BURBANK, Calif. -- In a radical move that will likely have repercussions throughout the video distribution pipeline, Buena Vista Home Entertainment here will make all of its rental products available on a shared-revenue basis through traditional distributors.
The Walt Disney Co. subsidiary's goal is to increase copy depth of new releases at retail, said distribution sources. This follows copy-depth programs from Warner Home Video, also here, and Columbia TriStar Home Video, Culver City, Calif., that offer retailers free copies if they meet certain purchasing requirements. Universal Studios Home Video, Universal City, Calif., has announced a similar program.
Details about the Disney program were still being worked out, but distributors would license the software technology to track transactions from Rentrak Corp., Portland, Ore., or SuperComm, Dallas. SuperComm is another Disney subsidiary.
Currently, SuperComm offers rental products to larger supermarket chains on a shared-transaction fee basis, channeling the tapes through distributors for a handling fee. Rentrak pioneered this form of revenue sharing, which it refers to by the trademarked term "Pay Per Transaction." Rentrak supplies 6,500 stores on a direct basis, according to an official. Most are specialty operators or smaller supermarket chains.
With these shared-revenue programs, retailers pay a fee of $10 or less to acquire a tape, and then share roughly half the revenues with the supplier. The new Disney program is expected to be similar, except that retailers will deal directly with their distributors rather than with Rentrak or SuperComm, although they may continue to do so if they prefer, said distribution sources.
Discussions are still taking place that would determine how this program would affect retailers, distributors and the shared-revenue companies. More consolidation in the distribution ranks is a distinct possibility, said industry observers.
"Nothing's a done deal," said Bill Bryant, vice president of sales, grocery and drug at Ingram Entertainment, La Vergne, Tenn. "Conversations are in progress right now."
Although distributors have traditionally opposed Rentrak, "our feeling is that we are going to pick up a lot of retailers," said a Rentrak official. While SuperComm has been friendlier to distributors, Rentrak has a broader product line, including titles from Fox and Universal. This advantage and Rentrak's huge customer base among video specialty stores may persuade distributors to put aside past differences, said observers.
Des Walsh, SuperComm's vice president and general manager, said if Disney's new program were successful, it would lead to more studios making their products available through revenue-sharing. "To the extent that expanding the availability of copy depth will mean more satisfied customers, we believe that this is going to further lift the retailers' opportunity for profitability in the video rental category," he said.
This could also lead to more supermarkets getting into rentals, he said. "In certain overseas markets, where we have the majority of the major studios participating in revenue sharing, this has resulted in a number of nonspecialty chains -- supermarkets and convenience stores -- electing to get into video rental. Both the entry cost and their new release purchasing budget were dramatically affected by the availability of a broad range of product on a revenue-share basis," said Walsh.
The three studios' emphasis on copy depth was brought on by two developments: last year's industrywide decline in rental revenues and Blockbuster's deals with studios to acquire products directly on a revenue-sharing basis, said industry observers.
"We believe there will be a lot of changes in the rental industry during the coming year and that these will be positive ones for retail," said Ingram's Bryant. "The year 1997 was a relatively flat year for retailers. The studios and distributors have acknowledged this and all are working together on solutions.
