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Many Say Market Demise of VHS Is Imminent

18 Dec, 2003 By: Thomas K. Arnold

It's a common refrain this holiday season, overheard in front of massive new-release walls at Blockbuster as well as catalog dump bins in Wal-Mart: “No, put that down. We don't do VHS.”

As videocassette sales and rentals continue to plummet, pundits wonder whether the VHS cassette, which birthed the entire home entertainment industry a quarter of a century ago, will soon be relegated to the scrap heap of outdated technologies, along with eight-track tape and the vinyl LP.

“Clearly, it's on its way out,” said analyst Tom Adams of Adams Media Research. “Once there is recordable DVD at an affordable rate, and that's become the case now, there's no reason to keep VCRs in the house.”

Adams notes he may revise earlier projections that VHS still has a few years left. “We had predicted it would be later in the decade before it completely disappears,” he said, “but the way things are moving it may not take that long.”

VHS Gives Up Both Sales and Rental to DVD
Indeed, DVD now accounts for 87 percent of all home video sales and 64 percent of all rentals, according to Video Store Magazine market research. At the beginning of the year, VHS still had nearly a quarter of the sales market and a slight majority of rentals.

Comparing the fourth quarter of 2003 to the fourth quarter of 2002, DVD sales are up 42 percent, while VHS sales are down a staggering 50 percent, Video Store Magazine market research shows.

All indicators seem to be pointing to the videocassette's imminent demise. Perhaps the most telling: A load of VHS Warner Home Video “classics” — including The Postman Always Rings Twice, My Giant and Dark Passage — is featured in the latest Big Lots newspaper insert. The closeout chain is advertising them for $1.99 each.

Rick Timmermans, director of video merchandising at Tower Records and Video, said DVD now accounts for 92 percent of the 98-store chain's video sales, “and it's changing daily.”

Tower this year significantly expanded its DVD footprint at the expense of VHS, Timmermans said, with the chain's remaining cassette inventory consisting mostly of catalog product priced below $10.

“We still bring in some new releases [on cassette], but it's really pretty futile,” he said.

Those sentiments aren't limited to the big retail sellers of home video software. Even Tom Warren, president of the Video Software Dealers Association and owner of Video Hut, a 10-store chain of video specialty stores based in the small town of Fayetteville, N.C., doesn't see much of a future for the videocassette.

“We project our VHS business to be less than 18 percent of rentals and less than 5 percent of sales during the first quarter of 2004,” Warren said.

Studios Quietly Phasing Out VHS
On the studio front, there's also been a quiet phasing out of VHS. Some executives are reluctant to talk about what they're doing, noting, in the words of one executive, “there's no upside for us” to publicize shrinking VHS output.

But most studios this year have been drastically cutting back the number of catalog titles that are available on VHS. At Artisan Home Entertainment (currently merging into Lions Gate Entertainment), where the business is currently 75 percent DVD, only 186 high-profile titles are still available on videocassette, down from a high of more than 2,000 a year ago.

“We're constantly revising that figure,” said Artisan president Steve Beeks. “As titles drop off in popularity we make them inactive.”

So far, theatrical hits like Basic Instinct and Terminator 2 continue to be available on both VHS and DVD, “but sometime during the next year titles of that stature will become inactive on VHS, as well,” Beeks said. “It's effectively reached the point where except for family and fitness, it's a DVD market.”

Indeed, sometime in early 2004, Beeks, who is set to take over the home video division of the merged Artisan/Lions Gate business, said Artisan will start releasing some new titles on DVD only, “and I don't believe we will be alone.”

He's right. Anchor Bay Entertainment, for one, no longer releases TV or film product on cassette, according to publicist Sue Procko.

Not Everyone Down on VHS
But not everyone is giving VHS up for dead. Earlier this month, Video Store Magazine received an e-mail from an independent retailer named Ron Koerber, who runs a store called Classic Video in Bridgeview, Ill.

“I have grown tired of Video Store Magazine reporting in every issue that VHS is ‘so over',” Koerber wrote. “My store has carried DVD since 1997 and yet VHS is over 70 percent of my sales. In my opinion, there are millions of older Americans who will never buy a DVD player. They resist change and technology. This market will always need to be served.”

Even Tower's Rick Timmermans concedes that while VHS sales will likely continue to dwindle, there are no plans to stop carrying VHS completely, as Circuit City and some of the other big chains have done.

“There's still a niche market out there,” he said.

And who, exactly, is in that “niche market?”

“My mom,” Timmermans said. “I even got her a DVD player, but she still prefers VHS.”

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