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TK's MORNING BUZZ: The Video Pipeline is Full This Year, but What Happens if the Holiday Movie Season is a Dud?

22 Jun, 2001 By: Thomas K. Arnold

Whatever happened to entertainment being recession-proof?

Two interesting items came across my desk today, both of them dreary.

One was a release from MGM in which the studio says it is issuing a "revised outlook" for the second quarter and full year of 2001 because two theatrical releases didn't meet expectations. (The press release did not specify which movies they were, but corporate spokesman Joseph Fitzgerald identifies them as What's the Worst That Could Happen? and Josie and the Pussycats).

The second was from beleaguered Valley Media, in which the distributor -- which recently got out of the video rental business --announced a decrease of more than 12% in net sales and a loss of $29.5 million. The release quotes Valley chairman of the board Barney Cohen as saying, "Fiscal 2001 was just plain ugly."

Don't label me a doomsayer, but I fear this is only the beginning. I have long held that while entertainment may have weathered past recessions surprisingly well, its ability to persevere in the face of adversity is diminishing. Even during our last recession, back in 1990 and 1991, there was a significant shakeout among video retailers, even though consumers continued to tell pollsters that they considered renting a video a great bargain.

This time, I believe, entertainment will fare even worse. One reason, of course, is that there are so many more entertainment options out there that are either free or cheaper than renting a video or going to the movies.

Television has gotten a lot better, both on the broadcast side and on the pay side; we have never had so many channels to surf through. Then there's the Internet -- literally a world of entertainment at your fingertips, for pennies a day.

The nature of this quasi-recession we're in now is also different than past economic hardfalls. I'm no economist, but near as I can tell this "recession" has been triggered by corporate panic, followed by widespread layoffs. Add that to all the news that's been going around about the great dot-com shakeout and it's no wonder consumers are getting skittish and worried.

They're watching their dollars a little more closely, and already, our industry is feeling the effect. Sure, we're still seeing the box office set new records, but that's largely due to a handful of "event" movies, the must-sees, like Shrek. Lesser stuff is falling off; even Pearl Harbor, which generated more advance buzz than any movie since Titanic, may have trouble topping the $200 million mark.

On the home entertainment side, the still-soaring DVD market is keeping video alive, but it's an artificial high. DVD is a phenomenon; without it, we'd really be feeling some pain. The novelty of DVD is making lots of people buy and rent lots of movies they'd otherwise pass by, but DVD alone can't sustain the video market forever -- particularly if the product flow takes a turn for the worse, and many are saying it will.

Keep in mind that for many months now, there was talk of a strike by writers as well as actors. Studios rushed films into production; their home video divisions drafted ambitious catalog campaigns for DVD.

We're now seeing the fruit of all that excess labor. I don't think video retailers have much to worry about until the year is over; the video pipeline is full.

But the holiday movie season will be a telling one. If it's a dud, then watch out.

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

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