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TK's MORNING BUZZ: Mr. Antioco, Why Are You Talking Tough About Revenue-Sharing... Just Because You Can?

26 Jul, 2001 By: Thomas K. Arnold

No, I'm not going to drop it.

Yesterday, I wrote about why I thought Blockbuster chief John Antioco was talking tough about revenue-sharing. I speculated that because VHS rentals are starting to decline while DVD rentals are soaring, Blockbuster sees an opportunity to get more advantageous revenue-sharing terms because it really doesn't need such huge quantities of the hits on VHS as it used to.

I've given the matter much thought, and I've also had some interesting theories flow in from readers of Hive4media.

Let me advance some of them.

Theory No. 1: John Antioco is talking tough about revenue-sharing because revenue-sharing is a marketing tool, and he's gotten just about all the market share he can get. When Blockbuster first began sharing rental revenues with the studios, its market share was just over 20%. Now, it's around 40%. Blockbuster used revenue-sharing to load its stores full of hits, and then used guaranteed rental programs or extended rental periods to wipe out the competition. Now, there's not much competition left. Blockbuster no longer needs revenue-sharing. Revenue-sharing has accomplished its purpose.

Theory No. 2: John Antioco is talking tough about revenue-sharing because he wants to force the studios to raise DVD prices, and then share DVD rental revenue with the studios in return for significantly lower upfront fees. It's the same strategy he used to nearly double Blockbuster's market share between 1997 and now, only with rental-priced VHS cassettes. He could do equally well, he reasons, with rental-priced DVDs.

Theory No. 3: John Antioco is talking tough about revenue-sharing because he can. Blockbuster's market share has become so formidable he's got more clout at the negotiating table than ever before. And, as they say, a penny saved is a penny earned.

I'd like to publicly invite Mr. Antioco to comment on these theories. Other retailers may not care much for what Blockbuster has done, but you've got to hand it to John Antioco -- he has turned the chain around, he has significantly increased its market share and he has gotten the studios to comply to his terms and conditions. He's a very smart man, and I think what he has to say would be of interest to everyone.

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

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