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TK's MORNING BUZZ: The Fall of Rentrak Founder Ron Berger Is More Than a Company Coup -- It's an Indictment of Revenue-Sharing

19 Sep, 2000 By: Thomas K. Arnold

Today's the day Rentrak shareholders meet and decide whether to dump Ron Berger from the company he founded.

It ain't over until the shareholders sing, but from the looks of things, the dissidents will win. Already, Berger on Friday announced his resignation as c.e.o., and observers predict he will be removed as board chairman as well--along with his cronies.

The fall of Ron Berger is a much bigger story than that of a company founder who is given the boot due to a corporate squabble. It's an indictment of revenue-sharing.

It was Berger who unleased the revenue-sharing genie many moons ago, after having experimented with it on his own chain, National Video.

After selling out to West Coast Video, Berger began pitching his Pay-Per-Transaction system to other chains as a marketing tool, enabling them to bring in significantly larger quantities of select titles, in select markets, on the cheap to one-up the competition. Hollywood Entertainment Corp. used this approach in the late 1990s to build market share against Blockbuster. Blockbuster cried foul and found plenty of comforting shoulders in Hollywood.

The rest, as they say, is history--sad history, sordid history. Today, more than 50% of rental product is channeled through revenue-sharing, mostly through direct deals between the major chains and the studios. And Rentrak has been caught in the middle, along with many of its retail clients.

A "marketing tool" loses its effectiveness when everyone's doing it, and the fate of Rentrak's core PPT business is what was ultimately Berger's undoing.

Last April, Rentrak began exploring the sale of all or part of its PPT business. Too little, too late, critics said, and the assault on Berger was begun.

If revenue-sharing were, indeed, the great white hope of video rental, then why have thousands of independents gone out of business in the last two years? Why have two public video chains gone bankrupt in the last month? And why is total rental spending down from what it was two years ago, with three times as many copies of the hits flooding the market?

Berger's original concept of revenue-sharing as a marketing tool may have been valid, at one time, but the beast it's evolved into has turned on him and on practically everyone else in this business.

Comments? Contact TK directly at: TKArnold@aol.com

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