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TK's MORNING BUZZ: Will At Least One Studio Announce a Switch to Two-Tier DVD Pricing This Year, Starting With Titles Streeting in January?

30 May, 2001 By: Thomas K. Arnold

Rhetoric about a pending change to the existing DVD pricing model is heating up -- and, with it, hints of retaliation.

The latest: At least one studio will announce a switch to two-tier pricing before the end of the year, commencing with titles streeting in January. And at least one big seller of DVD software is reportedly so incensed that a private message is being relayed to the studios: if prices on new DVD releases go up, your catalog sales will go down, down, down.

As far as I'm concerned, it's sad that we're even discussing messing with a successful formula. I firmly believe it is in the best interest of retailers, consumers and studios that we retain sellthrough pricing for DVD.

I know, I know -- the DVD rental market is growing faster than anyone anticipated, and it's eating into sales of VHS rental cassettes. But don't punish the big sellers of DVD, without whose support the format never would have taken off in the first place.

It was the big chains like Best Buy and Musicland that took a chance on DVD and helped develop and build a market. To all of a sudden tell them, "Hey, guys, come January you won't be selling the hits anymore because we're going to raise the prices for 90 days or so before bringing them back down to sellthrough levels" is a slap in the face -- and I don't expect these retail giants, or any retailer, for that matter, to stand still for that.

Studios concerned about declining VHS rental cassette sales certainly have a problem on their hands, but raising prices on DVDs is not the solution. At this point, it appears as though studios only have two options: Do anything and everything in their power to get retailers to share rental revenue on DVD, even if it means doing away entirely with upfront fees, or sit back and watch the VHS rental market continue to erode.

The latter option seems doomed from the start, particularly for secondary titles; the former might be a tough sell, but it's worth a chance.

Anything's better than two-tier pricing. If that's where we end up, I fully expect things to get ugly, real fast.

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

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