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The Year Is Shaping Up To Be Pivotal

10 Feb, 2003 By: Stephanie Prange

As we embark on the road to more mainstream adoption of DVD, two questions seem to weigh on the minds of many in the industry: Will consumers continue to purchase videos at the same rate and, if they buy numerous videos, will they continue to rent enough to bolster that side of the business?

In this new era of universally sellthrough-priced video, the old models are under attack. If consumers can buy any hit at Wal-Mart for $14.95, will a significant number still decide to rent it for a couple of bucks at the local video store? Blockbuster's full fourth-quarter numbers, due today, should shed some light on this trend. The No. 1 domestic rental chain's late December announcement it would cut profit estimates for 2002 due to an unanticipated drop in rentals sent its stock plummeting 30 percent. Today, we may get a more complete story of the chains's fourth quarter, which executives have characterized as somewhat of an anomaly.

Despite the recent vicissitudes of the rental market, the sense is that many titles are better rentals than purchases. This theory will be tested as a mainstream audience, one that has traditionally supported rental, buys into and buys more DVD. The CD business survived without rental. Could DVD do the same thing? Will a harried mother just as soon pick up a $10 kidvid at Wal-mart while gathering other necessities as make a special trip to the rental store for a $3 rental?

After the heady days of both an exploding sellthrough business and a solid rental market, one can't help but wonder if another shoe is left to drop.

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