Holiday E-Commerce Sales Surpass $23B

ONLINE HOLIDAY SPENDING IN 2006 increased 26% over last year to $23.11 billion for the nearly two-month period ending Dec. 26, according to data released Thursday by comScore Networks. A late surge of Internet shopping in the week before Christmas--a 38% jump over the year-earlier period--helped push the total to new levels.
"That online retail consumer spending for the year-to-date has surpassed the $100 billion mark is a testament to the continued growth and strength of the online marketplace," said Gian Fulgoni, chairman of comScore Networks, in a prepared statement. He added that retail e-commerce now accounts for 7% of U.S. consumer retail spending, excluding gas, autos and food.
Amazon led all retailers in online holiday sales, followed by Dell.com, Yahoo.com, Walmart.com and Ticketmaster.com. BestBuy.com, Walmart.com and Ticketmaster.com posted the biggest gains over last year, with each site increasing sales by more than 50%.
E-commerce sales growth was fueled mainly by buying in big-ticket and popular gift categories including jewelry and watches (up 67%), video games (64%) video game consoles (63%), event tickets (55%), and consumer electronics (39%).
The 26% increase in 2006 online holiday sales is just slightly more than the 24% gain in e-commerce activity during the rest of the year. Web retail sales from January to October increased from $62.6 billion to $77.5 billion, according to comScore.

Online MediaDaily

A Tumultuous Year In Review For The Auto Industry

THE YEAR JUST PASSED WAS tumultuous even for the typically stormy automotive business.
It was a year in which Nissan North America made its corporate move from the heart of U.S. auto culture, southern California, to the relative hinterlands of Tennessee.
It's a year in which Ford and GM, after a rocky 2005, launched new turnaround plans. It was a year full of rumors of deaths exaggerated and alliances unrealized: that Ford, struggling to stay afloat after losing in 2005, would go under, in some form; that GM CEO Rick Wagoner, fending off stakeholder Kirk Kerkorian, would himself be ousted; that DaimlerChrysler would spin off its Chrysler Group; that GM would ally with Nissan; and most recently, that Ford would form an alliance with Toyota.
It was a year that, despite record gasoline prices, managed to finish with what will likely be around 16.4 million units sold.
The gainers were import brands, but General Motors has managed to hold on to share partly with a new warranty deal, and new versions of its Silverado and Sierra pickups.
The Chevy Silverado, representing the biggest portion of the highest single-platform volume for GM, launched with patriotic fanfare in September, using a Campbell-Ewald-created campaign derided by ad critics but celebrated by dealers and featuring the song, "My Country" by rocker John Cougar Mellencamp, and a theme, "Our country. Our truck." The patriotism is emblematic of an effort to counter Toyota, which has been running corporate advertising all year promoting its U.S. product footprint as a setup to its most important launch in years, the redesigned Tundra in the first quarter next year.
In turnaround mode all year was General Motors, which lost $10.6 billion in 2005, hasn't earned a quarterly profit in the U.S. since 2004, and saw its share of the U.S. market drop to around 24% this year, from over 30% 10 years ago. In addition to efforts to streamline operations, more sharply define its divisional brands, and get its vehicles on the shopping lists of the younger buyers who have forsaken the domestics, the company has tried to get away from incentive blitzes by focusing on "value" rather than deal-of-the week offers. For example, GM this year launched a 5-year, 100,000-mile transferable powertrain warranty program to validate its quality improvements.
Divisionally, the company has anointed Saturn as its ambassador to the world of Toyota and Honda owners, by giving that formerly product-starved division new vehicles and new ads. A new campaign this year, featuring the tagline "Like always. Like never before," preceded the launch of several vehicles, including the Aura sedan, a new version of the Vue SUV, a hybrid version, and a new crossover called Outlook.
High gasoline prices hurt SUV and trucks sales, especially at Chrysler Group, which lost its CEO Dieter Zetsche to the home office in Stuttgart, Germany at around the time inventories of hitherto hot vehicles like Chrysler 300, Dodge Magnum, and Dodge Ram and Durango, began hitting record levels.
The change, which put Tom LaSorda in the top position, also coincided with rising dealer ire about having to take delivery of vehicles they couldn't sell. Thus the ouster, in the fall, of sales and marketing chief Joe Eberhardt, and rumors that Wolfgang Bernhardt, who left Chrysler for VW might be headed back, especially since musical chairs at Volkswagen's Wolfsburg, Germany HQ, puts Audi chief Martin Winterkorn in the chairman's position at VW starting next week.
While it's unlikely Bernhardt would want anything less than top position at Chrysler, one thing is certain: the company is counting on new smaller vehicles, like Jeep Compass and Dodge Caliber to ignite sales. Currently, around 75% of Chrysler's volume is weighted toward minivans, pickups and SUVs.
Last week Chrysler Group CEO LaSorda went to Stuttgart to present a restructuring plan, after Chrysler lost $1.5 billion in the third quarter. Reports suggest that the plan, which the company will unveil in February, includes layoffs and the closure of at least two plants in the U.S.
Ford, whose "Way Forward" plan helped fuel its largest quarterly loss in 14 years, $5.8 billion last quarter, has put its operations up for collateral to borrow $18 billion to fund restructuring. But before that, CEO Bill Ford stepped aside after running the company for five years. Former Boeing leader Alan Mulally took over this fall as Ford's financial and sales woes deepened despite "Way Forward," which began in late 2005. The company is counting on its new crossover Edge, backed by a campaign aimed squarely at urban and culturally diverse audiences, to turn its fortunes around, as it trims its payroll to cut costs.
Last year saw imports continue to dominate in cars even as they expanded control of SUVs and crossovers. Nothing proves that more than Toyota becoming the No. 2 automaker worldwide, surpassing Ford and on track to be No. 1.
Toyota, which is set to oust GM in worldwide sales next year, sold 8.8 million vehicles this year. That is below the 9.2 million vehicles GM predicted it would sell worldwide this year. But while Toyota, which plans to sell 9.34 million vehicles next year, is expanding its factory footprint in the U.S., GM and Ford are both closing plants and tightening capacity.
General Motors' former 10% stakeholder Kirk Kerkorian had counted on his proxy on the board Jerry York to force changes, such as an alliance between GM, Nissan and Renault. When that deal fell apart, Kirk bailed out of General Motors entirely.
Meanwhile, analysts say next year will be slower than it has been in almost a decade. Detroit firm CSM predicts 16.2 million units will move next year.
While the good news for buyers is that they will have more vehicles to choose from and more deals to sway them, automakers are faced with shoehorning vehicles into a packed market. CSM--which said that automakers launched 60 new models in 2006, and will roll out 40 more next year--predicts that GM will stay level with about 23.5% of the US market next year; with Ford at 18.2% and Toyota at 16.3%. DaimlerChrysler--including Mercedes and Chrysler Group brands--will round out 2007 with a 14.7 share of the market.

Marketing Daily

Burger King Sells 2 Million Xbox Games

BURGER KING SOLD 2 MILLION of its $3.99 co-branded special edition Xbox Game Series in six weeks, making it a top-seller for the Microsoft game line.
"Most video games are considered a blockbuster when they reach the 1 million mark in sales, and this collection has achieved twice that," said Russ Klein, president, global marketing, strategy and innovation, Burger King Corporation, in a statement.
The three games in the collection, "Pocketbike Racer," "Big Bumpin'," and "Sneak King," incorporated Burger King brand icons, such as the King and Subservient Chicken. Sales rival other best-selling Xbox titles, such as "Gears of War," which sold 1 million copies in the first two weeks of release.
The BK Xbox Game Series was supported by television and print advertising, in-restaurant merchandising, custom packaging, direct-to-consumer events and a Web site aimed at 12- to-20-year-old males.

Marketing Daily

Strong summer movies drive DVDs to '06

Call it the year of smoke and mirrors. When 2006 began, fearful studio executives were still reeling with the first down year in DVD history.

They were anxiously looking for salvation, and hoping to find it in high-definition discs, digital downloads or perhaps a combination of the two.The next generation of software did launch in 2006, regrettably with two incompatible formats, first HD-DVD in April and then Blu-ray Disc in June.

Digital downloading began as well, with all the big Hollywood studios aggressively selling their hot new movies on Movielink, CinemaNow, Apple's iTunes and other download services. Studio executives even coined a new term, "electronic sell-through," or EST, for the lucrative business model.But in the end, none of these technological marvels really mattered. High-def discs still are a blip on the sales radar, and digital downloading are even less of a blip. And lo and behold, what saved the day for home entertainment was an unexpected resurgence in the DVD market, fueled by a powerful slate of summer theatricals.And thus it was that in a year when everything seemed to change, nothing really did. The bottom line was still good boxoffice leads to good video sales, as it has since this business was launched nearly 30 years ago. Or, as New Line Home Entertainment president Stephen Einhorn said, "At the end of the day, home entertainment is still a new release-driven business."

"What we're looking at is a market that is up slightly from last year, overall," Sony Pictures Home Entertainment president David Bishop said. "But if you break down the components, we're projecting DVD sales to be up 3%, year-over-year, and rental to be up about 12%. What drags the industry down to a flat or slightly up basis is that VHS sales and rentals are virtually going away.""The industry is up as a whole, despite a decrease in overall pricing," said Kelley Avery, president of worldwide home entertainment at Paramount Pictures. "Contrary to popular belief, reports of the decline of DVD have been exaggerated."Other studio presidents agree.

The year is expected to again finish more or less flat, but this time no one's running for the hills. It's become clear now that the home entertainment business has entered the mature phase, and the Great Slowdown of 2005 was due more to a weak boxoffice (which traditionally precedes a down video market), as well as a dramatic drop in videocassette sales and rentals, than anything else."Everyone's feeling pretty good," 20th Century Fox Home Entertainment president Mike Dunn said. "Thanks to the fourth quarter, the year may wind up in positive territory, and a big reason is the strong slate of summer theatricals -- as well as TV-DVD and some really strong catalog titles and promotions.""Notwithstanding last year's disparaging headlines regarding declining boxoffice and DVD sales, 2006 ticket sales and DVD purchases proved that the public actively enjoys moviegoing and the in-home DVD experience despite the proliferation of other entertainment alternatives," Genius Products CEO Trevor Drinkwater said.

Much of the cheery-eyed optimism floating around the studio DVD divisions stems from the fact that the industry has just come off an exceptionally strong fourth quarter. Things got off to a good start when 20th Century Fox's "X-Men: The Last Stand" and Buena Vista's "The Little Mermaid Platinum Edition" generated $80 million in consumer spending in a single day. Further triumphs came as the quarter progressed, culminating this month when Buena Vista's "Pirates of the Caribbean: Dead Man's Chest" sold 10.5 million DVDs its first week in stores, putting it on track to become the top-selling live-action DVD ever."A couple of interesting things happened in the fourth quarter," Warner Home Video president Ron Sanders said. "You had some very strong theatricals that performed very well across the board, and you also had the additional benefit of TV-DVD continuing to have a huge upside, year-over-year. All of this pointed to a very healthy category.""The consumer is the ultimate arbiter of what moves in the marketplace," Buena Vista Home Entertainment general manager North America Lori MacPherson said. "And when good entertainment is released to the home entertainment market, the consumer responds."The fourth-quarter DVD sales rally was probably the biggest home entertainment story of 2006, even though it didn't make the biggest headlines. That honor went to the launch of the two high-def disc formats and the flurry of major studio deals with digital downloading services.

On the packaged-media front, the launch of two rival, incompatible formats was, if not a disaster, a major disappointment. But the real culprit, and the reason software sales have been anemic (fewer than 10,000 units of even a really big title are typical), wasn't so much a lack of a unified standard. It was the fact that consumer electronics manufacturers really dropped the ball, with a series of delays that really pinged adoption rates. The HD-DVD camp never got beyond two Toshiba models, including an entry-level model retailing for $499, while only at the very end of the year did Blu-ray get additional players to join the $999 Samsung model that arrived in stores in late June."Everyone was disappointed in the quantity (of players) that came out of the electronics companies," Sanders said. "But what is encouraging is that the attach rate of the software was amazingly high.

On average, consumers bought 28 to 30 movies per set-top box, and that's just below what it was for DVD in the same time frame."Digital downloading, simmering on the back burner for several years, also had its official coming out in April when five of the six major studios begin selling downloads of their movies over the Internet, through services Movielink and CinemaNow. New releases went out day-and-date with the DVDs. Holdout Disney soon joined the party, and by year's end, the two dedicated download services were joined by a wide variety of others, including Apple's iTunes, Amazon.com and file-swapping service BitTorrent. The only hitch was that in most cases, downloaded movies could not be burned to standard DVDs for easy transport into the living room."We determined that there is consumer interest in the ability to download content digitally," Sanders said. "What is unclear is how big the economic potential is and what platforms will ultimately win out. But every studio wants to place a lot of bets, so we are leading consumer trends instead of following them, as the music industry did."The year brought other developments, as well.

Several major shifts took place on the content distribution side, with the MGM library moving to 20th Century Fox, DreamWorks transferring over to Paramount, and brothers Bob and Harvey Weinstein tapping Genius Products to distribute content from their film studio, the Weinstein Co. The brothers subsequently bought a 70% interest in Genius.Genius' Drinkwater sees a common thread: A desire by content providers to obtain "more control of how their products are marketed and distributed."In the retail world, the mass merchants continued to clobber each other over price and exclusive gifts with purchase on hot new theatrical DVD releases, while two veteran audio-video combo chains, Musicland and Tower Records and Video, bit the dust. The former was acquired by Trans World Entertainment after filing for bankruptcy, while Tower, which also filed for Chapter 11 bankruptcy protection, wound up being purchased by a liquidator.

So what lies ahead for 2007? For starters, studio presidents expect big things from high-def discs. The prognosis for 2007 is that one of the two rival formats will fall by the wayside, consumer electronics makers will rally and start cranking out players, the Chinese will weigh in with cheap players of their own and by the fourth quarter, high-def discs will be a viable, significant business."We're seeing tremendous growth in household penetration for high-definition displays and big-screen televisions," Dunn said. "At the same time, you have broadcast, cable and satellite delivery of high-def programming growing at an incredible rate. Given the popularity of purchasing and collecting movies, the next logical step is making those films available in a packaged-media format.""Consumers are buying more high-definition TVs than ever before," Universal Studios Home Entertainment president Craig Kornblau said.
And once they get hooked on high-definition entertainment through digital cable, he said, consumers are going to want, even expect, high-def content from all their media, spurring demand for high-def discs.Lionsgate president Steve Beeks agrees, noting that "the most sought-after gifts this holiday season were HD television sets" and predicting sales of high-def discs will mushroom in 2007 once hardware prices fall and a unified format is established.

The digital download market, too, is expected to grow significantly, particularly with the prospect that consumers will be able to burn downloaded movies onto DVDs playable in their set-top units. CinemaNow introduced the download-to-burn option on select catalog titles during the summer, but this year the gates are expected to be thrust wide open. An encouraging sign: The DVD Forum in late November gave its formal nod to a new type of recordable disc that will accept movies and other content encrypted with CSS, the same copy-protection system used on commercial DVDs, for playback on set-up players.

Depending on how well the summer theatrical features fare at the boxoffice, studio chiefs say 2007 could be a very good year, overall, for home entertainment."Certainly boxoffice is a key indicator in a maturing business, so that will do a lot to drive our business," Bishop said. "But I would say this time next year we are going to be in a growth mode. Will it be double-digit growth? I would say probably not. But I think you are going to start to see Blu-ray Disc get some traction in the marketplace and for whatever flatness we have in DVD you're going to start to see some incremental growth come out of that category.""The great story coming out of 2006 is that despite the drag of VHS, DVD still kept us flat for the year," Sanders said. "And when you look at 2007, when you factor in no VHS drag with the upside of high definition, you have nothing but great prospects for the year. When you look at the lineup of summer theatricals -- sequels to 'Harry Potter,' 'Spider-Man,' 'Pirates of the Caribbean,' 'Shrek 3' -- it's the biggest summer in memory. So for home entertainment, I think it's going to be a massive 2007."

The Hollywood Reporter

'Pirates' helps push '06 boxoffice tally up 5%

Boffice slump? What boxoffice slump?

The theatrical boxoffice might be under siege, but it fought back and actually gained some ground in 2006. As the boxoffice year, which will conclude with the New Year's holiday weekend, winds to an end, the total national tally is headed toward an estimated $9.42 billion, which would represent an increase of nearly 5% compared with 2005's $8.99 billion.Certainly, records were set along the way: The biggest cheers surrounded the record-breaking opening of "Pirates of the Caribbean: Dead Man's Chest," which set both an opening-day and single-day record of $55.8 million when it bowed July 7, supplanting the mark established a little more than a year earlier, when "Star Wars: Episode III -- Revenge of the Sith," debuted to $50 million on May 19, 2005."Dead Man's Chest's" opening weekend of $135.6 million also supplanted "Spider-Man's" $114.8 million record set in 2002. It also took just two days for "Dead Man's Chest" to pass the $100 million mark, another first.That helped set the tone for what proved to be a much more hopeful year -- at points during the summer, the year-to-date boxoffice was running as high as 6%-7% above the comparable 2005 figures.

Some of those increases declined in the final months. Although Hollywood opened a number of holiday offerings that turned into hits, none was as big as 2005's crop of year-end blockbusters. This year's biggest November/December release is "Happy Feet," with more than $165 million to date. By comparison, November 2005 unleashed "Harry Potter and the Goblet of Fire," which conjured up $276.9 million by the end of that year.

In point of fact, despite a few statistical upticks, the overall boxoffice picture for 2006 did not change dramatically from 2005. If the Cassandras decrying the end of the theatrical business last year were overly alarmist, the Candides proclaiming that this year represented the best of all possible worlds were just as overly optimistic.

Throughout much of 2005, Hollywood fretted and the media raised alarms as national boxoffice grosses declined nearly 6% from the previous record-breaking year. Industry executives and outside observers began assembling a lineup of possible suspects: Increasing competition from DVD sales as the window between theatrical openings and DVD releases narrowed; dissatisfaction with higher ticket prices, expensive concessions and unruly audiences; competition from such rival platforms as video games and music downloads for the minds and disposable income of the ever-more-elusive under-25 males. An endemic change in viewing habits seemed to be taking place.

Nonsense, insisted the skeptics, who argued that the big problem in 2005 was simply too many bad movies. Make better movies, and the audiences will come back.Last year was branded the Year of the Slump, when it suffered through a record 19 consecutive weekends during the first half in which boxoffice grosses fell below the numbers set during the comparable frames in 2004.

But a rally that carried into 2006 began in November 2005, when a number of high-profile movies, beginning with "Goblet of Fire" and continuing through "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe" and "King Kong," broke through and began attracting audiences en masse.

For the most part, this year maintained that momentum. Overall, the movies might not have been necessarily better, but moviegoers found them more appealing.Critics, many of whom applauded Johnny Depp's performance as rascally pirate Captain Jack Sparrow when he first sashayed into sight in 2003's "Pirates of the Caribbean: The Curse of the Black Pearl," were less enthusiastic about its big, action-packed sequel -- again directed by Gore Verbinski and produced by Jerry Bruckheimer -- but audiences were eager to embrace the movie.By year's end, it topped out at $423.3 million; by contrast, 2005's top-grossing movie, "Sith," had to settle for a mere $380.3 million.

Although this year is on track to become the fourth best-grossing year in Hollywood history -- knocking 2005 down to fifth -- the upturn wasn't strong enough to challenge 2004, which holds the record with $9.54 billion, or even to catch 2002 or 2003, which grossed $9.52 billion and $9.49 billion, respectively.

Discounting for a slight rise in ticket prices, the number of admissions increased only marginally between 2005 and 2006. Last year, admissions numbered 1.4 billion. This year, they are headed toward a projected 1.44 billion, a nearly 3% increase.

Drill down through the numbers, though, and not that much really changed. In fact, by some standards, 2006's crop of hits were not quite as robust as the biggest movies of 2005 -- or years before that. Only one film passed $300 million this year and last, while three films reached more than $300 million in 2004 and two each were in that category in 2003 and 2002.In 2005, seven movies crested the $200 million mark, with "Sith" going on to top $300 million.This year, "Dead Man's Chest" might have gone on to pass the $400 million mark -- a mark that wasn't reached in 2005 -- but only five other films grossed more than $200 million domestically during the year, two fewer than last year.In addition to "Dead Man's Chest," this year's select class of $200 million-plus winners includes "Cars" ($244.1 million), "X-Men: The Last Stand" ($234.4 million), "The Da Vinci Code" ($217.5 million) and "Superman Returns" ($200.1 million).

In the $100 million-$200 million category, 2006 did improve slightly compared with 2005. Last year boasted 10 movies on that level, while 11 of this year's releases made the list.

In part, this year relied on the relative reliability of sequels and remakes to win over moviegoers. This year, there were five direct sequels in the top 20 as well as two series relaunches -- "Superman Returns" and "Casino Royale" (with $147.6 million to date). Last year's top 20 included only three direct sequels and one series relaunch, "Batman Begins."This year's big winners were slightly more original; 2006's top 20 didn't include any remakes -- unlike last year's top 20, which included four.Animated movies took up more top slots this year than in 2005, when three animated films reached the top 20. This year there were five, with Pixar's "Cars," the second highest-grossing movie of the year, easily outdistancing the competition.

Given all that animated fare, it's not surprising that there was no room for an R-rated movie in this year's top 10. In 2005, "Wedding Crashers," in fifth place with $209.2 million, was the top-grossing R-rated movie; this year, "Borat," in 13th place with nearly $125 million to date, took that honor.

Shifting to the indie sector, 2006 also showed some weaknesses. Following last year's pattern, genre movies released by indie outfits led the roster: Lionsgate's "Saw II," which grossed $87 million, was the leader in 2005, while this year, Dimension's horror spoof "Scary Movie 4" ($90.7 million) and Lionsgate's "Saw III" ($80.2 million) led the field. As far as more traditional indie fare goes, the big winner in 2005 was Warner Independent Pictures' "March of the Penguins," with $77.4 million. (Focus Features' Oscar-winning "Brokeback Mountain" eventually would gross $83 million, though at year's end it had collected just $15.1 million.)This year, by contrast, the biggest nongenre indie movie is Fox Searchlight's "Little Miss Sunshine," which has picked up nearly $60 million to date, though hoped-for Oscar noms could boost that tally.

There were more wide releases (movies bowing in more than 1,000 theaters) this year than last -- 160 vs. 145. But fewer movies received ultrawide bows of 3,000 theaters or more, as those releases were scaled back from 55 in 2005 to 52 this year.Possibly as a result, the average opening-weekend gross for a new film fell from $17.6 million in 2005 to $16.9 million this year. On average, movies debuted in slightly fewer theaters -- 2,543 this year vs. 2,591 last year -- but scored a slightly lower per-theater average. This year it was $6,663, compared with $6,782 last year. As for average second-weekend drops, they were slightly steeper this year -- 45% vs. last year's 43%.

With so many of the statistical markers appearing to tread water, the theatrical release business did appear to be holding its own. But does that mean the boxoffice declines that bedeviled first-half 2005 have been halted and a genuine recovery is under way? Or does it suggest a yearlong pause in an inevitable decline?Next year's lineup includes several movies that could head into $400 million-plus territory -- "Spider-Man 3," "Shrek the Third" and "Pirates of the Caribbean: At World's End" -- and help to lift 2007's boxoffice above 2006's level. If that does happen, then the boxoffice revival will genuinely have taken root.

The Hollywood Reporter