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THE MORNING BUZZ: 2002: Maybe a Little History Repeating?

27 Dec, 2001 By: Kurt Indvik

It's been said "history is just one damned thing after another." As of next Tuesday, 2001 will be history. The New Year holiday usually affords us some time (between football, the interminable Rose Parade, perhaps dangling from the rain gutter taking down those Christmas lights) to think back on the year and recall some of its highlights and lowlights.

In next week's issue of Video Store Magazine, the editors have put together a comprehensive look at the years events, month-by-month, as well as several of our own Top 10 takes on the industry. As I say in that issue, having come into the industry only in the last quarter, editing that section helped me to get a perspective on the industry's ebb and flow of events in the past 12 months and how those might impact the business in 2002.

We ignore history at the risk of repeating it, but I'd bet a majority of you would say 2001, from an overall home entertainment industry standpoint (and, obviously, with bowed heads toward New York City and Washington, D.C., in a united and solemn grief), would rate as a year worth repeating in many respects. Even if the trends of this year continue to play out in 2002, your job as a home entertainment business manager is to now take advantage of what you have seen in the past year and use it to improve on those trends and prepare to mitigate some of their possible side effects.

No doubt, DVD will continue in meteoric rise in 2002, by almost everyone's prognostications. The fourth quarter saw one DVD sales record after another. And with player sales expected to continue to boom and the pipeline already loaded with such family-oriented, high-production value films as Monsters, Inc., Harry Potter and Lord of the Rings coming to video next year along with a host of other great titles, the studios should enjoy another banner year. But while the industry is busily maximizing that opportunity it must keep a watchful eye on such issues as the impact on VHS -- still the predominant format for this business -- and maintaining a viable rental market. How far and how fast the transition will be the challenge in the face of the great opportunity.

The past year has been a great one for video specialty retailers. The big, publicly owned chains enjoyed phenomenal stock price growth, climbing out of the basement after a miserable 2000. And there are indications the smaller chains and independents enjoyed a net gain in store numbers in 2001. Again, so much of this was fueled by DVD, which allows for a nice ROI on DVD rentals, along with a great slate of titles this year, especially in Q4. All things being equal, 2002 should also be a repeat performance.

And mass merchants, as a rule, grew their floor space for home video—again focusing on DVD, but not at the expense of VHS—driving the sellthrough of DVD to new heights. If DVD pricing policies on ‘A' titles remains status quo in 2002, as it appears to be doing, then mass merchants will continue to not only drive DVD sales to more records, but also play a key role in supporting the lower-priced family fare VHS titles.

On a more contentious issue, though the specter of video-on-demand (at least it's a specter to video rentailers) was rising quickly on the horizon in the early part of 2001, fueled by formation of joint studio efforts such as MovieFly and Movies.com, it waned to a certain extent in the second half of the year, or at least the rhetoric did. But 2002 will see VOD continue its (some would say inexorable) march forward and it will be interesting to see if these initiatives get off the ground next year and doubly interesting to see if a First Sale doctrine case arises out of the launch of one of these services, supporting the right of video stores to retail the downloaded product, once they purchase it. We may witness the whole early ‘80s battle of video rental rights between studios and retailers all over again—talk about history repeating itself.

Those are a few thoughts I have had percolating as I prepare to celebrate the coming New Year. On behalf of the staff at Video Store Magazine, Hive4media.com and Home Entertainment Events, have a wonderful and safe and Happy New Year!

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