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TK's MORNING BUZZ: Is This the Year Independent Video Retailers Finally Get the Respect They Deserve?

2 Apr, 2001 By: Thomas K. Arnold

It will be interesting to see what direction total video rental spending takes this year, and whether the independent video retailers, long shunned by studios, will finally get the respect they deserve as generators of a tidy chunk of Hollywood coin.

In the last few years, much has been written of how video rental revenue has remained flat, or even bumped up slightly. Studio executives have been quick to pat themselves on the back, saying the numbers validate their copy-depth initiatives, including revenue-sharing.

But let's take a closer look. Yes, overall rental spending hasn't experienced a precipitous decline, as many figured it would back in the dark days of 1997. But the dollars have shifted, toward the big chains like Blockbuster and Hollywood, with their rapid pace of store openings, and away from the independents, many of whom were forced to shutter their doors due to the competitive crossfire between the big chains.

Now, as my colleague Bruce Apar noted in his latest "Working Weekend" column, Blockbuster's growth has slowed, while Hollywood -- which for a time had been opening hundreds of new stores a year -- will actually finish 2001 with fewer stores than it had at the beginning of the year (at least 43 closures, as opposed to fewer than 10 openings).

This could have a significant impact on consumer spending. Blockbuster and Hollywood were opening stores like crazy, and yet overall rental spending remained essentially flat. Now, with the big chains settling down, what's going to happen?

A lot depends on the fate of the indies. If the attrition rate among independent video store operators continues, I predict rental spending will take a nosedive, mitigated somewhat, but not enough, by DVD. If the slowdown in new chain-store openings is accompanied by a halt to what's tactfully known as "consolidation" in the independent sector, a decline may be nowhere near as steep and may, in fact, not even materialize.

In any event, video rental is still a mighty $10 billion cash cow. And any studio executives who would like to continue milking it had better pay heed to what many now consider the "underclass" of video retailing.

It's a pivotal moment for the video industry's own "class" warfare.

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

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