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TK's MORNING BUZZ: How Will Bill Burton Keep Order on the NAVD Conference Call Today, With the Lawsuit Against Universal Burning Up the Line?

21 Feb, 2001 By: Thomas K. Arnold

What timing! The antitrust lawsuit filed yesterday against Universal and its two chosen full-line distributors precedes by exactly one day a conference call among the National Association of Video Distributors board of directors.

I sure wouldn't want to be NAVD chief Bill Burton today, trying to maintain order while litigants from both sides are on the same phone line.

The suit, details of which appeared here on the Hive4media.com Web site within an hour of the filing in U.S. District Court of Eastern New York, finds two of the wholesalers shut out by Universal in its distribution "realignment" announced last October, Flash Electronics and ETD, accusing Universal of conspiring with Ingram Entertainment and VPD to fix prices and deprive other distributors of Uni's video business.

I'm not going to discuss the merits of the case or take sides, but I will say that the filing reflects the passionate mindset key players have toward the one common ground everyone agrees upon -- namely, consolidation in the independent retail sector.

Universal believes that with the ranks of indies dwindling, there's no longer any need to maintain the same level of distribution. You no longer need to slice the pie into as many pieces as you used to, the studio believes.

Flash and ETD, on the other hand, believe the population of independent retailers is immaterial. They provide a certain level of service to their clients, regardless of how many clients they have. And they also have a right to remain in business.

That last argument, about a right to remain in business, is probably the dissident distributors' weakest legal claim. But it's also the most emotionally compelling.

I know the guys at Flash and ETD, and they're extremely good at what they do. I know some of their accounts, and realize that if Flash and ETD would disappear, a significant percentage of their retail accounts might also shrivel up and die, simply because they depend on their distributor for a lot more than simply shipping them product. They come to their distributors for advice on buying, for merchandising tips, even for emotional support in tough times. They don't want to work with anyone else, and they'd just as soon venture into another line of work should someone try to force the issue -- as many believe Universal is doing.

Universal's decision to pare down its distribution network may have been a smart business move. It may be perfectly legal. But it also brings the pain of consolidation right out into the open, along with the fact that in a shrinking industry, someone's bound to get hurt.

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

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