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TK's MORNING BUZZ: NAVD Takes a Firm Non-Stance on Ingram's Exclusionary Deals With Warner and Universal

10 Nov, 2000 By: Thomas K. Arnold

Distributor Steve Scavelli (center) of Flash Electronics is flanked by Mitch Budin of DreamWorks Home Entertainment (left) and Jed Grossman of Artisan Home Entertainment. (Hive Photo)

The trade association's biggest member cuts special deals with the studios.

The smaller members get upset and urge the association to look into those deals, and support them should they decide to mount a legal challenge. The association says no, it can't get involved in disputes between members. The smaller members fume.

Such was the case with the VSDA two years ago, when then-VSDA president Jeffrey Eves refused to let the association get in the middle of the spat between Blockbuster Inc. and independent retailers over Big Blue's direct revenue-sharing deals with the studios.

And now it appears that the National Association of Video Distributors will take a similar stance--or non-stance, rather--in the dispute between Ingram and other distributors over the top wholesaler's deals with Warner Home Video and Universal Studios Home Video that cut out most of its competitors.

Like the VSDA, the NAVD is in the tough spot. But like the VSDA, the NAVD is ultimately going with the "big tent" approach, believing that by not getting involved in member disputes and potentially alienating its biggest member, it can more effectively do its job in the future.

"What kind of clout do you think we'd have with the studios if Ingram wasn't on board?" NAVD executive director Bill Burton asked me the other night.

He's got a good point. Already, distribution only accounts for about 45% of rental product, and rental only accounts for about half total video sales. Slice that in half again--should Ingram bow out--and you'd be left with a weak association of comparatively small distributors.

Jeff Eves used the same argument to keep the VSDA neutral. Lose Blockbuster, with nearly 40% of the rental market, and you don't have nearly the clout you had before. (In the VSDA's case, it was belatedly discovered that the issue was also financial. Single-store retailers account for 78% of the VSDA's membership, but only 17% of its revenue).

I took issue with the VSDA's neutrality stance at the time, saying that if the association consists primarily of independent retailers, it should act in the best interests of the majority of its members and if they want the VSDA to get involved, then the VSDA had better do something, regardless of Blockbuster.

In the NAVD's case, I'm not so sure. The NAVD only has a handful of members, and had any one of them been offered a deal similar to the ones Ingram got--fulfillment for Warner's Rental Direct, and full-line distribution for Universal's rental, sellthrough and DVD--you can bet your PlayStation 2 they would have jumped on it.

And yet the exclusionary deals clearly hurt the other distributors, who comprise the majority of the NAVD's membership.

What's the association to do? I'm going to sit this one out--and thank my lucky stars that I'm not Bill Burton, an honorable gentleman in a business where honor and gentility no longer seem to have a place.

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

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