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Rev-Share Deals Probably Don't Mean A Return to Bad Old Days

28 Apr, 2003 By: Stephanie Prange

A recent post on the Video Software Dealers Association discussion board noted the new DVD revenue-sharing deals with the big chains and asked, “Are we about to be screwed again?”

The post referred to the controversial revenue-sharing deals of the late 1990s between the big rental chains and the studios, which forced many independent retailers to shutter, spawned a bitter antitrust legal dispute and changed the whole character of the business.

Despite the bad blood of recent memory, the simple answer to the question of whether indies will return to the bad old days is probably no.

The studios don't appear to be abandoning the sellthrough strategy on hit DVDs (Why would they want to upset Wal-Mart?), which levels the playing field on the most desirable titles between the big rental chains and the indies, thanks in part to the First Sale Doctrine.

The new revenue-sharing deals seem to be aimed at getting retailers to bring in the secondary titles, not more of the hits. They essentially allow retailers to share the risk of buying the lesser-known titles with the studios and maintain a nice selection in the process. That's a far cry from offering must-have titles to the big rental chains at what indie retailers complained was a highly preferential price with which they could not compete.

Retailer Tom Hannah doesn't seem too worried. In answer to the post, he wrote, “As for getting screwed by revenue-sharing, I think that will only happen to IVRs [independent video retailers] that enter into bad deals.”

He noted the big retailers may be using revenue-sharing as risk abatement in a mercurial business and that it's harder for the big chains to judge the number of copies needed for each individual store.

That's something independent retailers who are savvy enough to have weathered recent years probably won't have to worry about. If they've survived, they most likely have the expertise necessary to gauge their customers' demands. And, as Hannah notes in our article, the secondary titles are not must-have commodities. He's survived in the past by buying them later at a reduced price.

Still, suspicions in this business run high -- especially since the recent bad old days of indies exiting the business in large numbers looms large. I wouldn't discount the studios' interest in earning top dollar for product, but I don't think the market forces today dictate indies' demise.

Sellthrough DVD has been an unintentional peacemaker in the rental business. If the big chains think revenue-sharing on DVD fits into the company's business plan, it doesn't necessarily mean the indies need to follow suit.

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