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THE MORNING BUZZ: Success Comes At Your Customers' Convenience

8 Jan, 2002 By: Holly J. Wagner

I've been thinking about something my colleague, Thomas K. Arnold, said in this space a couple of weeks ago. He said video-on-demand (VOD) would not overpower the video rental business, that both could coexist peacefully.

I'm also thinking about a new drive the Video Buyers Group is putting on to lure customers back into video stores after the "honeymoon" period from initiating cable or satellite service. The theory goes that after about three months, the fat pipes lose their luster.

We as an industry tend to view any competing technology as a threat to our business. Pay-per-view specifically and cable and satellite generally are big bugaboos. But the truth is, if it was a showdown between video rental and cable or satellite, video would lose.

Outside of price, the video vs. satellite/cable tradeoff is a trade of convenience for selection. Viewers trade the convenience of having a show piped into the house for video store's much broader range of choices. Viewers can watch their choices at their pleasure, within a limited time frame. But there's one thing consumers can't rent at the video store: Connectivity.

In my market – the Los Angeles/Orange County area -- and I'd venture in most, broadcast television reception stinks. Even with an aerial antenna, signals are capricious and often have static. A viewer who wants to watch any television almost has to get cable or satellite just to watch the most basic programming.

So whatever direction our business takes in the weeks and months ahead, the strategy will have to reflect our resignation to the fact that cable or satellite will be in most homes. The struggle is whether it will be beside or instead of packaged home video.

That narrows the competition considerably -- we're really only competing with movie services. We're slugging it out to make our services more valuable and more attractive to consumers who need only dial the phone or log onto an Internet connection to get more movies, more live sports events and more choices.

Our challenge is to be the most attractive choice. That's not too tough right now, while video-on-demand is still a fat pipe dream in most areas. But in a few areas, where services like Insight let viewers see what they want, when they want – including local news and other local programming – I suspect video is much closer to the ropes. (Note: if I'm right, that would put Movie Gallery, with its dominance in rural markets, in a superior growth position for video rental, because it has a foothold in areas that will likely be last to get broadband connectivity and the competition it brings.)

So for now, many of us stick to basic satellite programming and watch video, on demand -- we put the disc into the DVD player and watch it, just like that.

But this industry is on notice: If the providers that pipe programming into households ever get it together and offer a la carte broadcast selections and movies when viewers want them, consumers' still-new relationship with the DVD player may lose its appeal. They might just pull the plug on their standing dates with the DVD player and step out, er, in.

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