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THE MORNING BUZZ: Who's going off half-cocked?

28 Apr, 2002 By: Thomas K. Arnold

For the nation's beleaguered video distributors, the other shoe keeps dropping – and as you read this, the survivors are likely looking at each other and wondering, “Who's going to be next to go out of business?”

Two of the six major studios are restricting distribution of their product to two wholesalers, Ingram and VPD. (I guess if it was just one, the government antitrust guns would come a-huntin'.)

Flash, WaxWorks and Baker and Taylor, shut out by a third of Hollywood, take solace in the fact that Warner Home Video, the first studio to effectively declare war on distribution by selling rental cassettes directly to retailers, is no longer in the business of producing rental cassettes – so they're back in the fold, in a practical sense.

Still, the loss of Columbia TriStar is doubtless sending shivers of fear up the spines of Steve Scavelli, Noel Clayton and Jim Ulsamer. Video is unique in that a supplier's products can't easily be replaced; a likely power-hit like Spider-Man or Stuart Little 2 constitutes what's known as a “unique market,” meaning that if you're not able to carry Spider-Man or Stuart Little 2, there's nothing else you can carry to make up for it.

The perception problem among retail clients is potentially more damaging. I can think of all sorts of cliches that apply here, including, “It's hard to fire a gun that's half-cocked.”

Well, without Universal or Columbia TriStar, the three smaller distributors are indeed going about their business in a half-cocked fashion, through no fault of their own. They will be forced to secure Universal or Columbia TriStar product through other channels, and while they may succeed it's certainly going to be a much bigger hassle than if they could buy the product outright, like Ingram and VPD.

Retailers like things quick, easy and cheap. Flash, WaxWorks and Baker and Taylor will be hard pressed to offer them one, much less all three, in regard to Universal and Columbia TriStar product.

Still, it isn't surprising that in the steady shrinkage of video wholesalers, these three are left.

Flash's Steve Scavelli is a scrapper. He'll get by no matter what, even if he has to distribute car parts. And Flash has an incredibly loyal clientele, in large part because Scavelli believes in treating his retailer customers like royalty. He takes care of them, and you don't find that too often in business.

Baker & Taylor has two things going for it. The distributor has wisely chosen to get involved in the Three Pillars of Modern Media, video, music and books. If one's down, the other two can still hold it up (although in this case, music sales are slumping, and that could pose a challenge). B&T is also known for its wide and deep catalog; even a decade ago, retailers would go to Baker and Taylor for titles they couldn't find anywhere else, and retailers tend to have long memories.

WaxWorks, like Flash, has an intensely loyal clientele. And for good reason: in many cases, the Owensboro, Kentucky-based wholesaler's clients are the retailers no one else wants to deal with, tiny mom-and-pops in the rural hills and dales of Kentucky, Tennessee, West Virginia, Indiana and beyond, who often run their little video rental operations in tandem with tanning salons or even gas stations.

They're below the radar of the other distributors, but the folks at WaxWorks know each and every one of them by name. They work together as partners, suggesting buys, sharing tips and merchandising strategies, and in general hanging in there together. These little mom-and-pops might not amount to much, but together they're enough to keep WaxWorks interested in the business and studios (most of them, at least) interested in WaxWorks.

Noel and his crew aren't as brash as Scavelli, who boldly promises to get the product he needs however, wherever he can. But I have a feeling Noel and the boys have a trick or two up their sleeves as well.

In this business, you've got to.



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