Dumping the DVD Dump Bins

23 Mar, 2008 By: Thomas K. Arnold

Studio executives are still cringing over the so-called “Pali Report,” in which New York's Pali Capitol Inc. projects a 5% drop in packaged-media sales in 2008, despite a tripling in Blu-ray Disc sales. But if you really study the report, you'll find it's not all doom and gloom ahead.

For starters, one of the key drivers behind the projected sales decline is the fact that Wal-Mart is getting rid of many of its DVD dump bins, huge vats in high-traffic aisles packed to the brim with DVDs selling for around $5 each.

Now, I've long held these dump bins are bad for the business, as they devalue DVD in the consumer's mind. These dump bins are ubiquitous, stationed like big fat sentries around the entrance to the electronics department, home of more sensibly priced DVDs.

I, for one, am not sorry to see them go. And if you make the next logical jump — that Wal-Mart is dumping the dump bins to make room for bigger Blu-ray Disc displays, something that's in the cards at most big retail chains — then it's easy to paint the move in a rosy light. Getting rid of the dump bins may have a negative impact on overall DVD sales in the short term, simply because there are so many of them, in so many stores. But it certainly positions Wal-Mart to capitalize on Blu-ray's likely upward trajectory by giving the chain a significant footprint in a category with dramatically higher margins than $5 DVDs — and a whole lot of growth potential. Sure, the number of cheapo DVDs sold this year may be off, dragging the whole category down. But that's a hit our industry can easily take, if in fact Wal-Mart does allocate more space to Blu-ray.

And I happen to believe this question is a moot point. Of course Wal-Mart will allocate more space to Blu-ray, as will smart retailers everywhere. For years, these big chains have relied on DVD as their No. 1 traffic driver. They've discounted the newest hits to bring people into their stores — and once these people are inside, they rarely leave without a cartload of other purchases, from toilet paper to underwear.

With the DVD business maturing, the appeal of new DVDs isn't what it used to be — and surely the powers that be at Wal-Mart and other big chains realize they need to reinvigorate the category, unless they want to risk hurting sales of other goods across the board. Now that the format war is over, Blu-ray is clearly DVD's designated successor — and to retailers everywhere, nothing short of a potential savior.