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War Has Upside, Downside for Video Revenue

14 Mar, 2003 By: Joan Villa

As the country moves to the brink of war with Iraq, video retailers expect rentals to lag in the first week or two of a confrontation but rebound when consumers turn to entertainment as a distraction from the news.

That seems to be the prediction for typical communities that are not impacted by military bases or tourism. But those retailers who rely on tourism to bring customers into their stores or who serve the military and their families fear a downturn could last longer.

“We've been down 8 percent ever since 9/11,” said Tom Warren, whose Video Hut chain in Fayetteville, N.C., serves the military in nine out of 10 stores. “If we do go to war, I expect that 8 percent to drop down to about 12 percent, at least, while the conflict goes on. We haven't seen the full impact yet.”

As many as 30,000 troops have been deployed from the four-county Fort Bragg base to await war in the Persian Gulf, Warren said. With the servicemen gone, spouses without jobs often leave and go home to family to wait out the war, creating a “multiplier effect” on his business, he noted.

“If war does break out, their spouses and friends and family are going to be glued to CNN,” he said. “So all you can do is run a lean and mean operation, cut any fat out, and try to be smart with your buys to adjust to less traffic.”

Across the country in Palm Desert, Calif., nine-store Video Depot also anticipates a bigger impact from the war because many customers come to the Palm Springs area in winter and spring to live in second homes and time shares.

“We suffered during the '91 Gulf War when our business was down significantly,” said VP Scott Whitmer. “I've heard other people say the video business won't be impacted, but my experience from 10 to 12 years ago is we probably will.”

Whitmer is particularly concerned that renewed fears of terrorist attacks on American soil will keep people “cocooned” in their homes and afraid to travel. To make matters worse, a weak slate of April releases won't drive his customers to rent. “March and April are very good months for us; April particularly around Easter is extremely busy and if for some reason tourism is impacted then we'll be affected,” he said. “We're still going to continue with our normal advertising, which does include television, radio and direct mail, but I didn't think the titles are good for April.”

At three-store Video Horizons in Arlington, Mass., owner Mark Nathanson believes “escapist entertainment” will prevail once the country tires of news of the war. “We'll be in a business that is not really affected by the war,” he said. “People will stay at home and be afraid to travel and need inexpensive entertainment.”

Research firm Alexander & Associates tracked the industry during the last war and after the Sept. 11 attacks and found that an initial drop-off was followed by a surge in rentals. “When Iraq invaded Kuwait, which was late August 1990, things came to a standstill for a bit,” said president Bob Alexander. “Then after a few weeks, three or four, video rentals came back strongly and continued strong all the way through the ‘counterattack' in January.”

In North Attleboro, Mass., COO Michael Richards of 12-store Massive Video believes the same pattern will be repeated. “Obviously there will be intent TV viewing around the clock, but then they'll settle into their usual habits and distractions,” Richards said. “I think that's why light romance and comedies like Sweet Home Alabama and My Big Fat Greek Wedding are playing so well right now; they're a perfect distraction.”

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