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TK's MORNING BUZZ: Trimming Expenses Has Never Made as Much Sense as it Does Today

25 Sep, 2001 By: Thomas K. Arnold

There seems to be great debate about whether or not we're heading into arecession, and whether video retailing does well during a recession or suffers, like most other businesses.

Memories are already hazy over the last recession we had, back in the early 1990s. I seem to recall a great shakeout among independent retailers that was attributed in large part to the poor economic climate. I wrote about this shakeout in my early days at Video Store Magazine; I still rememberconversations with retailers who were going out of business because of theshaky economy.

Yet others maintain our industry withstood the recession of 1991 quite well.As consumers tightened their purse strings, renting a video and being able toentertain the whole family for a couple of dollars a night seemed like a goodbargain. The great shakeout, they say, was caused by other factors, not the least of which was the emergence of Blockbuster as a true super power.

The strength of video stocks during last's week dramatic stock-market slide seems to support the latter point of view. And yet the video industry of today is vastly different from the video industry of 10 years ago. Back then, rental ruled, while sellthrough was just a minor-league player; today,sellthrough accounts for at least half of consumer video spending, while the soaring DVD business is fueling both sides, rental as well as sellthrough.

So what's going to happen should the economy turn south? That's a very goodquestion, and one I certainly don't profess to have the answer to. I can say this -- while it's always a good idea to cut the fat, trimming expenses has never made as much sense as it does today.

We may or may not be in a real recession, but we certainly are in a period ofeconomic uncertainty. And it's always better to be safe than sorry.

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

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