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ANALYSIS: Is Sellthrough Fueling Street Violations?

16 May, 2002 By: Kurt Indvik

Street date violations continue to plague the home video industry and may be increasing in regularity as the sellthrough business — driven by new-release hit movies on DVD — continues to expand.

Unfortunately, based on anecdotal reports from retailers and distributors, studio monitoring and enforcement isn't stopping the problem.

Violations often flare up during the home video release of “event movies,” such as next week's Harry Potter and the Sorcerer's Stone, which will have mass market appeal and retail distribution — and which retailers will have in their storerooms over the busy Memorial Day weekend, at their itchy fingertips.

The adherence to street dates is critical in an industry in which consumers can now buy (rather than only rent) most new releases. Video is a perishable product, competitively priced at a variety of merchants, many of them not video specialists. As a result, video is often handled by clerks who have little or no knowledge of what street dates are — and why it's important to adhere to them.

Not a Problem That's Going Away
Street date violations are “a thousands times worse” now than in the past, said one distributor who asked not to be identified. Field reports indicate a broad range of perpetrators, from small specialty independents and chains to mass merchants and drug stores.

The problem is almost exclusively with sellthrough titles, a segment that has grown due to the fact that most new releases are issued on DVD, day-and-date with the comparable videocassette, at a sellthrough price. In addition, as DVD penetration has grown, the number of rental cassettes coming to market has fallen, with studios going the sellthrough route instead.

Not surprisingly, specialty store owners single out mass merchants — the biggest sellers of video — as the primary class of regular offenders, though there is no indication that violations are endemic to any one chain or region.

Indeed, a quick survey by Video Store Magazine of Southern California stores a few days before the April 9 street date of Spy Game found one Wal-Mart store in Orange County, Calif., violating street date and another, in Los Angeles, that did not.

When smaller retailers break street date, it appears to be largely a reaction to these nonspecialist violations, retailers and distributors agree.

Whether it's Wal-Mart (the chain that was mentioned most by retailers as an offender), Target or any other major nonspecialty chain, the violators invariably claim the action was an isolated instance perpetrated by an unknowing clerk who saw merchandise in the storeroom and put it on the floor (ignoring the usual street date notices printed on most shipments).

Though there is no way to say whether street date violations are on the rise, comments from retailers indicate that the problem has never abated — and that the potential for abuse, thanks to DVD, is greater than ever.

Retailers React
An editorial in Video Store Magazine in March (written by this reporter) commenting on one retailer's experience with street date violations elicited a flurry of letters and e-mails from other retailers bemoaning their own recent experiences.

“There isn't a week that goes by in which one of the ‘big boxes' doesn't put out product the Friday or Saturday before street date,” wrote George Koste, VP of procurement for Bay Management in Easton, Md. “The most consistent offender in our markets is Wal-Mart. I struggle weekly with contacting studio representatives to apprise them of the situation, but generally to no avail.”

“A new Super Target store opened in west Mobile, Ala., and for two weeks they have put out DVD movies for sale before street date,” wrote Russell Williams of Hollywood Video & Pizza, an independent in nearby Bayou La Batre. “I have talked with the person in charge and his excuse was that new employees had done it.”

Things can get testy. One retailer in Ohio, when called on the phone by another retailer for repeatedly breaking street dates, reportedly became enraged and threatened the caller's life, which led to a restraining order.

Street date violations hurt distributors as well as abiding retailers. Tom Hannah, owner of Video Quest in Joliet, Ill., offered an example. Earlier in the year, he was at a Sam's Club, picking up additional copies of other titles he needed, when he noticed that the store had Riding in Cars With Boys,/I> out a week before street date.

“I bought eight copies and when I got back to the store, I called VPD and canceled my order,” Hannah said. “I figured if Sam's is selling it, then I'm going to rent it.”

Nancy Walker, manager of A One Video in Thomaston, Conn., said if street date rules aren't better enforced, “independent video stores will start to buy their DVD and sellthrough titles at the wholesale clubs and we won't need distributors any more.”

Enforcement of street date policies is a problem for most of the retailers Video Store Magazine talked to.

Gary Dennis, owner of Movie Place in New York City, said he's seen violations again and again. Even though he's been keeping a file with receipts, he said, “I have never seen anyone get punished or even really held accountable for violating the street date.”

Wal-Mart and Target stores were contacted for this story, but declined comment.

Industry Responds
Some studio executives, and even the Video Software Dealers Association (VSDA), say that while the dispersed nature of street date violations is a constant, it is not a problem that is broadly felt by a significant majority of the industry.

The VSDA, which acts as an intermediary between studios and retailers in street date complaints, typically receives five to 10 calls per week from retailers. That number has remained fairly constant over the years, said Sean Bersell, the association's VP of public affairs, and the association gives the same advice to callers each time.

“We tell retailers that studios are responsible for policing their own street dates,” Bersell said. “We supply all callers with the hotline number for the studio responsible for the video in question. In addition, we recommend that retailers contact their distributors and ask for their assistance.”

Editor's Note: Next week, the second part of this story examines studios' responses to street date violations and some possible solutions.

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