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Where Does the Buck Stop for Bad Numbers?

9 Nov, 2004 By: Holly J. Wagner

Reuters does an article at least once a year about the worst excuses publicly traded companies offer analysts for less-than-optimum financial reports.

In the most recent example, a Reuters reporter noted that Blockbuster executives cited the anticipated popularity of some titles as the very thing that will doom them at rental. The titles for the fourth quarter were Shrek 2, Spider-Man 2, Harry Potter and the Prisoner of Azkaban and The Bourne Supremacy.

In fairness, Movie Gallery executives cited the same titles in their most recent analyst call, and they had a couple of other contradictions that made me do a double take. For instance, in past quarters, Movie Gallery executives have said their rental business has a sweet spot in titles that do between $50 million and $80 million at the box office. Then they turn around in other quarters and bemoan the lack of $100-million-plus box office earners. In the most recent press release, Movie Gallery execs blamed both the brutal hurricane season and “unseasonably warm October weather” for lackluster results. Huh?

The truth for big titles, though, may have little to do with box office might. Consider Shrek 2, for which promotional partners like Pepsi make it possible for moms all over America to take the disc home for free if they just bought enough soda pop. A number of indies commenting on the Video Software Dealers Association's discussion board have commented about Albertson's-owned supermarkets in their areas offering the disc free.

Albertson's in my area did that (customers had a choice of Shrek 2 or Elf free with $50 in cumulative purchases of specific items) and offered the first preorder I've ever seen from a supermarket on the title. Acme, Shaw's and Albertson's were just some of the grocers offering this deal. And it's only fair to note that prominent advertising on the front of the weekly circular must surely have helped DreamWorks on its way to that 12.1 million in first-week sales for the Ogre.

To be sure, kidvid titles are more likely to be good for sellthrough and bad for rental, because we all know kids will watch the same thing over and over ad nauseum. My coworker, Stephanie Prange ,will tell you she had to sing her daughter “Rock Star” every night for a year after Shrek came out.

But the bottom line, in this case, may be rock bottom: “Free” is almost always sure to increase ownership appeal.

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