Indies Show Big Rental Revenue Drop7 Nov, 2002 By: Melinda Saccone
Independent video retailers are seeing a rental shortfall as the year progresses.
Through Oct. 31, 40 percent of independent video specialty retailers surveyed reported rental revenue losses, according to a survey conducted by Video Store Magazine market research. Retailers who reported rental revenue declines said on average their losses registered in the double digits.
Meanwhile, rental prices were up slightly, and DVD continues to make inroads in independent video specialty stores.
At the end of 2001, 45.4 percent of the $10.03 billion consumers spent renting cassettes and discs was transacted outside the sphere of the top 100 retailers. Their portion of the pie will likely decrease in the coming year as the top public chains gain ground (see VSM, Oct. 6-12) in the rental market at the expense of independents and other non-specialty retailers.
The number of independent video specialty retailers reporting year-to-date rental revenue losses increased between July and October as did the percentage their average rental revenue declined.
While 40 percent of the independent video specialty retailers surveyed reported a year-to-date rental revenue drop from the comparable period in 2001, at the end of July just one-third of independent retailers surveyed reported their rental revenue in the red.
Those that reported rental revenue declines at the end of October said revenue from combined VHS and DVD rentals had fallen on average by 18.9 percent from the comparable period in 2001.
By comparison, at the end of July retailers reporting rental revenue declines said revenue was down by an average of 16.2 percent.
Retailers who carry between 5,000 to 10,000 units in their rental inventories have been hit the hardest, according to the survey. Video Store Magazine market research estimates this group accounts for nearly 40 percent of the nonpublic population.
Forty-three percent of these retailers surveyed reported rental revenue losses in the first 10 months of the year. Their losses were the highest overall -- reporting, on average, rental revenue decreases of 22.4 percent from the comparable 10-month period in 2001.
The number of independent retailers surveyed reporting rental revenue as either flat or posting positive gains declined between July and October, while the percentage that said revenue is up also declined.
At the end of October, 31 percent of those surveyed reported no change in their year-to-date rental revenue, while 29 percent reported their rental revenue posting gains. Those that reported increases in their rental revenue said on average they realized gains of 13.3 percent over the comparable period in 2001.
By comparison, at the end of July, 67 percent of retailers surveyed reported either no change in their year-to-date rental revenue or that they were ahead of the comparable period in 2001. Those that reported revenue gains said on average their rental revenue was up 16.9 percent.
Independent retailers with between 7,500 and 10,000 units in their rental inventories fared the best in the first 10 months of the year, according to the survey, with 65 percent reporting their rental revenue was either the same or better than last year. Video Store Magazine market research estimates this group accounts for slightly less than 15 percent of the independent video specialty retailer population.
Meanwhile, DVD is on the rise in independent specialty retailer stores. At the end of October, 98 percent of independent retailers carried DVD for rent. By comparison, at the end of last year, 92 percent of independents stocked DVDs for rent.
DVD rentals continue to gain market share compared to VHS in independent video specialty retail stores. At the end of October, independent retailers reported that on average DVD rentals accounted for 29 percent of their weekly rental intake, up from 19 percent independents averaged at the end of 2001.
Independent retailers with more than 10,000 units in their rental inventories have the biggest weekly take from DVD rentals, with DVD rentals averaging 30 percent of their weekly rental revenue.
At the end of last year, 75 percent of independent video specialty retailers reported they planned to increase the amount of DVDs they carried for rent in 2002, and they followed through with their plans.
Independents are not only stocking more titles on disc, they are stocking deeper on each title on disc as well.
Nearly 40 percent of all new-release purchases are on disc in these nonpublic stores. The biggest purchasers of new releases on disc are independents that carry more than 10,000 units in their rental inventories. On average, of these big independents' new-release purchases, 41 percent are on DVD.
DVD inventories are also expanding in independent retailer stores.
Independent video specialty retailers have increased their DVD inventories by nearly 60 percent since the beginning of the year, averaging more than 1,000 discs for rent.
Independent retailers with more than 10,000 units in their rental inventory carry nearly double that number, averaging just fewer than 2,000 DVD units for rent.
Meanwhile, rental rates have risen only slightly in independent stores. The cost of renting a new VHS or DVD release in an independent retailer's store averages $3.10, up 3.3 percent from the cost of renting a new release title last year. In contrast, the cost of renting a catalog release has dropped from an average of $1.90 in 2001 to $1.80 this year.