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Insights from home entertainment industry experts. Home Media blogs give you the inside scoop on entertainment news, DVD and Blu-ray Disc releases, and the happenings at key studios and entertainment retailers. “TK's Take” analyzes and comments on home entertainment news and trends, “Agent DVD Insider” talks fanboy entertainment, “IndieFile” delivers independent film news, “Steph Sums It Up” offers pithy opinions on the state of the industry, and “Mike’s Picks” offers bite-sized recommendations of the latest DVD and Blu-ray releases.


Opinion
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8 Jul, 2002

THE MORNING BUZZ: What I Learned on My Summer Leave

There are at least two things I learned while at home on maternity leave these past few weeks: After watching the rest of the daytime lineup, you start to look forward to “Oprah;” and it takes less than a day for a 4-year-old to utter the words “I'm bored” on summer vacation.

Thus began my quest to find activities to occupy my little girl this summer -- and that's how I learned about free movie Tuesdays and Wednesdays at our local movie theater. Each Tuesday and Wednesday at 10 a.m. -- a time that is no doubt slow at the Cineplex -- kids can choose to view one of two free movies on the big screen. Selections have included Anastasia and The Rugrats Movie -- certainly not first-run fare, but quality entertainment nevertheless. What accounts for the theater's largesse? Concessions. Nearly every little kid there had a soda, candy or popcorn, and the theater was packed (seems I'm not the only one looking for relief).

It looks as if theater owners have taken a cue from video stores, which have long offered free kids' movie rentals to draw rentals from their parents. But I wonder if video stores take full advantage of the daytime family crowd looking to occupy the little ones during the summer. Heck, my daughter and I would get out of the house to see a clown fashion a few balloon animals. At a recent appearance by SpongeBob at the local mall, the mob rivaled a rock concert. It's amazing what parents will go through to have their kid's picture taken with a guy in a suit.

While our theatrical brethren have wised up to the power of a free offer, their quest for incremental revenue may be hurting them in another arena. Not too long ago I wrote a column about the new practice of showing commercials before features.

Now it's really begun to get on my nerves, so much that I purposely arrive late to the movie to miss the pitches. Of course, you can't do that during peak hours or you won't get a seat. Thus, audiences looking to see the hottest releases have to sit through the darn things.

Judging by the grumbling at my local theater, customers are none to happy. It's yet another advantage of watching a movie at home on DVD; for the most part, you can skip the previews and go right to the feature.


4 Jul, 2002

THE MORNING BUZZ: DVD@5 Was A Family Reunion

By all accounts the recent “DVD at 5: A Conference Commemorating DVD's Fifth Anniversary” was a real family reunion. It was two days of celebration, good vibes and, as at any family gathering, moments of candor and encouragement to avoid the mistakes of the past and move on.

The event was presented by the DVD Forum and produced by Video Store Magazine and the DVD Entertainment Group (DEG).

The awards dinner on the first night was emblematic of the whole event, bringing together the home video presidents (and other senior executives) from most of the major studios and independents, senior executives from hardware manufacturers and members of the creative community to recognize those who pioneered the way for what was the most successful consumer electronics hardware and software launch in history.

There was even a newly honored patrician of the family, Warren Lieberfarb, president of Warner Home Video, who unfortunately was out of the country and could not attend the conference. Honored as “the father of DVD” for his leadership in bringing DVD to market, Lieberfarb sent a video message to the gathering, congratulating not only his own staff and industry colleagues, but the creative community “who embraced the vision of the product,” and saw its potential for extending their theatrical creative visions into the home. “It is truly everyone's success and everyone's contribution,” Lieberfarb said.

Fellow pioneer Ben Feingold, president of Columbia TriStar Motion Picture Group, also was honored for taking DVD global, and he, too, made a point of thanking many of his staff and others in the industry. Others were recognized for their leadership, including Bob Chapek, president of Buena Vista Home Entertainment, for bringing family entertainment giant Disney into DVD in a big way; and Emiel Petrone, for his leadership as the founding chairman of DEG.

Others hoisting honors for their companies' early support of DVD were: Steve Beeks, Artisan Home Entertainment; Kelly Sooter, DreamWorks Home Entertainment; Peter Staddon, 20th Century Fox Home Entertainment; Garrett Lee, Image Entertainment; Susan Marble, MGM Home Entertainment; Steve Einhorn, New Line Home Entertainment; Eric Doctorow, Paramount Home Entertainment; Ken Graffeo, Universal Studios Home Entertainment; and John Beug, Warner Bros. Records.

In this and next week's issues of Video Store Magazine, you'll read about many of the “DVD at 5” panel sessions, which all looked closely at the challenges and opportunities confronting the DVD format in the next five years.


2 Jul, 2002

THE MORNING BUZZ: Measuring the PVR Tradeoff

I've been thinking a lot lately about personal video recorders (PVRs). They're an illustrative paradox.

They are truly wonderful inventions. Users can designate programs they want recorded; skip ads, use video features like fast forward, rewind and pause; time-shifting is a given. It all records to a hard drive. A user with the right feed need never watch an unwanted snippet of programming again.

Then there's the dark side of PVRs. Masquerading in the guise of customer service, they offer the supposed boon of targeted programming. That is the double-edged sword of targeted entertainment, which the customer requests, and targeted marketing, which the programmer forces.

In the case of PVRs, the targeting happens via data collection. Every time a user selects programming, it's logged and providers aggregate that information to draw customer profiles and choose which ads to send to which audiences. Sometimes without controversial skip features.

Most companies only use aggregate data without personal identifiers, but many consumers have learned their lessons from the rapid shift in privacy policies on the Web, especially at portals like Yahoo! and MSN. Unfortunately what we agree to today could morph out of our control tomorrow or the next day.

And therein lies the rub. The same features that allow nearly sedative automatic programming also enable data collection. That means giving up a lot of privacy. As I've told many folks, I'm not worried about watching the box --- I'm worried about the box watching me.

I think companies like SonicBlue and TiVo don't get why they can't get their PVR products more widely adopted. They are the perfect balance of give and take. They give consumers everything they want.

But they freak programmers out because they defy the advertising model; and they freak educated consumers out because using them holds the potential of becoming your own 21st Century information leak nightmare.

The problem PVRs have with adoption is that the price of personalized programming, besides money, is both the very Internet-spawned ad formats and user privacy issues that most offend the technologically literate community that PVRs target.

This is a notion that could turn the national economy on its ear. Advertising generates billions of dollars, millions of jobs and constitutes a subeconomy unto itself.

Recent studies that have crossed my desk indicate that 1) most of the people who click through on Internet banner ads are children, na?ve in the ways of the cyberworld; and 2) most people hate intrusive Internet advertising formats, zapping popunders, survey windows and long intro displays almost immediately. The target audience wants to cut to the chase. The answer for advertisers is product placement.

The answer for programmers is subscription fees with a la carte structures that let consumers pick the level of premium programming and advertising they receive. I'll bet a lot of people will pay more for no ads, which will throw off a couple of subindustries. We're seeing it already. I think the Internet is confirming what we already know about advertising – most people see it as an excuse to go to the refrigerator or bathroom. (Nevermind that Turner Broadcasting CEO Jamie Kellner recently told Inside magazine we're all a pack of thieves when we watch broadcast programming and skip ads).

As the years ahead unfold, I suspect I will find myself in the Johnny Mnemonic, Matrix, Blade Runner sort of counterculture. I rebel against corporate America prying into my life and as much as I crave the convenience and compactness, I will not go quietly into technology's dark night.

But you have to decide for yourself.


1 Jul, 2002

THE MORNING BUZZ: Pump Up the Volume – While We Still Can


Music is a powerful thing. It can be like a scent that reminds you of your childhood, or a person or place you loved. It inspires creation, emotion and memory. This is what music and my favorite musicians have always done for me.

Last week at the DVD Entertainment Group and Video Store Magazine's DVD at 5 conference, a DVD-Audio expert said something that stuck in my head.

He talked about how DVD has completely reawakened and reenergized a nearly dead genre of video — music video. In VHS-format only, sales of music video titles were all but on life support before DVD, he commented.

For most of us, there is a limit to the number of times we can watch a movie in a given time period, even our all-time favorites. But it takes a lot longer to get sick of listening to your favorite album. For me music DVDs, especially ones with concert footage, are a treat. I don't watch them as often as I may listen to the group's albums, but I pop one in whenever I want to see an old friend.

I particularly love my Pearl Jam: Touring Band DVD. There's this beautiful deaf girl on stage performing sign language for the words to “Given to Fly” and I get a lump in my throat every time I watch and see how into the music she is, she sings along and dances as she signs, her eyes are closed and her head is thrown back….it's pure enjoyment of the music even though she can't hear it. When Eddie Vedder walks over at the end of the song and wraps his arms around her, she's startled and pleased at the same time and it's just an awesome, genuine moment. Every time I think about it, it makes me so glad that someone captured that moment on video.

It also reminds me of Pearl Jam concerts I've been to, when it seems like Vedder personally reaches out and touches you with a few words in between the songs that have come to mean so much to so many people (though there are a lot of people out there who won't admit they're still fans, personally I'm holding true to my “grunge” principles). Any video with footage of Kurt Cobain also makes me tear up and want to listen to In Utero over and over.

This past weekend, my music DVDs of choice were The Who Live at the Royal Albert Concert Hall and the Who's Next making-of-the-album video, both of which I've watched many times before.

This time, my eyes kept searching out John Entwistle and I kept thinking about the first time I heard “Baba O'Riley,” or “Behind Blue Eyes.” My dad was the first person to interest me in The Who and over the years I've silently thanked him and the handful of friends and boyfriends who have helped instill the love of this band in me. I've never seen them live in concert and now I am wondering if I ever will. Even if I do, it won't be the same. Daltrey and Townshend, must feel as though they've lost a family member, and rock music has lost a virtuoso of a bassist.

As I was watching the concert on DVD, I thought how glad I am that we have all this footage, these lasting memories. With the loss of George Harrison and now Entwistle, it is becoming clear that some of the musicians of generations before me that I have loved as much as my own generation's stars may not be around for my kids to experience firsthand.

Stars burn out, especially rock stars, and as sad as it is to see ones who burn out young, like Cobain, it's almost harder to see them fade. Can you imagine the loss to the music world when Mick Jagger goes? Or Paul McCartney? Can you imagine a world without the Beatles or the Stones or The Who?

I can't. And thanks to music DVD, at least in a way, none of us will ever have to live in such a world.


28 Jun, 2002

THE MORNING BUZZ: Blockbuster, Studios Stuck to Their Guns in San Antonio

U.S. District Judge Edward Prado surprised plenty of industry onlookers last week in dismissing the antitrust trial in San Antonio after the plaintiffs in the suit had presented their case.

Already plaintiffs' attorneys have vowed an appeal and have set up a conference with the judge overseeing a related suit pending in Los Angeles.

If last week's ruling by Judge Prado was a surprise, the events leading into the trial made it surprising that a jury was even empaneled, but not because of a lack of evidence on the plaintiffs' part, as Judge Prado ruled last week.

Indeed, the position I took in an editorial the week of June 2, when I opined that even if the trial were to actually start it would never reach a verdict, was based on the fact that the early consensus was the defendant studios and Blockbuster would strike settlements with the three independent retailers suing them.

The feeling at the time was the momentum from the recently announced settlements by two of the defendant studios — Warner Home Video and MGM Home Entertainment —would lead to a domino effect, with the remaining five studios and Blockbuster also seeking deals, perhaps even before the gavel sounded on the first day of trial and certainly before a jury ever began deliberations.

As Judge Prado tossed out various motions of summary judgment by the defendants leading into the trial, it looked more and more like the pressure to settle would be very powerful, indeed. Well, Blockbuster and the remaining studios in the case obviously felt they had enough going for them collectively to make a stand.

During the trial, Blockbuster and the studios had been adamant in their positions that the revenue-sharing deals Blockbuster got from the studios were not coerced, were not discriminatory to independents and were only one part of a multipart strategy to improve the financial prospects of the big chain as it struggled for profitability.

For the plaintiffs' part, they hammered away at how the studios may have colluded with each other in dealing with Blockbuster (the Disney documents in Fox company files, etc.), how Blockbuster may have pressured some studios to take revenue-sharing terms by cutting back on buys, how Big Blue's per-unit cost advantage over other retailers gave it copy-depth advantages that hurt smaller independents and propelled its market share to new heights, and how similar deals were never offered to other retailers.

It's been quite a battle in San Antonio; now on to Los Angeles.


27 Jun, 2002

THE MORNING BUZZ: The Morning After

Just like that, it's over.

Yesterday's surprise dismissal of the notorious antitrust lawsuit against Blockbuster and the studios certainly stunned independent retailers, many of whom, based on testimony in the 11-day trial, felt the odds were in their favor.

The judge's ruling goes with what studio executives have been saying all along, that the revenue-sharing deals they cut with Blockbuster were available to all retailers and that when you're talking about a level playing field there are myriad other factors to take into account besides price.

But what's legal is not always fair and this case underscores the difference. Testifying under oath, on the witness stand, Blockbuster chief John Antioco may have said his chain did not target independents in its attempts to grow – but the fact is that in a mature industry the only way one player can grow is at the expense of other players. If the pie isn't getting any bigger, he who gobbles up the most slices wins and inevitably someone's going to have to go without.

In this case, Blockbuster's aggressive quest for more market share, which everyone agrees was fueled by direct revenue-sharing deals, sucked the life out of hundreds, if not thousands, of independent retailers. These deals may have been perfectly legal, as Antioco, studio executives and now a judge and at least some jurors, maintain.

But that doesn't diminish the pain of those who were forced out of this business, some of whom lost their life savings trying desperately to stay afloat, to win a battle or at least stave off the enemy despite being outgunned, outnumbered and outmaneuvered.

Actually, the power struggle between Blockbuster and the indies is a microcosm of something that's gone on in America for the last half century – the chaining of the country. Mom-and-pop grocers, hardware stores, dime stores and coffee houses have all been swept off the face of this earth by powerful cookie-cutter chains with names like Von's, Home Depot, Wal-Mart and Starbucks. There's even a Web site, www.newrules.org, devoted to fighting the chaining trend.

Of course, the flip side of this is that even with big corporate support, the chains couldn't have accomplished this industrial genocide without consumer support. Simply put, these chains looked at the business and vowed to do it better. I sorely miss the old coffee house near my home with the mismatched sofas and stacks of dog-eared books and magazines, but the coffee was never anywhere near as good as Starbucks – and I'm so hooked I even buy Starbucks coffee for home use at (sorry, again) Wal-Mart.

I also shop at Von's and Home Depot. Granted, there's no mom-and-pop grocer near me, but there's still a hardware store. I like the guy who runs it, but he can't match Home Depot for selection and price. I'm all for customer service, but even though getting to talk with a clerk at Home Depot is like winning an audience with the Pope, I still shop there.

Just like that, the Blockbuster case is over. But for the independents whosought justice, it was over long before the trial began.

They never had a chance – and I'm not talking about court.


25 Jun, 2002

THE MORNING BUZZ: More Fun With the Hunters and Gatherers

I've been interviewing a lot of executives from the personal video recorder (PVR), video-on-demand (VOD) and pay-per-view (PPV) camps lately.

They think they will win the video battle because to them, even DVD is clutter. "People don't collect movies," one executive told me recently. "How many movies do you have that you ever really watch more than once?"

But then there is my friend and rabid DVD collector Thomas K. Arnold (not to mention Ralph Tribbey's friend ROC and his wife Helga), who pile up and count their DVDs like kings in their counting houses.

I've theorized here before that entertainment consumers --- like all of nature -- have two primary behaviors: Hunters and Gatherers. In this case the cable, satellite and broadband consumers are hunters, while VHS/DVD collectors are the gatherers.

The hunters travel light; they don't want anything they can't carry when they move. Or even flinch. Entertainment is for the moment or, in the case of many file traders, the moment before the moment: file traders often take their greatest pleasure from apprehending the quarry. The rest of the hunters enjoy feasting on it, then spitting out the bones and moving on.

Gatherers, on the other hand, take pleasure in having the item. They do collect DVD. They like not only the main event, but the bibliographical content, featurettes, commentaries. All that archival stuff. They are gatherers and so they gather. Added gatherer bonuses for DVD are its compactness and positively anal retentive symmetry that makes them all look the same in a row on a shelf. (Oh yeah, except for Warner titles. Ugly package, bottom shelf. We can roll the ottoman out of the way to access those.)

I'm torn. I'm more of a gatherer, but you've read about my adventures selling stuff on eBay (an old doll and two posters this week) because I have too much crap, so I have a love-hate relationship with DVD. I dig it, but I hate digging out of it.

Enter the PVR -- a hard drive recording mechanism with all the video player features. Mucho storage, little space, suddenly Internet-wired. Microsoft is accelerating its push with computers that are entertainment hubs. Already in the house, already Internet-wired. And now the pipers are giving me the extras, "making of" featurettes, outtakes and other cool stuff previously only available on DVD, via my set-top box.

The appeal is obvious for a gatherer in a small space. It's altogether predictable that the tightest and most expensive housing markets -- Southern California, the Bay Area, Manhattan, Seattle and others, not to mention dormitories all over America -- will be the first places to embrace entertainment that never needs shelves.

This week, Cinemanow.com and anime supplier Pioneer Home Entertainment started offering Armitage Dual-Matrix. To launch they offered it for free June 25, not coincidentally the DVD street date. I'd call that a shot across your bow, my friends. It also proves those companies are no fools. They know their audience is early adopters -- hunters by nature -- who will revel in the instant gratification.

Now a company called nReach is offering kiosks to download stuff literally into your Palm, with downloads to personal data assistant (PDA) memory cards. There's one for the gatherers! Opportunity licks you can take with you. And I understand the technology is much less susceptible to piracy than DVD, which will get studio attention. Some people are blowing this off, but "a major video chain" is in discussions to test the kiosks in stores. (You figure it out: who tests everything anyone else does, at least for six months?)

Some of us have a little of each, the hunter and the gatherer, in us. We'll still collect DVD, but we'll start exploring other ways to get our entertainment and to consume it, which will fuel the battle over copy protection.

I believe that most people want to consume their entertainment legally, but we also want flexibility in how we consume it. What's convenient in one situation is not in another.

That is the reason copy protection will be such a contentious battle. It's also the reason many of the new entertainment formats and suppliers will catch on and endure.

Suddenly I'm feeling the urge to prowl…


21 Jun, 2002

THE MORNING BUZZ: Life Without a Plan 'B'


On the rare occasions that someone I know wants to know more about my job and the rental industry in general, I always use the same analogy to describe revenue-sharing.

I say: “Remember when Blockbuster first started advertising ‘guaranteed rentals'? They could do that because of revenue-sharing.”

I personally remember thinking at the time, “How can they guarantee a rental, how can they predict whether or not a video will be available? How many copies could they possibly have?”

I remember when Blockbuster first started carrying its floor-to-ceiling stock of the newest video releases. Before that, my family didn't even have a video membership anywhere. During high school one of my friends worked in the video department of Smiths grocery store and we rented stuff of her account all the time or used my aunt and uncle's membership at a small video store within walking distance of our house.

It was later in the 1990s that my family started frequenting Blockbuster. After that it seems like we had a membership at every location within a five-mile radius of our house so we could stop and pick up a movie any time the mood struck us.

Before we learned we would be able to get the movie we wanted at Blockbuster the moment we wanted it or get it free a day later, we were fully prepared to walk into the video store on a Saturday night and see that all the copies of the newest releases were checked out. Plan ‘B' was to split up and browse through the racks and come up with a few selections we could all vote on.

Reading about the antitrust trial with all the Hollywood and rental bigwigs thinking back to the beginning of revenue-sharing made me think about the effect the tactic had on the consumer level. Having witnessed it from the consumer view then, and looking back on it now, I think revenue-sharing did two things to the consumer perspective of video rental.

First, it created a consumptive monster. Granted, the American public is all about “give it to me now, now, NOW” and the copy-depth revenue-sharing provided was very much a response to that powerful consumer desire, So that monster, in effect, created itself. But, as a result, there are very few people in their 20s or younger who remember a time when Blockbuster locations and other video stores didn't have hundreds of copies of the newest releases. A whole generation was trained in this rental perspective and probably has rarely, if ever, heard from a video clerk that the movie they wanted was “out.”

If Hollywood studios had employed the same pricing model for DVD as they did for VHS, I wonder what ways medium-sized or smaller retailers would have found to feed that rental consumer monster. If they had to buy DVD the same way they bought VHS, how much time and energy would they have had to spend to determine the perfect balance of product for their customer base? And how many customers would they have lost to Blockbuster or Hollywood, if they made a mistake on that balance?

The last five years could have been a very different video landscape if DVD had not always been sellthrough. It would have been all about rental, no Best Buy or Wal-Mart to horn in. But there's no turning back. Just as the rental consumer monster now fully expects to see 200 copies of Kate and Leopold or the like on Blockbuster shelves, they also fully expect to be able to go out and buy that DVD the minute it is available. There's no taking it back now. Once the monster has something in its grip, it ain't lettin' go.

The other thing I think that revenue-sharing did by creating all this depth of copy was eliminate the consumer's “Plan B” rental mentality. I wonder if there's any statistics out there on catalog rental activity before and after revenue-sharing began? I wouldn't be surprised to find out that activity on older titles dropped drastically after that. (In fact. Netflix reports it rents three catalog titles for every new release rental, even though new releases are still its single biggest segment.) I could probably count on one hand the number of times in the last 10 years that I have even walked through the catalog section of a video store. If one sweep around the new release wall doesn't pique my interest, I'm right back out the door. It didn't use to be that way. And DVD can only do so much to rejuvenate interest in your average catalog title.

It will be interesting to see more testimony as the antitrust trial in San Antonio plays out. Maybe we'll even find out who the true parents of revenue-sharing are, as it seems a few people are claiming the title.

Whoever it is, I wonder if they're proud of their little monster?


20 Jun, 2002

THE MORNING BUZZ: Happy Birthday, DVD!

Pardon me for doing a little horn-tooting, but Video Store Magazine this week is involved in project of which I am most proud. In partnership with the DVD Entertainment Group and the DVD Forum, we will be producing DVD at 5: A Conference Commemorating. The event will be held June 27 and 28 at the Marina Beach Marriott in Marina Del Rey, California.

As my regular readers know I have been an avid DVD backer since Day One. Our magazine has consistently been at the forefront of DVD, with a dedicated DVD section and liberal DVD coverage even before the format really began taking off.

Last summer, we came up with the idea of staging a conference to celebrate DVD's fifth birthday, and after many months of talks and meetings with the DVD Entertainment Group we reached an agreement that hopefully some of you, at least, will be able to attend.

One of the high points of the panel, for me, is the directors panel, hosted by Scott Bowles of USA Today and featuring such top directors as John Singleton, Allan Moyle and Nicholas Meyer.

While DVD has revitalized the maturing home entertainment community, it also has excited Hollywood's creative community in a way VHS never did. DVD truly has brought mainstream theatrical Hollywood and its leading “after market” together. Directors and other talent are involved in the DVD during the development and production of their films and this has given home entertainment a much higher standing in the Hollywood food chain.

Video has always been responsible for the lion's share of Hollywood's revenues, but it's never gotten the respect it deserves. Now, that's beginning to change.

Another panel I'm looking forward to is the DVD producers panel, focusing on what many say is now the hot new job in Hollywood. Bruce Apar, who actually came up with the DVD at 5 name last summer during one of our many brainstorming sessions, is flying in from New York to moderate this discussion, which I'm sure will be lively and compelling.

DVD at 5 has a lot more to offer as well. I'll be moderating a “Presidents Panel” with the heads of most major studios' home entertainment units. Kurt Indvik, Video Store Magazine's editor-in-chief, will host a session called “DVD When It's Ten,” with key analysts and retailers doing a fair amount of crystal-ball-gazing. And our publisher, Don Rosenberg, will moderate a panel of key independents, appropriately titled, “Beyond Hollywood.”

I look forward to seeing at least some of you there. For those who can't be there, please stay tuned to the Hive for continuous coverage.

If anyone deserves most of the credit for DVD's success, it is the consumer. And this consumer enthusiasm, it has been said, is also at least partly responsible for the record box office numbers we're seeing of late.

DVD is not just fueling interest in watching movies at home, but watching movies, period.

Can anyone out there think of a better reason to celebrate?


To register for the DVD@5 conference, click the logo to the left or here.


20 Jun, 2002

THE MORNING BUZZ: Used DVDs Are Transforming the Retail Business

The growing development at retail of previously-viewed DVD sales is another example of how DVD's sellthrough pricing continues to rejuvenate the specialty retailer business, while at the same time driving up sellthrough numbers for new theatrical hits at mass merchants.

Not only have the lower price points on DVDs given rentailers, large and small, significantly larger margins on rental product, but they're helping specialty businesses compete with mass merchants in sellthrough.

The model for turning rental DVD product into used sellthrough product works for large and small rentailers. The key is DVD's sellthrough price point, which allows rentailers to recoup the return on their rental inventory a lot quicker and start moving some of that inventory to a sellthrough bin weeks (months?) earlier than with VHS previously viewed tapes.

Rentailers are, on average, selling off nearly one-fourth of their new-release inventory as previously viewed videos (DVD and VHS) within the first two months of a title's street date, according to Video Store Magazine market research. Anecdotally, when it comes to DVDs, retailers are pulling the sale trigger after several weeks on some titles. That's another good in-store reminder for customers who haven't bought themselves DVD players to get one. Another incentive may be the pricing of previously viewed DVDs which, according to Video Store Magazine market research, dropped in 2001. Interestingly enough, pricing on previously viewed VHS actually inched upward. As part of our 2001 Top 100 survey, our market research team found the average sales price of a previously viewed DVD dropped from $12.18 to $11.99 in 2001, while a previously viewed VHS cassette sold for an average of $8.19 in 2001 as compared to $7.98 the year before.

What price retailers put on previously viewed titles depends on many factors, including depth of inventory and popularity of the film. But because the ROI on DVD is so much stronger on the rental side, retailers have much more pricing flexibility to attract buyers to their used DVDs. Another plus for rentailers is their ability to prepromote previously viewed sales on the rental product, as we have already seen major chains such as Blockbuster and Hollywood do. In the first three months of 2002, Blockbuster's used-DVD and game sales increased by more than 31 percent compared to the same period a year ago after a major expansion of their used inventory.

It will be interesting to see how stores continue to manage their floor space in this DVD era.