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TK's MORNING BUZZ: 'Not Managing Your Rental Business Right?' E-mails Stream in From the Front Lines

9 Feb, 2001 By: Thomas K. Arnold

Yesterday's column triggered more responses than any of my previous online diatribes. I had quoted an anonymous studio executive as saying that retailers who pay more than $24 per copy for his studio's rental titles are "not managing their businesses right."

Well, the e-mail pipeline to the office was full by the time I got to the office, and throughout the day the responses kept streaming in. Here's an edited selection of the best and most pithy:

"The first problem with the statements made by the anonymous studio executive is that, while some studios do offer programs (revenue sharing or otherwise) that can net the cost per copy down to a sub-$24 level, many do not. Even so, the real issue is not what the cost per copy is, but rather what the COST PER TITLE is compared to the revenues that title will generate. I can easily obtain Warner titles (for instance) for less than $15 per copy. However, if the "goal" is too high (as it has been for the entire first quarter of 2001), then my cost for the title ends up being disproportionate with the revenues it will generate, and in some cases being GREATER than those revenues, resulting in an unnecessary loss. Even paying $5 per copy is too much if the goals are so high that I am unable to recoup my purchase price (let alone actually make a profit)..."

"Shame on the retailer that is not demanding these prices from the studios. They better not expect the studios to volunteer to lower the price for them. It is up to the retailer to demand it! The more retailers that do, the more sustainable competition out there for the big boys..."

"I wish you could tell me what studio is offering their titles for a whopping $24. I would by directly from that studio and save a ton of cash. Oh, I forgot, I can't buy directly from the studios, only the chain gangs can. So much for the IVR and the level playing field. Thank you, studios."

"Your column today was another eye-opener. I think it reinforces the need of independent rentailers to move to ALL DVD and to do so as soon as is possible. With the exception of Warner Bros. the studios have refused to level the playing field. If a studio is getting $24 per tape I would guess that the big guys are paying about $16 and the little guys are paying $32 on the average. It is no wonder Blockbuster is pushing for higher prices on DVD."

"Under their sweetheart revenue-sharing deals their cost would remain about the same but the competition down the street would be forced to pay twice as much."

"The question should be, 'How much are you receiving, per cassette, for rental-priced theatrical titles with a box office of $1 million or more that can be purchased without program ties to any other title?' The answer to that questions is simple for independents:

ARTISAN: $37 (in 3's per program)
MGM: $35 (2.5x)
BUENA VISTA: $38-$50 (3x)
FOX: $48 (2x)
UNIVERSAL: $38-$45 (3x)
COLUMBIA: $42-$50 (1.3-1.5x)
WARNER: $20-$25 (5x)
DREAMWORKS: $42-$45 (2x)
TRIMARK: $37 (in 3's)
PARAMOUNT: $38 (3x)
USA: $48 (1.5x)

See you next week.

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

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