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The Shelf-Space Crunch

10 Sep, 2004 By: Thomas K. Arnold


With the fourth quarter fast approaching, the home entertainment industry is bracing itself for a major shelf-space crunch at retail that promises to have a dramatic effect on business.

Among other changes, retailers are becoming increasingly picky about what they bring in — and how long they keep titles out. Even the big chains are tailoring store inventories to better fit their market demographics. And as the crunch gets worse, more and more retailers are getting rid of video cassettes.

Blockbuster, for example, intends to ditch VHS completely in about 200 stores by the end of this year because demand no longer justifies the space.

“Because of the sheer volume of product and the emergence of new categories with DVD, like TV DVD, the pressure on shelf space is more intense this year than it has been in the past,” said Matthew Smith, SVP and general manager, content, for Blockbuster. “Therefore, we have to be more selective of the product we are bringing in, and also buy demographically for our stores to make sure we have the right product in the right stores.”

How Crunched Is It?
Just how bad is the space crunch? According to The DVD Release Report, as of Sept. 3 there were 35,674 active DVD titles in release — a record high. By next March, the total number of active titles is expected to rise to 37,237.

“Shelf space is definitely an issue,” said Ralph Tribbey, the weekly newsletter's editor. “The big box is full, or getting very close to it.”

“We've all been talking about it,” said Kelley Avery, worldwide head of home entertainment for DreamWorks SKG. “For awhile, retailers wanted to do 50 percent or 60 percent [selloff] in the first week; now, some want to do that after the first weekend. And the challenge we're facing is that it's easier for retailers to go on to the next release rather than keep the display space up for a smaller title and work it for three or four weeks. Somebody always has something new to offer.”

Some relief may be on the way. Avery noted that most of the mass merchants, including Wal-Mart and Target Stores, “have actually expanded the space they have dedicated to DVD over the last year.”

Not only has the footprint for DVD gotten bigger, taking over more of VHS's space and in some cases expanding home video departments in general, but there are more freestanding displays in high-traffic aisles outside the DVD area.

Patrick Fitzgerald, Buena Vista Home Entertainment's EVP of sales and distribution, sees this as an encouraging sign.

“Many retailers will prove themselves to be very smart this upcoming fourth quarter by expanding the DVD locations beyond just the traditional space typically allocated,” he said.

The DVD Release Report's Tribbey sees some action on the supply front as well. In the fast-growing TV DVD arena, season sets are getting slimmer and release strategies are changing.

Paramount Home Entertainment, which had released the original “Star Trek” series on double-episode single DVDs, is now relaunching the series as “complete season” sets.

“When you work out the numbers, it's something like a 75 percent reduction in space requirements,” Tribbey said. “The market is disappearing for two episodes of ‘Bonanza' on a single disc. Retailers just don't have room for it anymore.”

Expanding, But Not Fast Enough
Even with DVD sections in the big retail chain stores expanding, “there will still be more titles coming out, competing for that space,” DreamWorks' Avery said. The major theatrical blockbusters like Shrek 2 or Spider-Man 2 won't be affected. New theatricals with moderate box office takes — $75 million and below — will likely get less prominent display time, as Avery said. Other product will require a little more salesmanship on the part of the suppliers.

“You have to offer exciting campaigns and content that you believe will drive consumers into stores to purchase,” said Jeff Fink, senior EVP of Miramax Home Entertainment, pointing to Miramax's 10th anniversary edition of Clerks with a documentary that's longer than the actual movie.

Avery agreed. “The onus is really on the studios to come up with great marketing campaigns to pull through that product,” she said. “And it's not about promising a big marketing campaign — you have to show them you have a smart marketing campaign.”

If a DVD release can draft off the film's theatrical campaign, so much the better, Fink maintained.

“That's why you're seeing shorter and shorter windows,” he said. “Studios want to ride the crest of all the theatrical awareness and advertising, so the movie is still fresh in the minds of consumers when it comes out on DVD.”

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