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TK's MORNING BUZZ: 2000 Has Been a Topsy-Turvy Year for the Home Entertainment Industry

22 Dec, 2000 By: Thomas K. Arnold

This is my last column of the year; I'll be off on vacation all of next week, and our Web gurus, Steve Apple and Ed Ochs, have graciously allowed me to take a little time off from writing my daily column over the holidays.

Looking back on 2000, it's certainly been a topsy-turvy year for the home entertainment industry.

The VHS videocassette began a precipitous slide in both sales and rental. But the explosive success of DVD more than made up for the slack, particularly on the sales front.

Savvy video specialists wisely began transitioning away from VHS. Blockbuster Inc. began selling satellite dishes and making plans for a video-on-demand service over the Internet. Sellthrough champs like Best Buy and Musicland began dumping VHS inventories and replacing them with DVDs. And independent video rental stores began building lucrative DVD rental sections, despite fears that the studios, alarmed at cannibalization of the higher-priced VHS rental cassettes, would mess with the existing pricing structure.

And yet for video specialists, these fears were the least of their worries. Indies continued to go out of business as Blockbuster accelerated its aggressive quest for market share, which at the close of the year stood around 40%. Hollywood Entertainment, with 1,806 stores the nation's No. 2 video rental chain, dumped its money-losing Reel.com subsidiary but ended the year in worse shape than it began when its stock price sank below a dollar a share. And two other public video chains, Video Update and Video City, succumbed to Chapter 11 bankruptcies.

Distribution had one of its worst years ever. The year began with rumors that Warner Home Video would begin selling rental product directly to retailers--rumors that were soon confirmed. Two video distributors, M.S. and Sight & Sound, went out of business within weeks of each other. Just as summer turned to fall, Universal Studios became the second major studio to yank product from distribution, limiting its full line to two wholesalers and letting a third carry only sellthrough VHS and DVD. Distributors were still reeling from the shock of the Uni announcement when market leader Ingram Entertainment bought No. 2 Major Video Concepts and proudly proclaimed the combined company's market share was bigger than that of all six of its competitors combined.

There was a lot of hype about electronic delivery, with pay-per-view proponents maintaining they were closer to their ideal of video-on-demand for everyone and studio visionaries declaring digital downloading The Next Big Thing.

How much of this hype will turn into reality is still a big question mark as the year winds down. However, some key analysts and retailers have revised their "sky is falling" thinking and now believe digital delivery can coexist alongside packaged media, with the overall pie growing bigger.

The year ended with Best Buy announcing a merger with Musicland, the nation's top music chain, and its intent to turn Musicland's mall and rural stores into entertainment emporiums offering movie and music software as well as DVD players, satellite systems and other hardware.

The stage, many say, is set for video retail to undergo a major facelift. And that can be either good news or bad news, something we'll have to wait until next year to find out.

Happy holidays, on behalf of the entire Video Store Magazine family.

Comments? Contact TK directly at:TKArnold@aol.com

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