THE MORNING BUZZ: Retailers Weigh in On VHS Flat Pricing7 Feb, 2002 By: Kurt Indvik
I'm not one to keep pounding on an issue when everyone else has moved on, but my column last Friday in this space regarding flat pricing of VHS garnered a lot of response that paints a picture of the mood of the retailer market, and I thought I'd share some of it with you.
The point of the column was that the meteoric rise of DVD is compelling studios to begin seriously moving toward a flat pricing scheme (and lowering the price as well) for VHS rental product as a way to keep the format alive and kicking in this looming DVD age. The question I posed was, how would flat pricing affect your buying patterns?
Tom Paine of Video Factory/Moviola Video in Redmond, Wash., notes he'll take advantage of the move to improve copy depth for VHS, but unless prices go real low, it still won't be enough to slow the DVD train.
"From the beginning I have been holding margins constant between the two formats. The advantage has been more copy depth with DVD. I believe this notable difference in copy depth has helped encourage the transition with our customers. At the same time, I am holding firm on margins with VHS. This means that VHS customers are being served the same way they have always been. As VHS prices come down, I will continue to hold to the dollar margin percentage. This implies improved copy depth for VHS. Copy depth means more revenue and consequently more gross margin. However, with these principles in mind, at $25 to $30, VHS still will not have the same copy depth as DVD. The advantage is still with DVD, but not to the extent as in the past."
Peter Mathieson of Movie Experts in Kingston, Ontario, Canada, said that until copy depth programs and other minimum buy formulas are reduced, there is still only so much money open to buy additional titles.
"Flat pricing on par for every title allows stores to distribute their budgets appropriately and satisfy demand for lesser known titles that formulas force them to either pass on or buy low on. The studios, in essence, do not gain any additional funds, at least in the short term…Over time, however, greater quantities and variety for consumers, coupled with knowledgeable staff and store owners that can recommend these lesser known titles, should logically improve the rental market. Thus, the logical answer is that the faster we see a move to lower (sellthrough) VHS pricing, the greater the chance of saving the VHS rental market as well as capitalize on the increased consumer demand to own the product by offering more variety at sellthrough at the same time."
An unidentified respondent from Dave's Movies & More in Granite City, Ill., said that the move to flat pricing, "Most definitely would increase copy depth. At this stage, paying more than $30 per copy in depth is suicide! Warner is on the right track and we will support them in depth on both formats."
Tom Hannah of Joliet, Ill.-based Video Quest made no secret of his stance, as he always does.
"They should have gone to flat pricing and lower prices two years ago. At this point I could not care less what those greedy studios do. I have begun to phase out of VHS and no matter what, I am going 100 percent DVD in the near future."
In October of last year that's just what Jack Uniglicht at Double Features, Vineland, NJ, said he did. In business since 1981, it was a bold move, but Uniglicht said financially, VHS rental pricing made no sense any longer in light of DVD. He's never looked back after the move and has enjoyed considerable success. However, he'd reconsider VHS, if the price were right.
"For every old-time customer that we lost because they were not ready to get a new DVD player, we picked up 10 new customers who were ‘tech savvy.' Our rental revenue has increase every month since October after years of decline and we are able to sell the previewed DVDs at a bare minimum of $10 each well after the 30-day window for rentals…Personally, I have nothing against VHS movies, so if the studios dropped ALL titles to $20 and under wholesale, I would bring them back." But Uniglicht said he doesn't believe that's likely to happen, and he added that "The VHS movie is now history and…will soon go the way of the 8-track."
It's clear from these responses that the home video retailing business is in for quite a transition over the next several years.
Want to weigh in with your thoughts? Click here to read these and other responses and add your own.