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HIVE EXCLUSIVE RESEARCH: Indie Rentailers Say Consumers Love Extras

14 Sep, 2001 By: Judith McCourt

While 88% of independent rentailers rent DVDs, only 36% are selling DVDs to their customers — leaving the lion's share of the sellthrough DVD market in the hands of chains and mass marketers, according to anexclusive survey from Video Store Magazine's market research department.

DVD rentals on average account for more than 15% of indies' total rental revenues, compared to less than 10% a year ago at this time, when just 67% of rentailers were renting DVDs.Even though a minority of independent rentailers sell DVDs, VideoScan data shows that in July, they generated 25% of total DVD unit sales.That's significantly higher than the indies' 15% share of the VHS sales market.

The Video Store Magazine survey of 200 independent retailers, conducted in July, also underscores the growing importance of special features. Seventy percent of the retail respondents said the studios are right on target with adding extras to DVDs; 60% said special features are important totheir customers.

This is another significant finding, because initially it was thought that DVD extras appealed primarily to the high-tech early adopters who were on board when the format was launched in spring of 1997.

Today, the market has expanded significantly, thanks in large part to adramatic drop in DVD player prices. By year's end, Video Store Magazineprojects the installed base of DVD players in U.S. households will be upwards of 22%. Most of the new DVD converts are mainstream families simply following the tide in what many are calling a transition from VHS toDVD.

Customers most request outtakes, retailers report, with 48% of those surveyed saying shoppers look for this extra. Close behind are deleted scenes (46% of retailers) and “making of” information (45% ofretailers).

Michael Stradford, v.p. of DVD programming and content at Columbia TriStar Home Entertainment, agrees consumers seem to be particularly fond of outtakes and deleted scenes because they get a chance to see things that they hadn't seen before, or more of actors that they like. Consumers alsolike documentaries accompanying films with a rich history, such as TaxiDriver or Lawrence of Arabia.

“The best added-value materials complement a movie, they don't replace the movie itself,” he says. Still, “I do think [extra features have] become an expectation for the consumer, specifically for specific types of movies,” Stradford says.

Those movies include big new releases and science fiction films, which lend themselves to discs filled with extras delving into the special effects, stunts, and other elements in a movie.

And while it's hard to gauge just how critical extras are to selling a DVD, they can be a decisive factor when a consumer is torn between two discs: one loaded with extras, the other without them.

“[Extras] could be the thing that sends the person over to that camp, to purchase that disc,” Stradford says.

“I think the best extras are those that legitimately enhance the film itself and don't get in the way of the film,” he says. “Extras for extras' sake don't serve anyone.”

Buoyed by special features, DVDs have energized consumer spending on homeentertainment products. Adams Media Research estimates that by year's end, consumer [sellthrough] spending on DVDs and VHS cassettes will total $12.5 million, up 15.9% from the $10.8 billion they spent in calendar 2000.

DVD sales will account for 49.6% of the spending pie, according to Adams Media projections.

Consumer rental spending, too, is on a roll. Video Store Magazine marketresearch estimates that rental spending for 2001 will come in at $10.1 billion, a 7.2% increase from last year. Again, DVD is primarilyresponsible for the bump.

Additional reporting by Enrique Rivero.

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