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TK's MORNING BUZZ: Are Studios Deliberately Trying to Kill the VHS Rental Cassette?

29 May, 2001 By: Thomas K. Arnold

Are studios deliberately trying to kill the VHS rental cassette? It certainly appears that way, judging from the out-of-control goal system currently in place.

I just received a letter from a retailer who complained that his goals for two movies from the same studio are exactly the same, even though one grossed $30 million at the box office and the other, $60 million.

This follows several other letters that complain goals are getting higher and higher as time goes on, due to the steady influx of more cassettes into the marketplace. Retailers who bought high on titles included in early copy-depth programs are finding that their buys are coming back to haunt them, because those titles invariably become the base for subsequent releases.

It's easy to see how this whole thing can spin out of control, and I have to wonder, are studios trying to milk the most out of VHS because they can see the end is near? Do their internal studies show DVD continuing to cannibalize sales of VHS rental cassettes at a growing clip, to the point where the studios want to dump as many cassettes into the market and enjoy the ride while it lasts?

Interesting questions, and ones studio executives, when asked point blank, will answer with a resounding, "No, of course not."

Still, one has to wonder. I think at this point, most industry minds concur that the rental cassette's days are numbered. It may be a slow phaseout, it may be fast, but eventually VHS cassettes will all be priced at current sellthrough levels, or a little above.

With DVD, of course, it's a different story. The jury is still out whether studios will simply accept low pricing as the new order of selling packaged home entertainment, or transfer the current two-tier system to discs. As a matter of fact, I don't think all the studios know what they're going to do yet, although all sorts of plans and strategies are being discussed, analyzed and considered.

The one studio that has made its plans for DVD public is Warner Home Video, and those plans are to keep discs at sellthrough prices in the belief that DVD should help retailers generate incremental revenue, and not be viewed merely as a "replacement" for VHS.

If I were a betting man, I'd gamble that Warner will also be the first to bid the rental-priced cassette adieu.

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

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