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DreamWorks Latest to Up DVD Pricing

16 Nov, 2001 By: Joan Villa

DVD pricing on second-tier theatrical and direct-to-video rental titles may be in for a hike in the New Year, as some studios bump up pricing to test consumer and retail sensitivity now that DVD has gone mainstream.

In a departure from past practice, DreamWorks Jan. 29 will launch Woody Allen's Curse of the Jade Scorpion, a modest $7.4 million box office performer clearly destined for rental shelves, at a $32.99 suggested retail price ($24.99 minimum advertised price). The studio had set a $26.99 retail price with a $19.99 MAP for most of its 2001 titles, from the Dec. 26 release Evolution ($38 million at the box office), to The Contender ($17.8 million) last April and An Everlasting Piece ($75,000) in August.

However, the studio isn't the only one to push prices over $30 for a no-frills DVD; 20th Century Fox Home Entertainment has a three-year record of pricing video premieres and other rental fare at $34.98 and Buena Vista Home Entertainment often releases DVDs at $32.99.

However, industry insiders believe the DreamWorks move tests price sensitivity in the crucial post-Christmas time frame, when some 32% of U.S. households are expected to enter the New Year owning a DVD-capable device, according to Alexander & Associates research director Greg Durkin.

Durkin says consumers have paid an average $20 apiece for all DVD product in the last six weeks, but studies show there is room for even more pricing flexibility.

“The cult or collectible product you have to price higher because you have a niche market that is going to be interested and will pay the premium,” Durkin says. “Even the direct-to-video and ‘B' movies, if the only market for that is the rental store then they're still getting a deal relative to the VHS price.”

“The studios are going to bounce around on price points until they can figure out a way to maximize returns,” agrees Ralph Tribbey, editor of the DVD Release Report. “Say they're going to sell 20,000 units at $29.98, are they going to sell significantly more if they lower the price to $24.98 and the answer is probably no.”

DreamWorks' executives declined to explain the pricing change, saying through a spokeswoman that the studio prefers to emphasize its minimum advertised price rather than suggested retail, as it did in full-page ads for Shrek. “We're looking at the marketplace and evaluating it on a case-by-case basis,” she notes.

But insiders at other studios agree that all suppliers are looking to maximize return now that DVD is established in the rental market. “It's not going to be a revolution in pricing,” says one. “You're still going to see ‘A' titles competitively priced.”

Another praised the increase as an opportunity to see what the market will bear. “The reality is the people who want these movies are going to buy these movies, the people who want to sample it are going to rent it, and [the relatively low $32.99 DVD price] is a bonus to retailers,” another executive adds.

Universal Studios Home Video, which distributes DreamWorks, also appears to be inching prices toward the $30 mark for titles that offer minimal collectible appeal to consumers — prime rental fare under two-tiered VHS pricing. After offering most mid- to low-tier theatricals at $26.98, including The Fast and the Furious on Jan. 2, the studio bumps prices to $29.98 for other January titles, The Man Who Cried, a $739,000 box office film starring Christina Ricci and Johnny Depp, and the $35,000 art house film Pavilion of Women. This pricing extends later in the year with the $29.98 Mulholland Drive, which posted a similar $4.3 million box office to Jade Scorpion, slated for March.

Mick Blanken, who monitors pricing and retail trends and owns SuperHitz Moviez & Gamez in Delaware, Ohio, predicts cannibalization of VHS sales by DVD — which studios have long feared — will skyrocket after Dec. 26.

“It's a good kind of title to find out what the market will bear, how much will the consumer spend especially after Christmas,” he says. “With Jade Scorpion I don't think they'll sell any more copies at $19.99 than they do at $24.99 and the higher margin will more than make up for” any decline in volume.

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