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2005 In Review Part 6: JUNE 2005

1 Jan, 2006 By: Thomas K. Arnold

With rumors Wal-Mart planned to phase out sales of VHS movies, following Target's decision to do the same the previous month, the end of the VHS format was on the horizon.

Concerns of a slow DVD summer prompt suppliers to ratchet up release schedules for August and September, in some cases pushing out titles significantly earlier than under normal patterns. Meanwhile, suppliers are busy trying to compensate for a shortage of hot theatricals by pumping out TV DVD sets at a breakneck clip. On June 7 alone, no fewer than 17 TV DVD collections arrive in stores, sparking fears of a glut.

Wal-Mart follows Target's lead in phasing out VHS titles, with studio sources saying they've been told that VHS inventories will be realigned in September and then cut in February 2006. A Wal-Mart spokesperson insists the chain isn't ditching VHS, but calls to several Wal-Mart stores across the country confirm the flight from the videocassette.

DreamWorks SKG shareholders sue the studio, claiming it overinflated projections of Shrek 2 video sales in the first quarter by failing to factor in returns. Due to the overly optimistic prognosis, the studio announced a $25 million downturn in revenue expectations.

Cheeriness over their successful acquisition of Hollywood Entertainment doesn't last long for Movie Gallery executives. The chain's stock takes a pounding on the heels of a weaker-than-expected second-quarter forecast and the announcement that 51 of Hollywood Entertainment's underperforming Game Crazy departments were slated for closure.

Home Media Retailing's fourth annual Home Entertainment Summit finds studio presidents reluctant to publicly debate the pros and cons of the two rival next-generation formats vying to succeed DVD. Tower's Kevin Cassidy takes them to task, quipping, “Y'all are crazy” for not insisting that one, and only one, format come to market. Studio presidents, however, have more pressing issues at hand: After a robust first quarter, DVD sales slowed significantly and projections now are that the year may only be up 5 percent — a far cry from the double-digit gains of previous years. Warner's Steve Nickerson told a somber crowd, “The boom times are over.”

The U.S. Supreme Court deals a blow to peer-to-peer file-sharing services — and a victory to the music and movie industries — by holding that services such as Grokster can be held liable for illegal trafficking in copyrighted files on their networks.

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