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Columbia TriStar Offers Indies DVD Rev-Share

9 Aug, 2002 By: Joan Villa

Starting with the September title Panic Room, independent retailers can revenue-share DVD along with VHS under a new deal from Columbia TriStar Home Entertainment.

Columbia TriStar becomes the first major studio after MGM Home Entertainment to offer DVD rev-share to independents. The studio reportedly negotiated similar VHS-DVD revenue-sharing agreements with Hollywood Entertainment Corp. and Movie Gallery.

The terms appear to address studio concerns that VHS rentals are getting prematurely squeezed out in favor of lower-priced DVD. The deal limits DVD to less than 45 percent of a retailer's total units on a given title through mid-February.

It also prohibits retailers from selling off used DVDs before 45 days in an apparent effort to limit cannibalization of the new DVD market, particularly during the big holiday selling season, sources said. Columbia TriStar this fourth quarter will have several heavy-hitter entries, including Spider-Man Nov. 1. Under current sellthrough pricing, retailers can begin culling DVD rental units for selloff as early as two weeks after release and still make a profit, since they only pay about $18 per unit. VHS product may be sold off after 60 days under the new terms, which is a typical restriction for other revenue-sharing deals, sources added.

“DVD is such an integral part of the home video business, and with penetration approaching 40 percent it simply made sense for us to offer DVD revenue-sharing to our retail partners,” said Columbia TriStar EVP of North American sales Marshall Forster.

Under the agreement, a copy of which was acquired by Video Store Magazine, retailers can “cherry-pick” titles they wish to revenue-share and pay a nonrefundable upfront fee of $6 per unit, along with another $11 that acts as a guarantee toward the studio's 40 percent revenue split on the combined VHS and DVD units. On each title, retailers are required to pay Columbia either 40 percent of all revenue in the first 26 weeks or $1.20 per rental transaction, whichever is higher.

“Our DVD cost could be $21, $22, $23 per unit if a title is wildly successful, but the price per copy on VHS will be lower than under previous terms,” noted one retailer. “They're using one to leverage against the other.”

Retailers also can continue to revenue-share VHS alone.

Columbia's plan is through its chosen distributors, Ingram Entertainment and VPD, while MGM's is available through pay-per-transaction distributor Rentrak Corp. as well as traditional wholesalers.

Additional reporting by Thomas K. Arnold.

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