Deja Vu22 Sep, 2009 By: Thomas K. Arnold
Are we going back in time or what? I read our story about Blockbuster chief Jim Keyes' conference call with Pali Capital (to see it, click here) and immediately rolled my eyes and let out a chuckle. Apparently Blockbuster isn't putting its own DVDs into the 2,500 Blockbuster Express kiosks the chain plans on rolling out through the end of the year. Instead, Blockbuster's partner in the venture, NCR Corp., is in charge of feeding, and among the sources for its dollar-a-day rental DVDs is — surprise, surprise — Wal-Mart.
That took me back to 2000 and 2001, in the early days of DVD, when studios were once again going through one of their period bouts of consolidating distribution. Retailers and even other distributors shut out by studios such as Universal limiting distribution to Ingram and VPD would simply turn around and buy product, on street date, from the local Wal-Mart.
It was something they couldn't do in the days of high-priced rental cassettes, when the mass merchants weren't even in the home video business, for all practical purposes. In those days, you will recall, videocassettes were released with list prices of up to $100, with the express purpose of limiting sales to video dealers who would turn around and rent them to consumers. No one thought consumers would actually want to own hit movies released on video, except for a smattering of family and children's features that would likely be viewed repeatedly. Six months down the pike, the price would come down, primarily to give retailers a chance to replace their worn-out rental cassettes. Marketing these no-longer-fresh theatricals to consumers was merely an afterthought.
But DVD changed the equation, and studio attempts to consolidate distribution — a ploy to both feed the burgeoning sellthrough market by limiting rental availability and at the same time get a share of the rental action, since the retailers and distributors who made the cut had to agree to revenue-sharing arrangements — were consistently dinged by the Wal-Mart factor. Indeed, independent rental dealers as well as smaller distributors like Flash unabashedly stated they would not be stymied by the studio clampdown and simply buy their DVDs at Wal-Mart, Costco and other mass merchants who were doing cartwheels just to tap into the booming DVD sellthrough business.
Nearly 10 years later, the same thing is happening, although now Blockbuster has joined the disgruntled indies in shopping at Wal-Mart. Here's a novel concept for the studios to entertain: Why not just ship everything to Wal-Mart and let Wal-Mart be the country's sole distribution source for DVD? Wal-Mart is open early and even has a good number of 24-hour locations. The chain is fairly ubiquitous; according to Snopes.com, 90% of all Americans live within 15 miles of a Wal-Mart store. And the prices Wal-Mart charges for new DVD releases tends to be lower than some distributors charge.
Hey, I think we're on to something ...