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HIVE EXCLUSIVE: In Search of the Elephants' Graveyard

13 Jul, 2001 By: Seth Goldstein

Cassettes can go a lot of places to die. Proliferation of copy-depth schemes, sellthrough and DVD has hastened the departure of a lot of cassettes. But death need not be as final as a garbage dump.

Intermedia Video in Chatsworth, Calif., offers the promise of resurrection. Tapes in the millions go to the recycler to be erased and sold as blanks, rerecorded with public-domain cartoons and nature documentaries, and broken up for eventual reconstitution as cheap flower pots. Intermedia figures to process about 24 million units this year, nearly double last year’s conversions for various studios, retailers and two trade organizations.

That’s just a drop in the gigantic bucket of plastic that video consumes annually. The onslaught of DVD may have diminished VHS output, but the International Recording Media Association (IRMA) says U.S. duplicators will crank out close to 1 billion tapes in 2001, bringing the total since 1991 to 8.8 billion.

The vast majority end up in consumers’ sellthrough libraries, including old rental titles sold from “previously viewed” bins. Where do the rest go? “It’s a good question,” acknowledges Gene Gross of Video Group Distributors in Clearwater, Fla., which buys and sells store inventories. Gross and other liquidators are less sure than in the halcyon days of home video when Video Group stocked 10 to 20 new stores a month. Now the pace has slowed to three, he says.

“There’s a glut of VHS on the market,” says Mark Jasperson, c.e.o. of Video One Liquidators in Tampa, Fla. “Customers exist, but not enough to purchase all that’s available.” Former copy-depth titles, which sold for $6 to $12 three years ago, are available for $3 to $8 today, Jasperson adds.

The trend has driven liquidators to find new outlets like dollar discount stores or to drop used tapes in favor of sub-distributing new copy-depth releases to video retailers outside the studios’ reach. All this further complicates the search for the VHS equivalent of the elephants’ graveyard.

Millions of cassettes — after they’re made unplayable — are dumped into landfills; more sit in duplicator warehouses racking up storage fees while program owners who usually pay them decide how to dispose of them; and Intermedia handles much of the rest.

The dominant recycler, Intermedia buys and sells cassettes like any broker, but with this catch: The company is open to round-the-clock inspection by the studios, anxious that none of their cassettes escapes complete erasure. Employees are closely supervised to make sure no arriving tapes depart unaltered. Numerous competitors have come and gonebecause “they couldn’t keep their hands off the product,” says Intermedia sales and marketing senior v.p. Douglas Booth.

Intermedia has several recycling deals, but the concept has been slow to take root as long as there were new stores to stock. The swarm of used-tape brokers, now diminished, “made it tough for us a lot of times,” Booth recalls. “We’re profitable, but it was very rough in the early days.” He’s confident of the potential residing in duplicator warehouses already bursting at the seams and threatened with moreunsaleable cassettes. “Any studio would rather produce 100 too many than 10 too little,” Booth adds. “There’s a substantial quantity of stock, and the last thing the studios want to do is destroy it.”

Not everyone’s in full agreement. Deluxe Video Services and Premiere Video, two prominent duplicators, did not return calls for comment.

However, a former Deluxe executive, who asked to remain anonymous, knows of “massive degaussing programs” at his former employer “to reduce the level of junk. The problem is getting better. The studios are being more careful to limit exposure.”

Still, he admits Booth’s right about the general situation. “Good dubbers are always having conversations with the studios about shrinking inventory,” this source adds.

The Motion Picture Association of America is a contented client. The MPAA ships Intermedia “tens of thousands” of confiscated bootleg tapes annually, says director of U.S. antipiracy operations William Shannon.

Intermedia also has the Video Software Dealers Association as a pro bono customer that prompts members to send the recycler their screeners for recycling as blank tape. Intermedia sells them for about 65 cents each and donates revenues to the association’s scholarship fund.

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