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TK's MORNING BUZZ: Unlike Warner, Universal Has Yanked Its Sellthrough VHS and DVD From Distribution -- With DVD the Only Real Growth Area Left

5 Oct, 2000 By: Thomas K. Arnold

The other shoe has dropped.

The video distribution community was stunned, although not altogether surprised, by the announcement late yesterday that Universal Studios Home Video had become the second major studio in two months to "streamline" distribution of its product.

On the one hand, the change is not as drastic as Warner Home Video’s Rental Direct program. Universal is still leaving physical distribution of its product to wholesalers, albeit just two of them for rental (and three for sellthrough). In addition, the studio still plans on using Rentrak Corp. for its revenue-sharing, unlike Warner, which launched its own weighty revenue-sharing machine.

But on the other hand, the Universal deal is far more drastic--and ominous for the remaining distributors.

Unlike Warner, Universal has also yanked its sellthrough VHS and, most significantly, DVD from the clutches of distribution. And with DVD the only real growth area in packaged home entertainment’s future, it’s a loss that certainly will be felt.

You can’t really fault either studio for reducing its dependency on distribution. Going through eight distributors to sell your product to a still-dwindling account base of independent specialty retailers doesn’t make much sense.

But ironically, that’s only part of the reason both studios dropped distribution. The other is the fear that the continued complexity of copy-depth programs is taking distributors too much time and effort to explain, and the studios would rather do it themselves.

As one distributor told me, "Talk about adding insult to injury. They come up with these complex programs, force them on us, and then cut us out because we’re devoting too much time to making them work."

Welcome to Hollywood, where eating one's young is standard practice!

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

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