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Subscriptions Mulled at HERE Show

27 Sep, 2004 By: Jessica Wolf

BALTIMORE — Retailers buzzed about subscription programs and whether indies need to implement them at last week's Home Entertainment Retail Expo, a joint venture between the Video Software Dealers Association (VSDA) and Advanstar Communications, which also publishes Video Store Magazine.

But most panelists and independent retailers in attendance said they feel it's premature for indies or small chains to jump on the subscription model.

Reacting to Blockbuster's decision to implement an in-store subscription model or trying to combat the consumers' distaste for late fees are not reasons enough in themselves, retailers said.

The danger is that the customers most likely to sign on for a subscription program are frequent renters who are already spending much more than the flat sub rate, said Adrian Hickman of Philadelphia-based TLA Video during a panel discussion.

Hickman, who has spearheaded the creation of a white paper on the subscription issue for the VSDA's indie retail group, iDEA, talked about the option during a packed session titled “Changing With the Times.”

Plus, the idea that consumers are flocking to sites like Netflix for unlimited monthly rentals simply because they are fed up with late fees — thanks mostly to Blockbuster automatically adding late fees to its customers' credit cards — is often an overblown assertion, said industry consultant John Farr.

Retailers in attendance talked about policies for late fees — which all admitted are pure profit and can make up as much as 14 percent of revenue — that not only do not alienate the customers, but inspire more loyalty, such as cutting deals to keep good renters coming back. These kinds of options are ones that Blockbuster at large can't and doesn't offer, Hickman pointed out.

A rough draft of iDEA's white paper on subscription models was available at the show. It walks indie retailers through the basic steps needed to implement a sub program: marketing, staff training and technological issues. It also includes a grid that tells retailers how many new customers they would need to make up for the dollars lost from the avid renters at the high end of the scale. iDEA's preliminary draft of its white paper also addresses the fact that subs are not one-size-fits-all. Indie retailers considering subscriptions may need to develop programs that have product caveats or that still allow for late fees.

Bill Bradley of midsized chain Bradley Video said he's got a subscription plan ready if needed, but has not yet found it viable for the company's customer base.

Also, for retailers participating in revenue-sharing programs like Rentrak's Pay-Per-Transaction, a subscription model could create a loss for the retailer on each rental. How Blockbuster will manage its subscription program when the chain is supposedly involved in rev-share deals was another question of interest, albeit an unanswerable one.

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