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TK's MORNING BUZZ: Welcome to the Sideways Selling Superstore

17 Nov, 2000 By: Thomas K. Arnold

Welcome to the Sideways Selling Superstore.

MetaExchange, the online swap meet for small businesses that operates a video trading site, sent out a most interesting press release that crossed my desk last night.

It appears the company is seeking to legitimize the industry's Dirty Little Secret.

No, I'm not talking about adult. I'm talking about sideways selling, which every studio executive vows to crack down on and yet which distribution sources estimate 80% of small retailers engage in at some time or another.

Sideways selling, of course, is the practice of retailers pooling their buys on new releases covered by copy-depth programs so one of them can make goal.

This chosen retailer then splits his order, divvying up the freebies so that the effective price of each new video is a lot lower than it would be had it been purchased legitimately.

Studios hate sideways selling, but many independents say for them, it's become a necessity. It's the only way they can afford to buy enough product they need without mortgaging the farm or meeting a goal they claim is invariably unrealistic.

I'll quote directly from MetaExchange's release: "The power of the Internet has been harnessed to easy buying and selling movies between retailers.

"MetaExchange ... has opened its [video] site to accommodate pre-release transactions between retailers for new movies to be delivered by street date. This method of purchasing and buying (commonly referred to as "sideways" selling) is now streamlined with automation only the Internet can provide.

"Retailers around the country can now place 'bid' and 'ask' offers on movies prior to their release. Then, a retailer who finds an attractive 'buy' or 'sell' offer for a title can enter into a transaction for copies of that upcoming release."

MetaExchange senior v.p. Bob Reid says "sideways selling is commonplace among retailers today and our system simply leverages the Internet to bring thousands of retailers together to make the process more efficient and economical."

The release goes on to state that "the absence of broker markups and studio goals can result in significant savings for retailers who don't participate in studio copy-epth programs. Currently on the MetaExchange site, a retailer can prebook the purchase of Gladiator for $52 per copy, as opposed to $70+ through normal challenge.

"Similar pricing exists for most scheduled releases."

Boy, when word about this leaks out, expect the you-know-what to hit the fan.

Studios will scream and holler and threaten and warn. They'll probably issue missives and memos telling their retailer clients that under no circumstances do they allow sideways selling of their product, and anyone caught doing it will be subject to strict penalties and reprimands, including the loss of the line.

MetaExchange may or may not be threatened with legal action, but will almost certainly receive a batch of nasty letters from studio executives (their address, by the way, is 1250 45th Street, Emeryville, California 94608).

Then, when all the smoke clears, it will be business as usual for all involved. No one's going to be punished, no one's going to get sued, and MetaExchange will continue on its merry way--provided it does so quietly.

The studios may want sideways selling to stop, but if it means bending the rules to prevent their independent retail account base from disintegrating, so be it.

They're not stupid, you know.

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

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