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THE MORNING BUZZ: DVD Rockets Into 2002

3 Jan, 2002 By: Kurt Indvik

It's clear that the fourth quarter of 2001 and the holiday selling season have given the DVD category a major afterburner push going into 2002. I spoke with a number retailers following the Christmas holidays and the anecdotal consensus was that, on the rental side, DVD's share of revenues leaped 10 percent or more. Stores where DVDs share of rental revenue was 20 percent reported DVD rentals accounting for 30percent of revenues; stores with 30 percent saw their DVD share of revenues grow to 40 percent. That's a 33 percent to 50 percent growth in DVD rental volume. Some retailers reported even higher numbers.

Video Store Magazine's stellar research team has been tracking the data going into the year end and reports DVD accounted for about 25 percent of rental spending in the last week of the year, compared to little more than 9 percent for the same week last year.

Our staff also visited major sellthrough retailers as well, from Target to Best Buy to Tower, right after the holidays and found scenes reminiscent of a horde sweeping through and leaving in its wake empty shelves, displays in disarray and clerks in a daze. (Okay, perhaps that's a bit dramatic, but you get the idea.) Videoscan/A.C. Nielsen reports that for the five weeks from Thanksgiving through the week ending Dec. 22, DVD software sales surged 71 percent compared with the same period in 2000. Anecdotally, previously-owned DVD sales also rocked for some retailers who really jumped on some of the bigger fourth quarter titles in the expectation that the post-Christmas holiday would see a lot of newbie DVD owners come looking for movies to play on their shiny new machines.

Now comes the interesting part…what happens for 2002. I think it'll all come down to price. It will be very interesting this year to watch the pricing trends in DVD and VHS as the industry tries to find the maximum rental and sellthrough revenue model for both studios and retailers. One possible model: ‘A' title DVDs remain in their current $20 range, while rental-oriented titles DVDs climb to the $30 to $35 range; and VHS titles in the ‘A' category debut at sellthrough prices as a rule, along with their DVD brethren.

Check out Video Store Magazine next week as we begin a series on 2002 pricing trends.

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