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TOP 100: 2003: A Breakout Year for Previously Viewed

30 Apr, 2004 By: Holly J. Wagner

It was definitely the year of the previously viewed disc. Independent video retailers discovered a sea change that sellthrough DVD pricing was creating in the industry: Many consumers are willing to wait a couple of weeks to buy a previously viewed disc, rather than pay more to buy it on street date.

Freed from the bonds of revenue-sharing and contractual agreements to keep titles on rental shelves, retailers found they could sell titles off sooner at a much higher price, freeing up shelf space at the same time.

The Video Buying Group studied data from its member retailers and released a report in February touting the high margins and business benefits of selling off titles after the fourth rental turn for $4 less than the new retail cost. Some retailers picked up on a business model that migrated from the music industry, wherein CD rental is forbidden, but trading in used CDs is legal.

The Internet was a big driver as well, with many merchants migrating online to eBay or other sites to sell off previously viewed product. Chain stores like Wherehouse, Second Spin and Djangos were buying discs online, and a new crop of Web sites geared specifically toward buying, selling or trading used DVDs sprang up.

The chains felt the bump as well, although most didn't acknowledge it much outside of their filings with the Securities and Exchange Commission.

By the end of 2002, Blockbuster Video noted in its annual report that previously viewed sales had leapt so much it drove a 29.7 percent increase in same-store rental revenue. While the company noted worldwide unit sales of previously viewed titles fell by 7.2 percent last year, the decline was offset by a higher percentage of PVT DVD sales, which commands a higher average selling price than VHS.

At the end of 2003, Blockbuster launched its “Big DVD Trade-In” campaign, which let customers trade in any non-adult DVD in good condition to get one of a dozen hot new releases new for $12.99. CEO John Antioco later reported the chain took in 600,000 discs and sold off 60 percent of them. Not only did Blockbuster make the promotion permanent on a revolving list of new releases, but the chain has recognized enough revenue from previously viewed sales to mention as a business risk in its 2003 annual report the potential impact of a decline in used disc prices.

Most previously viewed titles at Blockbuster and rival Hollywood Video sell for about $10. Neither those chains nor competitor Movie Gallery disclose what percentage of their bottom line comes from used-disc trade, but enthusiasm for the foreseeable future is evident.

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