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Rentals Slow as Sales Encroach on Demand

4 Dec, 2003 By: Melinda Saccone

Consumer spending at the rental counter posted gains the week of Thanksgiving, but remained below the comparable week in 2002 as video sales continue to encroach on rental demand.

Consumers spent $148.6 million at the rental counter for the week ended Nov. 30, up 12.6 percent from the previous week, but down 21.4 percent from the comparable week in 2002.

Earlier in the year, many industry pundits had expected big things from rental in the fourth quarter, but so far the quarter is falling short of estimates. Video Store Magazine market research estimates that rental spending posted a 5 percent decline in the first two months of the quarter from the comparable period in 2002.

As rentals wobble, sales are picking up. In October, sellthrough dollars were up 34 percent from the same month in 2002.

Meanwhile, rental legs on new releases are shorter, and catalog titles are in less demand as rental product. According to Video Store Magazine market research, catalog releases have historically contributed nearly one-third of rentailers' rental revenue, but a November survey of rentailers conducted by Video Store Magazine shows that catalog transactions are contributing less to the overall tally. On average, catalog rentals account for 26 percent of weekly rentals, according to that survey. By comparison, catalog rentals accounted for 31 percent of weekly rentals in November 2002. According to the survey, 33 percent of rentailers polled said their catalog business had decreased in the past six months. These rentailers cited consumer purchases of catalog on DVD as the overwhelming cause of the catalog rental decline (62 percent).

Although cumulative rental spending in the past two months is down, year-to-date spending stands at $8.7 billion, up 9.1 percent from the comparable 48-week period in 2002.

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