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Rental Growth Prompts Return to Old Strategies

28 Jul, 2009 By: Thomas K. Arnold

The Brothers Bloom

Video rental’s resurgence is not unnoticed by savvy suppliers like Summit Entertainment’s Steve Nickerson. With a new feature film, The Brothers Bloom, nearing the end of its platform theatrical run, Nickerson was looking ahead at the increasingly crowded fourth quarter and not liking what he saw.

“It’s a really nice movie that has fantastic talent in it, including Rachel Weisz, Mark Ruffalo and Adrien Brody,” Nickerson said. “But it’s going to finish at just over $3 million, and with all the big titles coming out in the fourth quarter it would get lost, swamped. So we were thinking, how do we do something different that’s going to make our film stand out?”

What he finally came up with is this: When The Brothers Bloom is released on DVD and Blu-ray Disc Sept. 29, Summit will limit sales to rental dealers, with the big DVD and Blu-ray Disc retail sellers like Wal-Mart, Target Stores and Best Buy having to wait until the first part of 2010.

Nickerson hopes this exclusive rental “window” will not just give rental dealers something they can really get behind, since they won’t have to compete with sales, but also build further awareness among the public so they’ll be more inclined to buy it when it does become available to the sellthrough market.

“We see it as a way to expand our audience—as a quasi second theatrical run, if you will,” Nickerson said. “We’re going back to the future.”

In the early days of home video, before the introduction of DVD in 1997, most new releases had a rental run before they were released to sellthrough for the public.

Nickerson added that he and his team have met with all the big sellthrough chains, and they’ve bought off on Summit’s logic.

“They understand what we’re doing,” he said. “And they get the additional benefit of when we introduce it at retail it probably won’t be at the full new release price. So they will get it later, but at a lower price — and after more people have been exposed to it.”

Industry sources say several other studios and suppliers are plotting similar moves, at a time when DVD sales are still slipping while rental, buoyed by the troubled economy and a general belt-tightening among consumers, is doing remarkably well. According to Rentrak numbers released several weeks ago by DEG: The Digital Entertainment Group, consumer spending on video rental rose 8.3% in the first six months of this year from the first half of 2008.

Studio executives and analysts agree that the surge in rental can be attributed to the down economy as well as the continued success of Netflix and the proliferation of rental kiosks, primarily from Redbox. In 2008, according to figures just released by the Entertainment Merchants Association, rental kiosks accounted for 6% of the total rental business, but that share is expected to surge this year.

Redbox earlier this year announced plans to add more than 7,000 kiosks to its fleet of 13,000 before the year is up, including a chain-wide rollout in Wal-Mart. Redbox ended 2008 with kiosks in just 700 Wal-Mart stores.

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