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TK's MORNING BUZZ: What's In Store for Video Retailers Staring into a Future of Studio Downloads?

1 Dec, 2000 By: Thomas K. Arnold

The report in the Wall Street Journal that several major studios are looking at ways to sell movies directly to consumers over the Internet has caused a panic attack among many retailers. The sky, it appears, is beginning to fall, and retailers are more concerned about their future than ever before.

A followup report in the Los Angeles Times that maintains the studios plan to offer new movies over the Internet only after they come out on video provided little solace to retailers, who say their worst fears have been confirmed.

Studios already offer movies through pay-per-view cable and satellite, with video windows averaging more than 50 days, and yet that doesn't make that threat any less formidable.

Guys, stop worrying. The Wall Street Journal report was hardly a major revelation; for years, we've known that video downloading via the Internet was in the works, just as music downloading is already a reality.

Music retailers are concerned about the proliferation of music downloading sites, but they're not making plans to shutter their businesses and fall down on the floor, kicking and screaming that all is lost.

To the contrary--smart and savvy retailers, like Tower Records and Video and Trans World Entertainment, are working overtime to find ways to participate in this new delivery system, while at the same time beefing up their packaged goods business, both in their brick-and-mortar stores and on their Web sites.

Ultimately, the big record chains plan to sell digital downloads of music alongside CDs and audiocassettes, in dedicated "shops" on their Web sites as well as through Internet-connected kiosks in their stores. To them, digital downloading is just another format, and one they're more than willing to carry.

Video retailers need to adopt the same strategy. Who was it who said, "They can only defeat me if I let them?" By embracing this new technology rather than running and hiding from it, music retailers are turning a potential threat into a new opportunity, albeit a challenging one.

And there's no reason video retailers can't do so as well--particularly since the present state of technology is such that practical video downloading on a wide-scale basis is still several years away, giving retailers all the more time to plan their strategies. That's the essence of what Blockbuster is doing with its "Blockbuster On Demand" movie service through Enron--video downloading is not a viable business now, but the mechanism is being put in place so that when it is, Blockbuster will be there.

And so should other retailers.

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

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