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Reflections on a Post-FAIR Era

23 Feb, 2003 By: Kurt Indvik

The headline on our initial reporting of last Thursday's federal court ruling dismissing the antitrust lawsuit in California brought by a group of independent retailers against Blockbuster and a host of studios stated "Strike Two for the Indies." Strike three would, presumably, be a ruling against the appeal pending on the dismissal of the similar lawsuit in San Antonio last June. I am not hearing a lot of expectation that the San Antonio plaintiffs are going to hit that one out of the park and, if preliminary returns on our online poll about the Los Angeles ruling are any indication, most people in the business pretty much see this latest decision as "the final nail in the coffin" of the indie retailers' efforts.

As these cases have come to a crescendo over the past months, I have heard it said on several occasions that whatever the outcome for the parties involved in the litigation, the overall future impact of these decisions was largely moot. The reason being that the whole concept of revenue-sharing, something that had radical implications five or more years ago, applied as it was to VHS for the most part, was already becoming anachronistic in the era of sellthrough-priced DVD. Six months or so ago I think that may have been a point well taken. But now I am not so sure.

The fact is that revenue-sharing involving DVD separately or in combination with VHS is becoming more prevalent. And as I have recently said in this space, I will not be surprised to see rental windows and rental pricing programs for select titles on DVD begin to emerge from studios, which could involve new revenue-sharing arrangements.

I am not suggesting that the court decisions on these past two cases will have any direct bearing on the specific structure of any future revenue-sharing deals, but I have heard from several industry observers that - and this is not a reflection on the merits of either side of the case - if nothing else, studios are going to continue to be careful to ensure that they find ways to involve the full spectrum of specialty retailers in revenue-sharing options.

It's to their advantage, certainly. Studio execs are the first to point out that the last thing they want is to help create one 800-pound retail gorilla (a Big Blue one) that can muscle bigger and bigger concessions as it gobbles market share. In fairness to Blockbuster, John Antioco has said that's completely understandable and pretty much proves why any conspiracy theory between Blockbuster and the studios doesn't make sense.

While "volume discounts" can't be denied, they can be reasonably scaled for every size retailer and that should be the expectation of all in the business. And to that end, perhaps the coalition of retailers called the Fairness Alliance of Independent Retailers (FAIR) can take some satisfaction in their efforts over the years.

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