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TK's MORNING BUZZ: Indie Retailers' Claims Against Blockbuster Are Justified and the Case Deserves to Move Forward

20 Mar, 2001 By: Thomas K. Arnold

The battle has been lost, and the fate of the fight hinges on the angels. Or, rather, an angel.

A federal court judge's ruling this week against independent retailers in California in their suit against Blockbuster and the studios was a major setback, to be sure. Judge Edward C. Prado decided the retailers -- who claim Blockbuster is monopolizing the market and trying to drive them out of business -- were too divergent a lot to qualify for class-action status, saying that individual investigations would be needed into each store owner's charge of damage from Blockbuster's tactics.

He's right -- each retail operation is different, and does, in fact, have differing ability to cut revenue-sharing deals with the studios.

But the common bond that binds all these divergent retailers together is the pain and hurt they've felt from Blockbuster's aggressive quest for market share.

And while I'm not a lawyer, I can't help but feel the judge focused on a technicality while ignoring the bigger issue, which is whether the independents' claims are justified.

I believe they are, and on those grounds the case deserves to move forward. Blockbuster has admitted its goal is to increase its market share.

Blockbuster is building market share by guaranteeing the availability of hit new releases, extending rental periods and cutting rental rates. And Blockbuster admits it would not be in a position to do this if it were paying full price for rental product.

Is Blockbuster really out to monopolize the video rental market? Privately, some studio executives feel Blockbuster already has -- to the point where the chain is dictating terms and conditions for the renewal of its revenue-sharing deals with the studios.

Is any of this illegal? That's hard to say. But it sure would be nice if we were given the chance to find out by letting each side present its arguments in a court of law. Sadly, with class-action status yanked way, it's going to be next to impossible for any of the afflicted retailers from proceeding with the case on their own -- unless maybe there's a financial angel out there who loathes the chaining of America and is willing to step in to allow this case to proceed.

Blockbuster, meanwhile, is trumpeting its victory. Yesterday, Blockbuster publicists were calling the trade press to make sure we all heard the news. In particular, they called our attention to the wire service story in which Blockbuster chief John Antioco told the AP that revenue-sharing "is a common industry practice and has been used to the benefit of consumers by video distributors, theaters and pay-per-view services for years. Most importantly, these agreements are open to anyone in the industry."

I wish I could hear what the other side would say to that. I hope I get the chance.

Comments? Contact TK directly at:TKArnold@aol.com

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