TK's MORNING BUZZ: 'Too Many Distributors Are Chasing Too Few Accounts,' Says David Ingram10 Oct, 2000 By: Thomas K. Arnold
The video distribution community was rocked with its second earth-shattering announcement in less than a week when Ingram Entertainment, confirming weeks of speculation, yesterday announced it was buying Major Video Concepts.
It's hard to believe the sale wasn't related to the announcement last Wednesday by Universal Studios Home Video that it was limiting distribution of its product to three wholesalers, including Ingram but not Major.
And yet in an exclusive interview yesterday afternoon, David Ingram insists that's not the case. He says it was "dumb luck" that the Universal cutback came so close to the finalization of the purchase agreement.
Still, Ingram may have used this "dumb luck" to its advantage. It has been widely speculated that after the Universal deal was announced, Ingram went back to Major and renegotiated the purchase price. David Ingram won't confirm this, but he won't deny it, either. Regardless, the end result gives Ingram a lot more clout than ever before.
The company is now the only distributor through which retailers, at least officially, can buy rental and sellthrough product from all six major studios (even though with Warner Home Video, Ingram merely acts as the information processor).
And by snapping up Major, Ingram now has a 23% share of the rental market and more than 50% of that portion of the business channeled through distribution--a higher percentage than all six of its remaining competitors, combined.
That puts Ingram right up there with Blockbuster in terms of clout and power with the studios--and David Ingram, the company's majority owner, into the driver's seat as a force to be reckoned with.
Instead of me proselytizing this morning, I thought I'd pass on some choice comments from David about the industry and his competitors.
For starters, David agrees with the contention by some studio executives that given the dwindling account base of independent retailers, there are too many distributors. "I think it's very true that there's been a big change in the amount of business available to distribution, and if you want to say there are too many distributors chasing too few accounts, I think that's an accurate statement," he said. "I think the studios recognize that they would rather have a smaller group of financially stable distributors than a world of eight to 12 distributors, some of whom are extremely financially unstable.
"That's not good for studios, and it's not good for retailers, either."
David also has some words of advice for his smaller--soon to be a lot smaller--distribution competitors. "If I were Baker and Taylor I would be focusing more on my book business and library," he said. "If I were WaxWorksI would have just sold my retail chain and I'm not sure precisely what I would be doing. If I were ETD, I don't know a whole lot about the different businesses they're in, so I'm not sure. I have read some of the comments about Ron Eisenberg's feelings [he's not ruling out litigation in the wake of the Universal deal]. I like Ron, and I hope he doesn't drag us down and waste our time in courtrooms."
He's also ambiguous about any potential price hikes. "That's a difficult question to address," he said. "Our game is, how large can I get and how well can I spread my operating costs so I can get [product] costs down as low as possible and get the best return on investment to customers, while at the same time make enough margins to make an acceptable return on investment for our at-risk capital.... This is not a charitable thing we're doing, and if we're not making any money, I don't know why we are doing it."
Retailers and other distributors, I'd love to hear your comments.
Comments? Contact TK directly at:TKArnold@aol.com