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VHS Shrinking, But Still Generating Millions for Certain Studios, Stores

24 Feb, 2005 By: Judith McCourt

VHS is dead. Right? Wrong. With more than $1 billion in annual sales in 2004, the cassette market is still adding tidy profits to the coffers of the studios.

Although sales are on the decline, Home Media Research estimates that cassette sales will float around the $500 million mark in 2005, making it a healthy cash cow.

Buena Vista Home Entertainment and Warner Home Video together accounted for 38 percent of all cassettes sold in January, according to Nielsen VideoScan, and were successful with divergent strategies.

Buena Vista, with a strong product portfolio in the family and children's market, held the line on price to pump up cassette profit. While many have dropped the price of their VHS product line, Disney has successfully held its average price in the low $14 range. The 2004 VHS market share leader generated more than $300 million at retail from cassette sales last year.

Warner led the charge for DVD adoption — pouring product into the marketplace — yet it remains No. 2 in cassette sales. While price was Disney's strategy, volume was Warner's approach. The supplier's VHS products pulled in almost $200 million at retail in 2004, according to Home Media Research estimates. Warner's strategy included flooding the market with catalog product at the impulse-buy price of less than $10.

Channels such as grocery, drug and mass merchants are still moving enough cassettes to make it worthwhile to keep them in stock. According to Nielsen VideoScan, 60 percent of all cassette sales occur in discount mass merchants, drug and grocery channels. More than half (59.2 percent) of the VHS units sold in January came from children's nontheatrical (29.6 percent), comedy (15.4 percent) and family (14.2 percent) fare — genres that fare well in these channels.

Direct-to-video kids' titles also are a VHS sweet spot. Buena Vista's direct-to-video release Mulan II is the top VHS seller so far this year. Universal Studios Home Entertainment's direct-to-video The Land Before Time XI: Invasion of the Tinysaurauses is No. 2, and Paramount Home Entertainment's Dora the Explorer: Catch the Stars is No. 3. By comparison, the No. 1 overall seller (including DVD) so far this year is Warner's epic Troy, which does not appear on the top 20 VHS sellers chart.

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