Blast Off, meet Big Brother

Blast Off Video store was a small I business I opened in 1997. With some cash, around 500 movies, and partner Sam McAbee, I opened the store in Chicago. Over time we grew the store to over 3,000 titles, we were featured in newspapers and on television, we were voted 'Best Video Store in Chicago' by the readers of New City Magazine, and we were turning a tidy profit.

In hindsight, our business strategy was PRODUCT FIRST. Our message to the public was WE CARRY THE STUFF YOU CAN'T FIND ANYWHERE ELSE. I say in hindsight because we were really flying by the seat of our pants. It's only with the benefit of time, experience, and education that I can start to see these patterns in how the business operated. Sam and I focused on getting the weirdest, rarest, most esoteric, best, most intriguing films we could find. We weren't customer-centric, for sure. Our collection was solely a reflection of our tastes. What this narrow focus did allow, though, was the formation of an identity. Customers knew we were the place to find random Japanese game-shows with no subtitles, a Turkish version of Star Wars, and the complete works of Fassbinder, all under one roof. We had the cool stuff and people who came into the store quickly found out.

Trouble started when another video store opened up.

Big Brother Video was started by serial-entrepreneur Jason Mojica. Before opening up Big Brother, Jason had established a coffee shop called Jinx in the hip Wicker Park neighborhood. Jinx wasn't anything special, but it was always packed with hipsters. Kids were always hanging out in the shop, out in front of the shop, in the apartment above the shop, working in the shop, and walking to and from the shop. Jinx had a great logo - a black cat with the word Jinx in a cool font. Visitors were greeted by cool music and decent coffee. I liked it. Jason was good at branding.

He certainly brought his branding skills to Big Brother Video. Influenced by our store (I know because Jason came in and asked questions on several occasions), Jason opened up a video rental store specializing in cool movies. He enlisted the help of Rob Lowe, a local musician and socialite (and a close friend of mine to this day). They got a cool logo for the store - a two-tone silk-screened version of the big head from the BIG BROTHER IS WATCHING YOU poster. Before the grand opening day, the Big Brother crew papered the Wicker Park neighborhood with flyers offering free rentals. Soon after the store opened it became the hang out for hipsters.

I decided to close Blast Off about a year after Big Brother opened. We were doing fine financially, I was just ready to move on. Before we closed, though, Big Brother won a people's choice award for best video store in Chicago.

It was a hard lesson to learn. I don't think Big Brother ever had more than 1,000 titles, and it was mostly 80s teen-dramady films. But in the end, Big Brother had won the hearts and the minds of the people. The public perception became that Big Brother was the cool place to find cool movies. My hat is off to Mr. Mojica and to Mr. Lowe.

I feel pretty confident that Blast Off had a better collection of hard to find, rare, and esoteric film than just about anybody Chicago. I feel confident that we had a larger market share and revenues than our friends at Big Brother. But where Big Brother managed to make a serious dent, though, was in brand awareness and public perception. With all due respect to Big Brother and their owners, I feel Blast Off had the superior product but it didn't matter - their branding was just awesome.

This all speaks to the power of marketing and branding. As important as your product is, your branding is equally important. Every aspect of your product, operations, and message should be in sync, reinforcing one other. This is how the little guys compete with and possibly topple the big boys. It happened to me with Big Brother. It has allowed Apple to compete with Microsoft for all these years. Little Miss Sunshine, Toyota Scion, Pabst Blue Ribbon - all have scrapped their way to success in competitive markets through powerful and bold marketing.

Marketing in the age of plenty

Per David Eun, Google's VP of Content Partnerships, “An iPod can hold roughly 10,000 songs. Increase the storage capacity every 13 years, something the size of an iPod could store one year of video in another few years. By 2015, you could store all the music ever produced. By 2019, you could 85 years of video - a lifetime’s worth of video. By 2020, the same sized device could store all the content ever created. I’m not saying it’s going to happen, but it should think about the way we think about our businesses. It’s made the Long Tail viable - the theory is that our culture is shifting away from small number of hits. As costs fall, less need to lump consumers into one size fits all. Narrowly targeted goods can be as successful as mainstream fare. Because there’s no constraints on shelf space, you can get a lot of singles and doubles instead of just a few home runs. There will continue to be room for home runs, To not address the long tail is to miss a huge opportunity.”

What role will marketing play in this world of filter and recommendations and algorithms making the matches for users?

Well for one, the digital shelf space definitely has end-caps: the front page. According to the Wall Street journal,

Apple has jettisoned some of the conventions of traditional music retailing -- notably, the practice of selling prime promotional spots to recording companies willing to pay for better visibility for their acts. But behind the scenes there's plenty of horse-trading going on that influences which songs are seen and purchased by iTunes customers.

Apple -- now one of the largest sellers of music in the U.S. -- offers home-page placement in exchange for things such as exclusive access to new songs, special discount pricing or additional material such as interviews with stars. Most other big retailers, digital and physical, also seek exclusive offerings, but Apple is especially aggressive and has outsize clout when it comes to the slightly out-of-mainstream music it often emphasizes.

Acording to Justin Sinkovich, New Media Manager at Touch and Go records, "Placement on the homepage is a huge, huge deal. It means the difference between charting and not charting." Mr. Sinkovich says he fights hard to get Touch and Go artists on the homepage of any site that is digitally distributing Touch and Go material. He believes good placement is even more important in the digital world because "there is no good digital shelf space."

So there is certainly room for promotions in the digital realm. Ad buys could be necessary if only to give producers the leverage necessary to get their product into the front page.

The marketing team will need to know it's audience and where they are. Yes, there will be times when saturation marketing is necessary, but I suspect that with time the point of diminishing returns on this type of marketing strategy will become lower and lower. Economically it will be better to spend against a target audience much more than spending against the universe.

I think the recent release of Grindhouse is a good example of how this marketing might have worked. Look at opening weekend for Grindhouse. According to the April 10th, 2007 issue of Daily Variety, 4 of the weekend's Top 10 Grossing Theater Engagements were Grindhouse engagements, with a total of gross of $391,474, yielding a per screen average of $97,868.50. Hindsight is 20/20, but what if The Weinstein Co. had held back it's release of Grindhouse to just the major cities plus a few secondary markets? This would have reduced the overall gross, but the per screen-average would be astronomical and those people who wanted to see the movie would have a chance. Then those people could do two things.

1. Give feedback to the Weinstein Co. Grindhouse was an ambitious movie, especially in its 3 hour running time. It was a lot to ask of audiences. Maybe they could have altered their release strategy, showing the films as two separate movies in some instances, back to back in others. They could even include different trailers in different showings, thereby encouraging repeat viewings!

2. The audience could have time to tell their friends how cool it is - the proverbial word of mouth.

Grindhouse isn't one of the numerous titles that can be stored on the iPod yet, but it is in effect in the same environment already. Consumers have more choice and access than ever before. Content providers must address this issue.

Maybe the exhibitors could sell the DVDs?

With all due respect to the 40% of exhibitors who will be losing business (or their entire business), the clock seems to be ticking on their release window. Video Business reports that the Journal of Marketing will soon report Hollywood could increase revenue by closing the release window altogether. This phenomenon holds true only for the U.S. where studios could gain 16% in revenue by releasing DVD sell-through on the same date as theatrical release. On the flip side of the coin, theatrical distributors will see a 40% fall in revenue. Elsewhere in the world, day and date releasing of DVD and theatrical will not have a positive effect on studio revenue.

So, no matter what action is taken someone is going to be worse off. I'm going to assume the window is eventually going to close and movies will be released flat out - DVD, VOD, Theatrical, iTunes, whatever. How can theatrical survive? It's going to be tough while there is a shakedown and financially unstable theaters close. As a consumer I'm kind of excited, though. I like movies and I like seeing them at theaters. I get excited when I get a chance to see a movie at the theater - even something I've seen before, like THE GOOD, THE BAD, AND THE UGLY. I expect the competition to bring out the best in some chains. Better service, more options. DVDs could be sold at the theater - what if I see the movie and then get a discount on the DVD?

I just hope this doesn't lead to the opposite - a homogenization of theaters as the expense for niche theaters becomes to much to bear.

The Beginnings of the Thesis

Malcolm Gladwell wrote a great article for The New Yorker on neural networks and predicting box office returns. Let's take this as the starting point for a Master's thesis.

I guess you could say that, per the article's descriptions, I'm a Kamesian. I like to think we could find a formula that could predict a film's profitability within an acceptable margin of error. Sure, it would be off occasionally, sometimes way off, but those discrepencies can only make the formula more accurate over time.

In terms of a thesis, though, I'm not sure it's enough to just study the idea of a formula to predict film profitability. The next step could be to actually develop my own formula to accurately predict a film's profitability.

A third option would be to consider other options for such a formula. What other applications are there for the entertainment industry for these formulas? Or, from another angle, what results will such information have on the film business? Could such formulas result in better films or a decrease in film variety?

In a larger sense, the thesis could be more about the coming changes that digital technology will bring in general. What will be the result of our access to more and more data and our ability to process this data in more powerful ways? What changes will occur and how will filmmakers and film distributors be affected by these changes? What opportunities will be created by these changes and what jobs will be eliminated?

The next few weeks will be spent refining the problem to be addressed by my thesis.