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T.K.'s MORNING BUZZ: Distributors Breathe Sigh of Relief Now That MGM Will Not Streamline

17 May, 2001 By: Thomas K. Arnold

Distributors are breathing a sigh of relief now that they've learned that MGM Home Entertainment will not streamline its distribution network after all.

Rumors that MGM would "pull a Universal," in the words of one wholesaler, limiting full-line distribution of its video product to one or two companies, were the buzz of the NAVD conference last month. There, MGM executives reportedly complained that distributors weren't focusing enough on their product.

This buzz grew louder when MGM subsequently summoned distributors to Los Angeles for a series of one-on-one meetings.

Publicly, wholesalers kept mum about the whole affair. But privately, distributors sliced from Universal's roster rallied behind the scenes with a flurry of threatened litigation and all sorts of allegations of ethical and possibly legal breaches.

Did MGM executives cave under all this pressure, of which they were surely aware? Did the one-on-one meetings convince them their needs would be better served with all distributors in their camp, instead of just one or two? Or was the whole thing a ruse? Did MGM simply want to send distributors a message--"We will not be ignored!"--at a time when the studio has some exceptionally strong product in the pipeline?

Good questions, all of them--and I don't profess to have any answers. What I will say is this: I'm glad MGM is sticking with traditional distribution, at least for the time being. I've spoken with scores of distributor and studio field reps and retailers since the whole distribution shakedown began nearly a year ago with the announcement of Warner Rental Direct. I have come to truly believe that distribution serves a vital role to the independent retail channel. There is simply no other way studios can give retailers the proper amount of attention and service without the help and full support of these middle folk.

I know, I know--the studios that did cut back had their reasons, some of which we can only surmise. Warner went direct, I have a hunch, because they don't really care all that much about indie retailers; they like controlling their product and the fewer players, the better. As for Universal, I think economics were a factor; I think they probably got some great commitments from VPD and Ingram and, having just been sold, cost containment is paramount on their agenda.

But on the whole, distribution is a vital conduit to the indie retail channel, which still generates a hefty chunk of video dollars for the studios each year even though its share of the overall video market isn't what it used to be. And I know for a fact that there are retailers out there who depend so much on their distributors--not just for their product, but for support and even advice on what and how to buy--that they'd just as soon close up shop if they had to take their business elsewhere.

With the economy worsening, businesses are less inclined to take risks. Making drastic changes in a distribution network that, let's face it, has actually worked quite well over the years is a risk I wouldn't think studios would want to take.

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

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