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TK's MORNING BUZZ: With Distribution Fighting for Its Life, Loss of Universal Product Could Be a Fatal Blow

9 Oct, 2000 By: Thomas K. Arnold

I had a most disturbing phone call with a high-ranking distribution executive last week. He told me that the morning Universal Studios Home Video announced it was cutting out all but three distributors to sell its product--hours before the news was made public--representatives from Ingram Entertainment, one of the lucky few, were already on the phone with his top retail accounts, telling them their distributor would be going out of business and they would have to buy Universal product from Ingram.

"If the situation was reversed and one of my sales people did that, they'd be fired," this distributor told me. "Fortunately, four of these retailers right away called us and told us their response had been, 'You can take this product and shove it. We're not dealing with people who do business that way.' "

David Ingram says his reps began calling rival distributors' customers "precisely at the time we were given authorization to do so by Universal," and did so in haste "because it's a footrace between VPD and Ingram and Valley to get signed credit applications in with these customers." But he says Ingram sales reps were specifically instructed "to not speculate on how other distributors that don't have Universal product would fare," and if retailers did, in fact, receive calls of the kind described by the other distributor, he'd "love to have that information" sent to him at his personal e-mail address, david.ingram@ingramentertainment.com.

As times get tougher, the line between fair and unfair competition tends to blur. What the Ingram sales reps allegedly did, albeit without David Ingram's consent, is akin to kicking a man when he's down.

But even the sanctioned message--that the only place to get Universal rental product is Ingram or VPD--isn't quite accurate, because believe me, I don't know of one distributor that intends to stop carrying Universal product, either ordering it through Canada or buying it sideways from retailers.

Can you blame them? Distribution is fighting for its life, and the loss of Universal product--particularly with the studio being on a roll in both the rental and the sellthrough arena--could be a fatal blow, coming on top of the loss just one month earlier of Warner rental product.

The studios have always frowned on sideways selling, but in the past, this practice has pretty much been limited to retailers pooling resources and forming de facto buying groups, meeting goal and then breaking up their orders--and free goods--among each other.

Now, we're going to see a new twist on the sideways selling phenomenon, with distributors rather than small retailers in the buying seat.

On the surface, this practice appears just as unethical as the alleged calls from Ingram. But I see a compelling difference.

The calls are dirty tricks, nothing more.

But distributors do need a full line of rental and sellthrough product to stay in business. God bless 'em in their efforts to do so.


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

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