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TK's MORNING BUZZ: Are Retailers Paying Too Much for Rental-Priced Cassettes Managing Their Businesses Right?

8 Feb, 2001 By: Thomas K. Arnold

About two weeks ago, I wrote a column in which I said the average price retailers are paying for a rental-priced VHS cassette had sunk to the low $30s. I was immediately chastized by retailers as well as distributors who argued no way had the price come down so low; one e-mailer said he paid an average of $48 per rental cassette, while others maintained the actual price was in the high $30s to low $40s.

I stand by what I said, and I now have corroboration from a senior home video executive with one of the six major studios. Granted, the price paid by independent retailers might be more, but for this studio, the average price its rental cassettes fetched is -- are you ready for this? -- a whopping $24.

Twenty-four dollars.

Now, if indie retailers are paying a lot more than that, then it figures that the revenue-sharing public chains are paying a lot less. Through revenue-sharing, the chains pay a token fee upfront, and the amount of revenue they're sharing on the back end has been steadily declining due to lower demand for VHS rental cassettes, as more and more consumers either rent the DVD from the same store or buy the DVD someplace else.

So much for any level playing field.

This studio executive, however, maintains all retailers should be able to bring their price down to the same level. "If they're not, then they're not managing their businesses right," he says.

Retailers, I'm anxious to hear your comments.

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

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