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The Hits Need Some Help

15 Oct, 2007 By: Thomas K. Arnold

Despite optimism that a parade of hot theatricals will lift consumer spending in the fourth quarter, there's an undercurrent of foreboding. It's not just how well the hits sell; it's also about how many other DVDs consumers buy when they walk into Target or Best Buy to get Shrek the Third or Spider-Man 3.

A few years ago, consumers with armloads of DVDs in checkout lines was a regular sight, particularly during Q4. The guy who bought Pirates of the Caribbean for himself also bought some catalog titles for his parents. The mom who rushed to buy Shrek also picked up a workout video for herself.

That's really the story behind those years of double-digit growth. The hits drove consumers into the stores, and once there they spent liberally on all sorts of other DVDs as well.

What's going to happen this year? Buy rates are down significantly from the days when the average DVD household could be counted on to buy 15 to 17 discs a year. As recently as 2002, 2003 and even 2004, DVD players were streaming into U.S. homes at a breakneck clip, and those new DVD owners couldn't get enough of those shiny little discs. A mom might venture out to buy Spider-Man and wind up buying four or five other DVDs, just to build up a collection. Today, that collection has been pretty much built out. While this same mom might buy Spider-Man 3 because her son has been asking for it, she will be mindful of the stacks of DVDs cluttering the family room when deciding what else, if anything, to buy.

To their credit, studios and independent suppliers are releasing a goldmine of attractive non-hit product this Q4, from bundled collections of catalog movies to pricey boxed sets of complete TV series such as “Full House,” “The X-Files” and “The Gilmore Girls.”

How will Q4 ultimately shake out? Will a steady influx of hits drive consumers into stores and keep them there long enough to pick up other titles and products?

If it does, DVD distributors will breathe a collective sigh of relief. But if only the hits sell well, there could be big trouble up ahead. This business was built on incremental business, first rentals and now purchases. It never could survive, much less thrive, on hits alone.

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