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Chapek: EZ-D Is About Incremental Growth

16 May, 2003 By: Holly J. Wagner

Rentailers, don't panic.

That's the message Buena Vista Home Entertainment president Robert Chapek hopes to convey as the label's salesfolk fan out across the country to discuss the new self-destructing DVD format from Flexplay Technologies, tagged EZ-D, with retailers and rental dealers.

“This will have a window attached to it so that sellthrough is uninhibited and unencroached on by this EZ-D product. After the bulk of sales have happened, over say a six-week period for example, then you might have a situation where you might have both in the store, but I don't think they will be merchandised next to each other because we see EZ-D as more of a impulse purchase-type product than DVD.”

The six-week mark is, however, one aspect of the product that tests scheduled to start in August are designed to hone. Another aspect of the test will be pricing.

“We've not disclosed a price, but it would be at a slight premium over traditional rental,” Chapek said, dismissing the $2 hike other publications have speculated will be the sweet spot. “We think the market is going to do that for us,” he said. “They will have a wholesale price and they can price it however we want.”

The EZ-Ds will also have only the movie, probably in widescreen format only, with no bonus materials.

“This whole thing is about protecting the existing business models,” he said. “Controlled studies indicate that this will be incremental business with this type of windowing philosophy, thereby protecting sellthrough business and protecting rental business.”

While the format is not intended to kill off rental, it does aim to bring lapsed rental outlets like supermarkets and convenience stores back into the fold along with lapsed renters. But Chapek stressed the test format would stall in its tracks if it hurts sellthrough.

“The quickest way for us to stop this test is if there is sellthrough cannibalization. Because economically, we can't have that," he said. "The return to a studio of a sellthrough transaction from a rental transaction is significantly different. If we start cannibalizing sellthrough because of the lack of an adequate window or because of prices that are out of line or because the products are merchandised too close together or whatever it is, if we start having cannibalization, that could be a hasty end to this particular test. However, through all of our testing we believe that with the right prices, with the right window, with the right merchandising, this has the benefit of giving the industry, both retailers and our studio, significant upside in terms of capturing those lost renters.”

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