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Rentailers Increasingly Retailers After All

20 Jul, 2004 By: Stephanie Prange

From the beginnings of the sellthrough business, industry pundits have exhorted rentailers to get into selling movies. Many said they were missing the boat, while rental dealers claimed they couldn't keep up with mass merchants' loss-leader pricing and stuck to what they did best — rent movies.

What a difference DVD has made.

Compared to VHS, the cost of the little disc was lower, the consumer appetite to buy it much higher (primed by mass merchants and first-day sellthrough availability) and its format more durable and, therefore, collectable. That opened a whole new sellthrough business for the rental dealer — low-priced previously viewed titles.

As I talked to rentailers during last week's VSDA convention, I asked them if they were worried about the drop-off in rental transactions. They all said no. Everyone said PVT had more than offset the decline in rental revenue. They all considered PVT a part of rental revenue, but I beg to differ. Whether they like to term it as such or not, rentailers are in the sellthrough business. And now that they have this toehold, I think they can move on to selling new titles with more success.

Because DVD was available as a sellthrough item from the get-go, mass merchants expanded their shelves, but data shows they may have finally hit a wall. The DVD Release Report, edited by contributor Ralph Tribbey, noted that the title total for 2004 is expected to show only a small gain for the year: 5,232 vs. 5,134 in 2003. If the number of titles is to grow, so must the sellthrough marketplace absorbing them.

And that's where the rental dealers come in. They are in a strong position with independent suppliers. During the VSDA convention, budget sellthrough supplier GoodTimes Entertainment gave dealers a tutorial on selling product that isn't Shrek 2. He urged rental dealers to learn to sell stuff that discounters won't discount or won't even shelve due to space constraints. In essence, he asked them to become niche sellthrough retailers, competing in arenas that the discounters won't or can't, much as they have with PVT.

“You have to look at independent suppliers as your partners [in tackling the sellthrough business],” he said, telling them to look for evergreen catalog and other budget product that sells.

It's a provocative idea, especially if rental transactions begin to fall off so much that PVT can't make up the difference.

If indie music retailers survived selling music alongside mass merchants (before the downloading debacle), so can indie video retailers — and they'll have the cushion of the traditional rental business and PVT. In the end, though they built their business on rentals, rentailers can be in the sellthrough business after all.

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