UPDATE: Rentrak VHS Shipments Up on Better Terms18 Oct, 2001 By: Joan Villa
While much is made of each new record-breaking DVD shipment, VHS is quietly holding its own. Distributor Rentrak Corp., which supplies cassettes to 10,000 rental locations under its Pay-Per-Transaction revenue-sharing system, has boosted its cassette shipments for the quarter ended Sept. 30 by 28% over last year and 12% over the previous quarter.
“Many analysts expected the VHS format to decline as the DVD format continues its rapid growth, but the total number of videocassettes shipped during the quarter increased across the industry,” asserted c.e.o. Paul Rosenbaum at an investment meeting in Portland, Ore., where Rentrak is based. The increase, he continues, “provides convincing evidence that consumer demand remains strong for this rental product.”
The higher numbers also indicate a shift in retailers' buying patterns and a growing acceptance of Rentrak programs that over the past year have eliminated long-term leases and offered better terms and revenue-sharing splits than in the past.
According to Rentrak sales v.p. Chris Roberts, retailers are struggling to split their purchases between lower-priced DVD and high-priced rental VHS, which still represents the bulk of their revenues. Especially this fall, however, retailers find it's tough to predict the depth of each format they will need on the new release wall as DVD continues to grow in popularity and rental turns. Rentrak enables them to manage their risk and stay within budget, he says.
Eric Smith, owner of 11 Video King stores based in St. Cloud, Fla., says he “did step up” Rentrak orders on titles streeting in the slow months of September and October to avoid studio programs that required him to purchase more units than he needed.
“We wanted to put the risk on the revenue share, paying a few dollars a copy instead of putting out a lot of money upfront,” says Smith, who purchases low-priced DVD from Ingram Entertainment and VHS from Rentrak in the quantities he chooses. “If we order a copy on DVD we need to get rid of a VHS copy. If I want 60 of a title, that's what I want — I don't want 60 of VHS and 25 more of DVD.”
Robert Alexander, president of research firm Alexander & Associates, says the shipment increase doesn't show that VHS rentals are up, merely that more retailers are utilizing a revenue-sharing system that reduces a store's upfront capital outlay. Ultimate costs may be similar between retailers who purchase through traditional distribution and those who get product through Rentrak, “but the Rentrak guy would not have put all his money on the table on day one,” Alexander says.
Alexander agrees retailers “are abandoning studio programs right and left,” because studios have not adjusted their VHS rental goals downward enough to compensate for growing rentals in DVD. As a result, he says, for retailers who don't want to pay full price for VHS rental titles, “basically Rentrak is the escape hatch.”
Plus, new c.e.o. Rosenbaum, who took control of the company a year ago after a shareholder proxy fight, has loosened Rentrak's contract requirements and set a friendlier tone of partnership with retailers, he continues. “I think shipments are up because it makes sense for studios, it makes sense for customers and it makes sense for stores.”