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Hastings Testing Subscription Service

11 Oct, 2004 By: Erik Gruenwedel

AMARILLO, Texas — Hastings Entertainment is ready to give the subscription model a ride.

Citing a need to stay abreast of burgeoning rental subscription business plans on the market, the Texas-based retailer has begun test marketing E-Pass, a credit card-activated monthly service that lets customers rent up to two movies and two video games for an unlimited time. The test involves several price plans the company did not wish to unveil at press time.

The service — good only at the store where an account is activated — was announced last week to favorable response from about 200 Hastings managers attending the five-day Hastings 2004 VIP Conference here.

“We intend to stay competitive with Hollywood [Video] and Blockbuster,” said John Hintz, director of retail technologies for Hastings.

Blockbuster and Hollywood recently launched online and in-store monthly subscription services, with Movie Gallery about to join the fray.

Despite concerns from Hastings managers regarding the lack of transferability of the service between stores, Hintz emphasized that doing so would make it difficult to synchronize rental data between locations in addition to reducing profitable extended viewing fees.

“The more someone rents, the less profitable you will be,” he said.

Rentail RIP?

With a 2.9 percent decline in video and game rental revenue for the first half of fiscal year 2004, John Marmaduke, president and CEO of Hastings, said sellthrough and diversity of product remain the cornerstones of growth for the company's 151 stores in 21 states.

“Rentailers are on an island that is shrinking,” Marmaduke said, citing data that suggested more than 50 percent of video sales happen at the discount chains. “We grew up in a Wal-Mart market.”

Hastings sales continue to be led by music (25 percent), followed by books (22 percent), video and game rental (20 percent), video sales (18 percent), video games (8 percent) and other related items (8 percent).

Used and budget-priced items account for 8.2 percent of revenue, according to Marmaduke.

Expansion will primarily consist of complete remodels — up to 25,000 square feet — in existing stores, a tactic Marmaduke said keeps Hastings out of malls and dominant in small and mid-size markets.

“We think the mall is at risk,” he said.

Studios Come a Courtin'

During studio presentations from Paramount, Columbia TriStar, Warner, MGM, and Buena Vista, among others, executives made clear the importance of home video to their business.

In a morning special address, Don Jeffries, SVP of sales with 20th Century Fox Home Entertainment, reiterated that 51 percent of Fox's revenue comes from home video. That economic reality, he said, necessitates more creative marketing of the product.

“We take what theatrical does and improve upon it,” Jeffries said. “We have an advantage in video to work with 20/20 hindsight.”

In addition to mail-in rebates, cross-promotions with consumer products and related coupon discounts on selected titles, recent Fox enhancements included “eventizing” the DVD release for the Star Wars Trilogy with targeted promotional trailers for mainstream viewers and aficionados, extensive public relations events involving super-sized character Chewbacca and, separately, the unedited DVD release of The Girl Next Door. The latter — increasingly popular among studios for teen-related fare — was well received by store managers who see the concept as a major advantage when competing against loss leader Wal-Mart, which doesn't stock unrated versions.

“It blows out the store,” said Jeff Cox, manager of a Hastings location on the periphery of Northern Arizona University in Flagstaff, Ariz. “Anything on the edge sells.”

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