Point of Sale

Analyzing Media Retail

Daniel Herbert,Derek Johnson

• Publisher: Rutgers University Press
• Year: 2019
• ISBN:
  9780813595542
• Topic: Business
• Subtopic: Business General
• Index: Business

Point of Sale offers the first significant attempt to center media retail as a vital component in the study of popular culture. It brings together fifteen essays by top media scholars with their fingers on the pulse of both the changes that foreground retail in a digital age and the history that has made retail a fundamental part of the culture industries. The book reveals why retail matters as a site of transactional significance to industries as well as a crucial locus of meaning and interactional participation for consumers. In addition to examining how industries connect books, DVDs, video games, lifestyle products, toys, and more to consumers, it also interrogates the changes in media circulation driven by the collision of digital platforms with existing retail institutions. By grappling with the contexts in which we buy media, Point of Sale uncovers the underlying tensions that define the contemporary culture industries.

Part I

Retail and New Media Technologies

1

Industrial Crossroads or Cross Purposes?

Circuit City, DIVX, and the History of Multifunctional Media Retailers

DANIEL HERBERT

In January 2017, the Wall Street Journal reported that Apple Inc. planned to begin procuring original media content for a new subscription service.1 This article noted that Apple’s endeavor “could . . . mark a significant turn in strategy for Apple as it starts to become more of a media company, rather than just a distributor of other companies’ media.”2 A later story on this topic placed Apple within “a crowded market, where both new and traditional media players are vying for original shows.”3 Considered together, these accounts suggest a potential shift in Apple’s ontology from a “tech” company into a “media” company and, further, indicate that Apple was (merely) the latest company to expand into media.4

Apple’s expansion followed, first, the company’s previous diversification into retailing and, second, the entry of several major retailers into the media business. The first Apple Store opened in 2001, and by 2015, there were more than 450 Apple Store locations. Apple opened the iTunes Store in October 2003 as a digital platform to sell music and began selling movies and television programs through the iTunes Store in 2005 and 2006, respectively. And while Apple moved into the retail sector, retailers moved into the media business. After years of selling books, music recordings, and physical video commodities, Amazon.com Inc. began selling television programs and feature films via digital download in 2006, and in 2011, the company offered a video streaming service to members of the Amazon Prime program. Analogously, Walmart purchased Vudu Inc. in 2010, and the company continues to offer movies and television programs through the Vudu app on various smart devices.

All this points toward a new industrial alignment of the retail and media industries. Indeed, many of the most important “media” companies today are vitally, if not centrally, involved in retail. It is crucial that we interrogate this historical and industrial conjuncture because, at the minimum, it represents a rather novel innovation of vertical integration within the media industries. The current combination of media and retailing activities among multiple major corporations represents a significant consolidation of power within media culture that could significantly impact the kinds of media that get made, how media circulates, and how audiences will access and make meanings related to these media. And yet, as the stories about Apple’s entry into the media business suggest, this new industrial landscape appears as a fait accompli.

This essay seeks to denaturalize the current alignment between the retail and media industries by looking at a similar but failed attempt to align the retail, tech, and media industries in a previous historical moment. Specifically, this essay examines the big-box electronics store Circuit City and the company’s unsuccessful endeavor to launch the DIVX (Digital Video Express) media format during the 1990s. DIVX was a movie-on-disc platform that largely resembled the DVD (digital versatile disc). Unlike DVDs, however, DIVX discs were designed to only play within a short period of time after purchase; following this window, consumers had to pay an additional fee to continue watching. In this way, DIVX was both a video format and a business model. And whereas DVDs “became the fastest-selling item in the history of the US consumer electronics market,”5 DIVX failed to attract consumers and was discontinued in 1999. Paul McDonald has previously detailed the rise and fall of DIVX.6 Yet McDonald focuses more on the format than the retailer and does not address the way in which DIVX represented an attempt at an industrial convergence among the retail, media, and technology industries. Indeed, my focus is as much on Circuit City as it is on DIVX and questioning how Circuit City’s foray into media technology development foreshadowed the present moment of multifunctional retailers.

In using the word multifunctional, I hope to specify the ways in which some retailers, including Circuit City, have diversified in ways that bend conventional industrial categories. Of course, many conglomerates have been composed of different divisions that are involved in different business sectors. One might think of Paramount Pictures, which was a division of Gulf and Western from 1966 to 1989; during this period, Gulf and Western was also involved in manufacturing and agriculture, among other industries. Similarly, the Sony Corporation bought Columbia Pictures in 1989 after years of primarily being involved in electronics manufacturing. What I am trying to distinguish, specifically, is that business endeavor that diversifies a company in a new, potentially definitional way, such as when Amazon moved from merely retailing movies to distributing movies of its own. At this point, in fact, many retailers are best thought of as multifunctional to the extent that they also operate as technology firms, media distributors, and media exhibitors, among other identities. For its part, Circuit City was involved in consumer electronics retailing, media retailing, used car sales, banking, and, with DIVX, technology development—a technology that it would sell as well.

As the Sony/Columbia example prompts us to consider, companies often engage in multifunctionality in the pursuit of “synergy.” As Jennifer Holt has indicated, this buzzword has had multiple definitions, including “the commercial possibilities of mutually locking commercial ventures”7 and “tight diversification.”8 Thus on the one hand, the idea of multifunctionality accounts for the divergent business activities, divisions, and sectors that a company might be involved with. On the other hand, history shows that various media companies created new divisions or enveloped other companies with the idea that these different units might coordinate and generate new value. This might occur, as Derek Johnson discusses, as the reexploitation of a single intellectual property across different media platforms.9 Or, as in the case of Sony and Columbia, synergy might appear as a marriage of hardware and software.

However, as Johnson also details, synergy is an “ideal” that “often proves impractical.”10 Similarly, multifunctionality can sometimes put a company’s divisions at cross-purposes. Such was the case with Circuit City’s participation in the development and retailing of DIVX, as the platform created tensions within Circuit City and across the retail sector. As a retailer, Circuit City aimed to make money from any home video technology; thus the company sold the hardware and software for both DIVX and the competing DVD format. As a technology firm, Circuit City needed as many retailers as possible to carry DIVX, and yet other retailers resisted DIVX precisely because of Circuit City’s “primary” function as a retailer. Thus while synergy and multifunctionality are not quite the same, this case shows how multifunctionality can fail due to, in part, a failed attempt at synergy.

Out of Control: Home Video Retailing before DIVX

In order to understand Circuit City’s involvement with DIVX, one must first look to the historical development of home video in the United States. Although it garnered vast revenues for hardware manufacturers, movie studios, and retailers, home video raised a number of problems for the movie industry. First, it entailed a brief but impactful format war between rival VCR (videocassette recorder) technologies. Second, it threatened the studios’ control over video commodities and the IP (intellectual property) embedded on them. Third, it allowed for the emergence of a new sector to the business, retailing rather than theatrical exhibition, now largely defined by a rental business model and controlled by new industrial players.

Although video was used in television production in the United States during the 1950s and 1960s,11 it wasn’t until the 1970s that video technologies were used more widely. Sony released the Betamax videocassette recorder in Japan in 1975 and then in the United States in 1976.12 JVC unveiled the competing VHS (Video Home System) format that same year, and in 1977, electronics manufacturer Matsushita asserted that it would support VHS, pitting different technology companies against one another in a format war.13 Department stores and consumer electronics stores retailed VCR hardware.14 These retailers positioned the VCR as an appliance that extended from television, and they treated videotapes as appendages of this appliance.15 The promotional discourse initially situated VCRs as tools to be used for “time shifting” television programming—that is, as devices that allowed one to record and watch television shows at a time of the viewer’s choosing.16 This time-shifting ability also allowed viewers to skip over commercials, the economic bedrock of the American television industry, and several studios joined forces to sue Sony for “contributory infringement” of their intellectual property by endowing consumers with the ability to duplicate, manipulate, and potentially redistribute these works.17

Although this lawsuit, known as Sony v. Universal, found in 1984 that Sony was not responsible for consumers’ uses of VCR technology, it signals the Hollywood studios’ concern that home video represented a loss of control over their intellectual properties. This issue grew more pronounced as conceptions and uses of home video changed through the early 1980s and as the retailing of home video shifted toward video specialty stores, which used a rental business model. Specifically, the VCR was repositioned from being a time-shifting device for television programming (although people could still use it in this way) toward being a movie delivery vehicle.18 And although some early video distributors tried to impose nonrental clauses in their contracts with retailers, this effort was unsuccessful due to the way in which the “first sale doctrine” was applied to videos.19

The first rental stores opened immediately following the release of feature films on video, and the rental industry expanded rapidly in the coming years; by 1985, more than 21,000 retailers specialized in video rental.20 Crucially, this first wave of video retailers was composed of independently owned “mom and pop” stores whose owners often “had no formal background in film whatsoever.”21 Thus the rapid expansion of the home video industry wrested control over movies away from the Hollywood studios in two ways. First, home video was characterized by a huge number of independent firms that did not have established relationships with the studios. Second, the rental business model meant that the Hollywood studios were cu...