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Warner Looks for a Better Cut as Rental Model Evolves

26 Feb, 2005 By: Holly J. Wagner

With prebook dates for April releases looming, some retailers are getting anxious about a new revenue-sharing formula Warner Home Video is reportedly readying for an April 1 debut.

“We've been hearing ‘any day now' for about two weeks. Once the new terms are announced, there is no guarantee people will renew. It's time to order Blade Trinity and Ocean's Twelve for April,” said Todd Zaganiacz, president of the National Entertainment Buying Group.

“[Dealers] don't know how they are buying it, if they buy it outright or by rev-share … Part of the key there is, what the upfront becomes. If that changes to a fee up front, that will make a difference in whether people will renew the new terms.”

One iteration of possible new terms included a studio cut of previously-viewed sales for a full year. But that may have already been changed, said Ted Engen, president of the Video Buying Group, with a revision to scaling the studio cut of PVT sales back to half a year.

The proposal also requires retailers not to sell previously viewed titles (PVTs) for four weeks.

The selloff window is critical for dealers and some have already stopped revenue-sharing because it is too restrictive, Engen said.

“A lot of my guys are putting them out at two [weeks],” he said. “So many of my guys are not on revenue-sharing, so it is not a concern to us. It [opting out of rev-sharing] started last year when pre-viewed got so hot. Retailers need more flexibility.”

A Warner spokesperson could not be reached to confirm or correct the proposed terms. But sources said other proposed elements include:

• a $1 minimum guarantee on every rental transaction;

• a $10 minimum guarantee on titles with $100 million or more in box office;

• an increase of Warner's cut from 29.25 percent to 34 percent for direct accounts and from 35 percent to 40,75 percent for non-direct accounts;

• a $5 flat fee on PVT sales during the covered period, recoupable against the minimum fee to Warner;

• increases in rev-share grid levels for titles that did between $50 million and $100 million at the box office; and

• no promotional credits for any rental or PVT promotions.

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