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Retailers Up Used DVD

3 Jun, 2008 By: Erik Gruenwedel

At the Second Spin in Costa Mesa, Calif., back walls once lined with eclectic music CDs are quietly being replaced with standard DVD and Blu-ray movies.

The Trans World Entertainment Corp. subsidiary, which predominantly sells used music-packaged media, is following a company-wide mandate aimed at replacing money-losing CDs with DVD as quickly as possible.

New York-based Trans World, which also operates the f.y.e. Suncoast and Wherehouse brands, reported a $11.8 quarterly loss primarily due to a 23% decline in same-store music sales.

The company said sales of new and used DVD movies, which represented 41% of revenue, compared to 38% during the previous-year period, would account for an even greater slice of revenue going forward.

For the Second Spin manager, the transition from music to movies has been a steady theme.

“I've been in music retail for seven years, and for the past two years DVDs have outsold music,” she said. “I've never seen that before.”

She shouldn't be surprised.

Hastings Entertainment Inc., the Amarillo, Texas-based retail chain with 153 stores, said it would begin focusing more on new and used movie and video game sellthrough versus rental due to consumer demand.

This, despite the fact comparable rental revenue increased 3.8% to $23 million in the first quarter.

“Buy, sell, trade, rent creates a new retailing synergy by offering greater value and selection,” said John Marmaduke, CEO of Hastings.

Rob Enderle, independent analyst with The Enderle Group in San Jose, Calif., said current economic conditions have fueled consumer interest in seeking alternative means of acquiring packaged media satisfaction.

He cited the success of Peerflix.com, which lets users trade used DVD movies for a fee.

Blockbuster Inc., which is aggressively transitioning itself from a rental pure-play to diversified entertainment retailer, has quietly upped sales of used DVD with positive results. The Dallas-based rentailer has a popular “four DVDs for $20” campaign (emulated by rival Movie Gallery) that has produced dividends.

Edward Woo, media analyst with Wedbush Morgan Securities in Los Angeles, said Blockbuster reported $656 million in sales of previously viewed product (PVP) in 2007, up $50 million from $616 million in 2006.

“It appears that used movies are doing better than rentals or new movies,” Woo said. “I don't know what Hastings or Trans World reports, but [their transition to PVP] would make sense since they are likely to mirror Blockbuster.”

In the first quarter of 2008, Blockbuster reported PVP revenue of $139.1 million, up $1.2 million from previous-year period.

“Sales of previously viewed movies and games represent a terrific value for our customers,” said Blockbuster spokesperson Randy Hargrove.

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