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Blockbuster Deals Tied To Copy Depth

15 Jun, 2002 By: Joan Villa

SAN ANTONIO -- Blockbuster's revenue-sharing deals negotiated with Universal Studios Home Entertainment in 1998 allowed the retailer to pay the traditional $65 per tape but the studio would ship two-and-a-half times that amount so the per-unit cost netted to $25.65, Craig Kornblau, president, testified in an antitrust lawsuit.

Kornblau defended a Universal strategy document that showed the studio in May 1999 was charging distributors between $48 and $50 per tape while Blockbuster paid about half that amount. While acknowledging under questioning from plaintiff attorney Stephen Hackerman that Blockbuster achieved a "significant reduction" in the cost per unit, he called it an incomplete "apples to oranges" comparison because Blockbuster also had other requirements.

Universal attempted to provide similar terms to independent retailers in the form of copy depth programs through traditional distributors or revenue-sharing options with Rentrak, he said, although he noted his sales reported retailers didn't want Blockbuster-style "output" deals requiring the purchase of every movie the studio released.

"To be clear," he said, "They all wanted output deals, but they don't want minimum guarantees, they don't want to report [revenue] to us on a timely basis and they certainly don't want us auditing." Details of other studios' pricing plans in Universal documents was the result of a "routine" gathering of competitive information from retailers and distributors. Defense attorneys will cross examine Kornblau Monday.

In other business, plaintiffs' attorneys were ordered to take down a Web site they had been using to inform retailers about progress in the case after jurors' names were "inadvertently" posted last night. Plaintiff attorney Jim Moriarty told the court the "clerical" error was discovered "within an hour" and removed, and agreed to abide by the judge's order to shut down the site for the duration of the trial.

Columbia TriStar Home Entertainment attorney Lee Godfrey cross-examined plaintiff John Merchant of 49'er Video in Sacramento, Calif., who recalled he "wasn't denied a deal and wasn't offered a deal" in meetings with studios in 1999 seeking group pricing for the Independent Video Retailers Group.

"They represented to us there wasn't a special deal to Blockbuster," Merchant testified.

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