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THE MORNING BUZZ: Life Without a Plan 'B'

21 Jun, 2002 By: Jessica Wolf

On the rare occasions that someone I know wants to know more about my job and the rental industry in general, I always use the same analogy to describe revenue-sharing.

I say: “Remember when Blockbuster first started advertising ‘guaranteed rentals'? They could do that because of revenue-sharing.”

I personally remember thinking at the time, “How can they guarantee a rental, how can they predict whether or not a video will be available? How many copies could they possibly have?”

I remember when Blockbuster first started carrying its floor-to-ceiling stock of the newest video releases. Before that, my family didn't even have a video membership anywhere. During high school one of my friends worked in the video department of Smiths grocery store and we rented stuff of her account all the time or used my aunt and uncle's membership at a small video store within walking distance of our house.

It was later in the 1990s that my family started frequenting Blockbuster. After that it seems like we had a membership at every location within a five-mile radius of our house so we could stop and pick up a movie any time the mood struck us.

Before we learned we would be able to get the movie we wanted at Blockbuster the moment we wanted it or get it free a day later, we were fully prepared to walk into the video store on a Saturday night and see that all the copies of the newest releases were checked out. Plan ‘B' was to split up and browse through the racks and come up with a few selections we could all vote on.

Reading about the antitrust trial with all the Hollywood and rental bigwigs thinking back to the beginning of revenue-sharing made me think about the effect the tactic had on the consumer level. Having witnessed it from the consumer view then, and looking back on it now, I think revenue-sharing did two things to the consumer perspective of video rental.

First, it created a consumptive monster. Granted, the American public is all about “give it to me now, now, NOW” and the copy-depth revenue-sharing provided was very much a response to that powerful consumer desire, So that monster, in effect, created itself. But, as a result, there are very few people in their 20s or younger who remember a time when Blockbuster locations and other video stores didn't have hundreds of copies of the newest releases. A whole generation was trained in this rental perspective and probably has rarely, if ever, heard from a video clerk that the movie they wanted was “out.”

If Hollywood studios had employed the same pricing model for DVD as they did for VHS, I wonder what ways medium-sized or smaller retailers would have found to feed that rental consumer monster. If they had to buy DVD the same way they bought VHS, how much time and energy would they have had to spend to determine the perfect balance of product for their customer base? And how many customers would they have lost to Blockbuster or Hollywood, if they made a mistake on that balance?

The last five years could have been a very different video landscape if DVD had not always been sellthrough. It would have been all about rental, no Best Buy or Wal-Mart to horn in. But there's no turning back. Just as the rental consumer monster now fully expects to see 200 copies of Kate and Leopold or the like on Blockbuster shelves, they also fully expect to be able to go out and buy that DVD the minute it is available. There's no taking it back now. Once the monster has something in its grip, it ain't lettin' go.

The other thing I think that revenue-sharing did by creating all this depth of copy was eliminate the consumer's “Plan B” rental mentality. I wonder if there's any statistics out there on catalog rental activity before and after revenue-sharing began? I wouldn't be surprised to find out that activity on older titles dropped drastically after that. (In fact. Netflix reports it rents three catalog titles for every new release rental, even though new releases are still its single biggest segment.) I could probably count on one hand the number of times in the last 10 years that I have even walked through the catalog section of a video store. If one sweep around the new release wall doesn't pique my interest, I'm right back out the door. It didn't use to be that way. And DVD can only do so much to rejuvenate interest in your average catalog title.

It will be interesting to see more testimony as the antitrust trial in San Antonio plays out. Maybe we'll even find out who the true parents of revenue-sharing are, as it seems a few people are claiming the title.

Whoever it is, I wonder if they're proud of their little monster?

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