Just think of the terms that Anderson/Wal-Mart will be able to extract.  That makes my shoulders tense up just thinking about it.
  • Napster and CinemaNow have an uncertain future. These are fairly recent additions and represent Best Buy’s efforts to do something in the digital space.  With Best Buy leaving entertainment, I’m not sure why they would continue running these businesses.
  • Job loss at headquarters.  In addition to the 301 jobs lost at the distribution center, many people will be impacted at HQ.  I bet the total number of people is close to 400. Ouch.  To date, some high profile entertainment leadership has left, and I am sure more are considering.

Trouble ahead

I am very surprised that nobody has talked about the implications.  Best Buy’s move demonstrates that entertainment retailers continue to struggle, while savvy companies downplay the seriousness of it all.  But let the entertainment industry beware: there is no foreseeable calm in these troubled waters.


Shh..they might say something

To begin, here’s a thought starter:  What do the following companies have in common?

Netflix, AppleTV, GoogleTV, Hulu, TV Everywhere, Boxee, Sezmi, Amazon On Demand, YouTube, Vimeo, Veoh, CinemaNow, Roku, Vudu , Samsung, Yahoo! ConnectedTV, Qriocity, xBox, Playstation, Tivo, Wii, YouView, Vizio

I’m sure you came up with a list of a dozen or so thoughts – here are a few obvious ones: each of these companies are trying to create killer video services; each of these companies realize that the living room is currently the best place to reach video consumers; each are trying to “win the living room.”  But let’s push these to the side for the moment, and consider that the commonality is each of these companies is creating significant noise in the marketplace as they compete for the attention of the consumer.

World class noisemakers

Apple’s efforts at making noise are world class – besides the hoopla that swirls prior to an event, the press revivals are devotee opportunities to rush to the Apple altar to commune in what’s new.  But this cultish following has not come cheaply – rumors are that in the early days of iPod and iTunes Apple spent close to $1 billion in marketing.  There is no question that its devices are cool and sexy and simple, but let’s not underestimate the role that creating noise has played in Apple’s success.

Another example to create noise came when Samsung announced that they will spend $70 million in marketing the Samsung Apps that will bring content services to living rooms around the world.  Another video consortium called YouView in the UK will be spending nearly $50 million market their service.  Microsoft, Google, Sony and many others, have massive noise making engines to compete for consumers’ attention.  Smaller companies like Sezmi are creating partnerships with the likes of Amazon to create even more noise in the market.

Ultraviolet and the problem of making noise

So I was at a holiday party the other day, and I conducted a clandestine focus group of my friends.  I asked any of them if they had heard of UV, and besides getting the expected snickering about the 2006 movie as well as the sun’s harmful rays, none guessed correctly about Ultraviolet.  This is clearly a noise problem.

After being around for over 2 years, UV has not made a chirp in consumer’s minds.  For a group of such big companies who have been working hard, that seems like a problem to me.  How will UV reach out and make some noise?  I personally think it comes down to a whole lot of money to buy the hearts and minds of consumers.  And it remains to be seen if this consortium can pull off reaching into the pockets of its members to pay to make some revolutionary noise.


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