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TK's MORNING BUZZ: Pity the Poor VHS Rental Cassette -- Soon You Won't Be Able to Give Them Away!

12 Feb, 2001 By: Thomas K. Arnold

My rantings about the ultimate demise of the rental-priced VHS videocassette have found support in Hollywood.

"Two years," one studio chief told me. It's a dying species, done in by complicated copy-depth programs and revenue-sharing. The scenario, at this point, is that we're going to see an accelerated transition from VHS to DVD by retailers, and at the same time witness a continued "real price" drop in VHS. By real price, of course, I mean what retailers are actually paying per cassette, not the unrealistic wholesale price that only about 15%, if that much, of the retail population is still paying. When the "real price" hits sellthrough levels, the rental cassette is done and finished. Bye-bye!

It almost goes without saying that as the VHS cassette rides off into the sunset, so do copy-depth programs and revenue-sharing. Who's going to want to share revenue on a product that can be purchased outright for less than $20? Certainly not Blockbuster, which has already snubbed any and all studio attempts to include DVD in its renegotiated and renewed revenue-sharing pacts with the major studios. And with a market share of 40%, Blockbuster is in a better position to dictate market terms, and ignite/kill trends, than it has ever been.

No, I think we can look forward to simpler -- much simpler -- times ahead. Fears of DVD rentals cannibalizing VHS rentals will be a moot point, simply because the average price of a rental cassette is tumbling down, down, down, and because DVD is re-energizing the rental market, rekindling consumer demand in rental (my view, shared by a growing number of analysts) and (demand driving supply) prompting retailers to up their buys, overall.

That's a funny thing -- suppliers that have tried drastic price cuts in VHS cassettes, most notably Artisan and USA, have quickly abandoned their schemes upon finding that retailers aren't increasing their buys.

Pity the poor VHS rental cassette. It's getting to the point where you can't give them away!

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

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