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TK's MORNING BUZZ: Studios Having a Hard Time Meeting Goal on Rental Titles Have No One to Blame But Themselves

16 Oct, 2000 By: Thomas K. Arnold

Reports are filtering in that studios have starting to have a hard time meeting goal on their rental titles. As Ray Jewell, the feisty Texas retailer who birthed the Red Hat Brigade protect-our-windows movement, told one of our reporters recently, "There just aren't that many of us left to buy all those videos."

Jewell has a point. While much has been written about how more than 50% of rental product is now channeled through revenue-sharing, primarily to the big chains that buy directly from the studios, the other 45% or so is still sold through traditional means, primarily to independent retailers. And since the output deals through which most revenue-shared product is sold are determined well in advance, any shortfall in meeting goals must lie on the independent side.

The rate at which independent retailers are going out of business has slowed considerably from the estimated high of 300 to 400 stores a month two years ago, but stores are still closing--and the pool of independent retailers is nowhere near as high as it once was.

On top of that is the fact that copy-depth programs are still not working, even after nearly three years of tinkering and modifying. By and large, the goals are still too high and the formulas too complex. On average, retailers do have a higher depth of copy on new releases than they used to, but it's still not enough to make up for the significantly smaller population of independent retailers.

For this problem to be rectified, one of two things has to happen: the closure rate needs to be turned around, so that there are more retailers getting into the business than there are going out of business, or studios need to come up with some sort of program to sharply elevate the average retailer's buys.

The former simply isn't going to happen--why anyone would want to open a video store these days is beyond me. And the latter, if achieved, still doesn't guarantee success. I'd be willing to bet that if all studios slashed the price of their new releases by half, so that retailers could buy as many or as few copies of every new video for $30 to $35 with no strings attached, you'd maybe see a few more copies being sold, but not nearly enough to make up for the loss in revenue.

It's a conundrum to which, sadly, there is no answer. And as studio executives begin to realize that it's getting harder and harder for them to meet goal, I sincerely hope they recognize the true culprit: themselves.

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

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