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TK's MORNING BUZZ: Why Don't the Studios Throw DVD Into the Revenue-Sharing Mix?

2 Nov, 2000 By: Thomas K. Arnold

I wish the studios would leave well enough alone and stop tinkering with DVD release dates.

At a time when most major releases are now streeting day and date on both formats, VHS and DVD, two studios are putting a fly in the ointment.

First, Universal Studios Home Video held up the DVD release of U-571, Pitch Black and The Skulls by two weeks.

And now Fox Home Entertainment says it will split release dates on Me, Myself and Irene, with the rental-priced VHS coming out Jan. 9 and the $26.98 DVD streeting two weeks later, on Jan. 23.

I understand why they're doing this, but I don't agree with the strategy in the least. Universal and Fox--and other studios as well, for that matter--are fearful that as the DVD base continues to grow, retailers will cut back on their rental VHS buys and pick up more copies of the cheaper DVDs.

I know studios can't afford to take such a hit, particularly with the DVD market expanding as rapidly as it is. And yet by delaying the DVD release, they're only going to anger consumers and perhaps make them think twice about the viability of DVD, which I don't think anyone, at this point, wants to do.

Think about it--Joe Consumer gets a $200 player for Christmas, and he wants to watch every new movie he can get his hands on. He treks down to the video store shortly after New Year's, sees a release announcement for Me, Myself and Irene, and gets excited--only to be told the film's not yet out on DVD.

If I were Joe, I'd probably truck that player back to the store it came from and tell them where to put it.

I sympathize with the studios' dilemma, and I fully realize that they can't afford to let DVD cannibalize sales of higher-priced rental VHS videocassettes. But delayed release windows isn't the answer--it merely sends the wrong message to consumers.

Another option that's being discussed, and advocated by such high-profile industry leaders as Hollywood Entertainment Corp.'s Mark Wattles, is two-tiered pricing, similar to the existing VHS model. Again, I don't like it, because it could damage the sellthrough market--and DVD has always been envisioned, first and foremost, as a sellthrough item.

I'll say it again--revenue-sharing. And for those of you, like Wattles, who believe there's no point in revenue-sharing unless prices go up, consider this: Why don't the studios, who already channel more than 50% of their rental product through direct revenue-sharing, throw DVD into the mix and give retailers the option of buying VHS cassettes and DVD discs for a lump sum?

That would take care of a significant portion of the cannibalization problem, right then and there.

As for smaller retailers who aren't into revenue-sharing, studios can either let them continue to buy DVDs at low sellthrough prices or include DVDs in attractive and competitive copy-depth programs.

Of course, that hinges on whether the studios can even come up with attractive and competitive copy-depth programs...

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

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