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How Low Can You Go? Probably Lower.

10 Oct, 2004 By: Kurt Indvik

How low can you go? Perhaps the question is how low should you go?

That's the previously viewed title (PVT) pricing question addressed in a front-page story written by senior editor Holly J. Wagner in this week's edition of Video Store Magazine.

The fact is that the much-anticipated commoditization of DVD may be looming in the not-too-distant future, based on the pricing trends from big-box outlets selling catalog titles for $5.50 to mom-and-pop rentailers selling previously viewed DVDs for an average of less than $10. (The average price for a PVT title is now $9.70, down from $14.51 in 1999, according to VSM Market Research.)

So many factors are at work in the “race to the bottom,” as some are wont to call it, that it's hard to see where there might be a control point to the process. As Wagner uncovers in her article, it begins with the shorter window between theatrical and video, and the pressure to maximize video revenue on new video releases in the first couple of weeks. After that, with the market perception being that demand for those titles has been largely sated at both retail and rentail, studio repricings and PVT sales and now the growing trade-in business prompt the inevitable slide downward. That, in turn, also puts pressure on catalog DVD releases to come out of the chute at a low price, which also sees an eventual slide into the $5.50 bargain bin.

Meanwhile, the tidal wave of DVD releases into the market continues, and consumers are finding more choices to fix their DVD cravings in virtually every kind of public environment in which they find themselves, from fast-food restaurants to convenience stores to supermarkets and mini-marts in gas stations. And, of course, traditional home entertainment retailers, a group that encompasses a huge range of retail outlets in its own right, are in a daily pitched battle to outprice each other on the hits, while finding niches in which they can try to find better margins.

How low can you go? Well, with some of the new studio DVD rev-share deals and trade-in programs under way, the margins on low PVT pricing are still quite good, thank you, so the answer may be … we can go lower. With retail shelf space shrinking and DVD player household penetration cresting, studios with unreleased catalog product still burning a hole in their corporate pockets will do what they can to cash in on the DVD market with those titles while the getting is still good; so, yeah, they'll probably price accordingly to move that product out.

The question then becomes, is there a place in this market dynamic that could allow studios and retailers to slow this downward progression? TV DVD and other gift sets offer some opportunity. And while it's been heartening to see hit movie new releases maintain their pricing levels, I wonder when we might start hearing a new consumer mantra — “I'll wait for the used version” — to start creeping into use, supplanting the now universally acknowledged “I'll wait for the video.”

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