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What's Your Move With VHS This Year?

25 Jan, 2004 By: Kurt Indvik

Ok, so we agree the future and the focus in home video is in and on DVD, but I'm going to be just as curious to see how the humble VHS cassette fares in 2004. I think this may well be a very telling year, indeed.

As I talk to studio and retail executives what I hear is still the same split personality response to the VHS question. In the one camp you have those who decry the premature abandonment of a format on which 40 percent of the country still relies to view home video. The other camp says VHS cannot support itself or justify its retail or warehouse inventory shelf space and will be virtually dead by the end of the year.

The early numbers don't bode well. According to Nielsen VideoScan, VHS unit sales dropped 44 percent in the first week of January this year compared to the same period last year. And VHS unit sales dropped a whopping 65 percent in the second week of January compared to the same week last year. While these numbers must be viewed as being indicative and not totally comprehensive, it is a strong market indicator of things to come.

If what I am hearing is right, and the above numbers seem to indicate a reality that is definitely upon us, here is what I think we could see this year.

--Studios will significantly increase the number of titles with a DVD-only release in 2004, primarily in the mid-level theatrical range of $0-$50 million and special interest and TV fare, certainly. Theatrical hits, childrens and fitness will continue to be offered in VHS, but we may see a few studios take up Warner's lead and decide that, like The Matrix Revolutions, it's only worth doing so at a rental price point. Sellthrough is DVD's domain, and even in previously viewed VHS commanded a 35 percent share in 2003, according to Video Store Magazine Market Research and that was with an average price of $7.80…a price point I bet was much lower by year's end.

Even the kids market and fitness have made great strides into DVD. Preschoolers now have a DVD they can “pop-n-play” thanks to Lions Gate Family Home Entertainment, avoiding the problem of menus they cannot navigate. And many fitness titles are using DVD technology to allow users to fashion their own workouts instead of following a linear program.

--Specialty retailers, pressured by a flat rental market will continue to dramatically reduce their VHS catalog space so they can devote that space not necessarily to DVD catalog, but to emerging opportunities in more previously viewed/used and new video sales and video game sales and rentals. An earlier survey of retailers by VSM Market Research indicated that 8 percent of respondents said they were planning on eliminating VHS from their rental business in 2004. I think it might be higher by year's end. And I think that the business of catalog rentals is going to be significantly impacted by the decent of the VHS format in 2004. DVDs in catalog rental have not performed as well simply because so many of the titles are available for sale at very attractive new and used prices for someone who really is a fan of a particular title.

I know there will be those pockets of the market that are not going to hustle VHS out the door as quickly, and I am still—in my heart of hearts, as I have been saying since I began writing this column several years ago—reticent about saying that retailers should be moving away from VHS with much haste. I'd be interested to hear from retailers around the country as to what they anticipate their moves will be with VHS in 2004.

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