BURBANK, Calif. -- Walt Disney Co.'s purchase of SuperComm, Dallas, clears the way for revenue sharing to enter the video distribution mainstream, particularly for supermarket rental departments, say industry observers.
Through it, supermarkets may become even more of a force in the video rental business than they are today. Supermarkets represented 18% of the $9.3 billion video rental market last year, roughly the same as Blockbuster Video, according to SN's State of the Industry Report on Supermarket Video, published last spring. The video distribution method -- known as "pay-per-transaction" or "pay-per-rental" -- allows retailers to acquire new release rental movies at a fraction of their purchase cost, but they must then share the revenues 50-50 with the supplier. Transactions are tracked electronically. Once regarded with skepticism by many retailers and studios, and with disdain by traditional distributors, the distribution method attained almost instant credibility with the Disney purchase.
"With the power of Disney behind it now, it is just a whole lot more attractive," said Carl Johnson, video specialist at Harp's Food Stores, Springdale, Ark. As a result, Harp's will now consider using the system, he said. "It made the distributors aware that SuperComm is here to stay," noted an executive with a major Midwestern chain that has been using the program. Meanwhile, trade sources told SN that SuperComm may be very close to signing another major studio to participate in the program. Disney's acquisition of SuperComm, which took place last December, means three things, according to industry observers:
More supermarkets and video distributors will embrace shared revenue, hoping to increase rental activity and customer satisfaction.
Disney here, through subsidiary Buena Vista Home Video, will plow big dollars into promoting and developing shared revenue, while continuing its marketing blitz on behalf of its rental titles.
Video rental in supermarkets will continue to grow, perhaps even adding to the transactions and revenues of the overall video industry. Harp's is not the only supermarket retailer looking at this form of shared revenue in a more favorable light since the Disney acquisition. "It's possible that since Disney has taken it over, we may do business with them in one form or another," said Rick Ang, director of video operations at Bel Air Markets, Sacramento, Calif. "But I don't know what their plans are." "I have not entertained revenue-share programs as I believe that our retailers receive a better return on investment through tape purchases," said Teri Severinsen, manager of video services at Roundy's, Pewaukee, Wis. "However, I would listen to a presentation to determine whether Disney's acquisition offered any additional benefits." SuperComm's primary market is supermarket chains, and Disney said it wants to continue this focus. Specialty retailers who want to acquire Disney rental products and join the revenue share plan should go through Rentrak, Portland, Ore., which the studio also has a distribution agreement with, noted Ann Daly, president of Buena Vista Home Video.
Disney's acquisition of SuperComm also helps Rentrak, said various industry sources. "It further legitimizes the concept of pay-per-transaction and ratifies in a very real sense what many supporters of PPT have been saying right along, that it is a vital, strategic program for the success of video stores and supermarket departments," said a retail executive familiar with supermarkets and shared revenue, who asked not to be identified. "The studios regard supermarkets as holding great untapped potential on the rental side of the business," said Tom Adams, president of Adams Media Research, Carmel Valley, Calif., a video industry analyst. SuperComm did well to establish its program in 1,211 stores of 24 retailers since it started in March 1992, he said. "The reason is that supermarkets realize that their main limitation is not being able to stock enough copies of the hits to really drive the department," he said. Among the chains known to be using the SuperComm system are Randalls, Pathmark, Safeway, Winn-Dixie, King Soopers, Fleming Cos., Price Chopper, Dillon's, Fiesta Mart and Nash Finch Co.
Lines of resistance to SuperComm are breaking down in the distribution community. Unlike Rentrak, SuperComm allows for distributor participation. But in spite of this, most of the bigger distributors have viewed the program as a threat and had, in the past, aggressively lobbied studio executives to stay away from it, said industry observers. However, ETD Entertainment Merchandising, Houston, agreed to work with SuperComm shortly before the Disney announcement, according to industry sources. Because of Disney's involvement, Ingram Entertainment, La Vergne, Tenn., will consider participating, said David Ingram, president. Other distributors are expected to follow. "We've worked well with Disney in the past. They seem to think that there is something to revenue sharing and we will see," said Ingram.