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New Formats, Shelf Space, VOD Among Industry Challenges

3 Feb, 2005 By: Kurt Indvik

With this issue, we introduce Retail Pulse, a new regular department in which members of Home Media Retailing's Editorial Advisory Board respond to a question on timely issues impacting the home entertainment industry.

This week's question: What do you see as the greatest challenge to the packaged media business in 2005 and why?

Gary Arnold, SVP, Best Buy
As the DVD business is confronted with the future of the next generation, will the hardware and software suppliers find a way so the consumer is not confronted with a dilemma around multiple formats and only certain content being available on certain playback devices?

Gaming is about the launch of meaningful new technology such as PlayStation PSP, Xbox 2 and the challenges to have meaningful availability of both hardware and software to launch and establish these great new consumer products.

Bill Bryant, VP, Ingram Entertainment
For video specialty stores, it's about accurately forecasting the ratio of DVD and VHS necessary to satisfy consumer demand, while maximizing rental profitability, and, effectively increasing catalog sell-through inventories, developing merchandising and sales strategies to increase DVD for sale.

At mass merchants, the primary emphasis is on the DVD format, while closely monitoring the development of next-generation formats such as HD-DVD and Blu-ray Disc.

Grocery and drug chains must focus on creating promotions utilizing tie-in products to effectively compete with loss leader pricing in the market place and developing methods to effectively control shrinkage. Developing ways to increase emphasis on catalog DVD to improve category profits and to generate impulse sales is also a major challenge.

Chuck Gorman, VP, Barnes & Noble
The biggest challenge moving forward is how to maintain growth in DVD sales — how to continue to grow this business, and manage the introduction of HD-DVD and Blu-ray in a way that does not confuse customers are the great challenges for 2005.

Steve Hicks, VP, Hastings
The upcoming new formats of HD-DVD and Blu-ray could create confusion in the marketplace, keeping consumers from adapting quickly to any one format. Even the alternative delivery of movies via the mini-DVD format and the game systems that will play movies may further intimidate and confuse the consumer.

Besides this primary concern of consumer dissatisfaction, the rentailer/retailer will now be faced with space issues. Will we carry one title in up to five configurations — full screen, widescreen, HD-DVD, Blu-ray and mini-DVD?

The DVD was a format that was universally applauded and accepted. Will it remain so?

Adrian Hickman, Manager, TLA Video
2005 is looking like a “land grab” year on the retail side, whether through acquisition, merger, or direct competition. As usual, pricing has been the main battlefront, but with the maturation of the installed DVD player base, and the decline (but not yet disappearance) of the VHS camp, retailers have to be clever enough to look beyond price to keep packaged media dominant. In turn, manufactures are now looking for the big thing, feeling that the current model has just about reached it's potential.

The greatest challenge this year is to see all of the upcoming challenges as “opportunities.” Whether it is supply side — HD vs. Blu-ray, catalog deployment, increasing sales in a mature marketplace — or retail — creatively looking beyond price, building a desire for customers to own as well as rent, smartly managing your stock levels, keeping the “entertainment” factor in full swing — we must progressively keep the packaged media business as the preferred choice for the consumer's home entertainment.

Rick Timmermans, Director, Tower Records and Video
Video-on-demand (VOD) is here, and how we, as packaged media retailers, deal with the maturation process will play a role in the success of our business. Too often, the media jumps on new innovations and pumps them up to a level that promotes the perception that “everyone” is now using that new technology when in fact, it may take years for that technology to match the hype. That being said, we must understand that a number of our customers will certainly embrace VOD to some extent. How we deal with that customer is very important.

People enjoy getting in the car and going out to a movie. They enjoy browsing the bins at their local video store. They enjoy the social aspect, and they enjoy building their collections. Keeping each customer enthused and coming back is the No. 1 challenge we face. However, to achieve that, we must be willing and able to incorporate the new technologies into our business practice while maintaining our packaged media offerings.

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