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The Growing Impact of Previously Viewed Sales

20 Apr, 2003 By: Kurt Indvik

The burgeoning business of selling used DVDs, VHS cassettes and video games continues to have an ever-growing impact on many parts of the industry.

It's impacting the way retailers buy and merchandise their products. For specialty rentailers, it's their way of battling for the sellthrough dollar against the mass merchants. The timing of when to bring rental product down from the rack to sell is being fine-tuned, not only to how mass merchants adjust their pricing and when, but whether or not local rentailer competitors have revenue-sharing selloff stipulations for their product and when those expire.

Previously viewed sales are impacting the way studios are structuring their DVD revenue-sharing deals and the previously viewed business is also a major factor in why units shipped into the rental marketplace have tripled over the past five years.

And, of course, previously viewed sales are having a significant effect on retailers' revenue over all. Consider that in 2002, Blockbuster scored some $365 million in previously viewed product sales in the United States, about 8 percent of its domestic gross dollar volume, according to Video Store Magazine market research estimates. Hollywood Video took in more than $100 million (7.6 percent of its gross) and Movie Gallery about $46 million (9.5 percent of its gross). A million here and a million there and we're talking real money.

For many smaller rentailers, sales from used product make up anywhere between 15 percent and 20 percent of their dollar volume and that number is growing.The fact is, as one retailer told senior editor Joan Villa, customers are learning that video specialty stores are no longer just rentailers, but retailers. Everything they see in the store is, or will be, for sale.

Not surprsingly, DVD can be seen as the cause for this fast-growing business segment. While VHS still outsells DVD at the previously viewed tables, DVD is growing by double and triple digits in unit and dollar sales at retailers around the country, while VHS continues to decline, according to a variety of market research.

DVD has transformed so many aspects of the home video industry. This is the latest evidence of the format's elevated perceived value in the mind of the consumer. Certainly its value as a “used” product is much higher than the lowly cassette and the reason that retailers are seeing exponential growth in sales.

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