Supermarket retailers are hungry for changes in the way they buy their rental videos. Ever since the first copy-depth programs were introduced several years ago, supermarkets that rent videos have had to cope with the complicated pricing schedules that studios calculate for each movie title they release.
When MGM Home Entertainment, Santa Monica, Calif., makes "Hannibal" available on video and DVD next month, however, it will be the first time since the copy-depth programs were created that a studio will offer such a high-grossing title at a flat rate regardless of how many copies a retailer buys.
"I foresee down the road that they are going to do away with the [copy-depth] programs completely," said Bob Gettner, video buyer and coordinator, B&R Stores, Lincoln, Neb. "It wouldn't surprise me if we see more of what MGM has done, with flat-rate pricing on everything, just to make it a lot simpler. I've got a hunch that if MGM is successful with that, other studios will follow suit."
MGM said retailers would pay $45 for each copy of "Hannibal," no many how many copies they order. Traditionally, studios price new-release videos so high that it prevents consumers from buying them right away, but they allow retailers to effectively obtain cheaper prices by purchasing larger quantities and earning free copies.
Although a few studios have experimented with flat-rate pricing on some titles, industry watchers say the release of "Hannibal" marks the first time that a flat rate will be applied to a major theatrical hit. The sequel to multiple-Oscar winner "Silence of the Lambs," "Hannibal" grossed more than $165 million in the box office. It was the second-biggest film in MGM's history, after "Rain Man," in terms of box-office receipts.
Robert Wittenberg, executive vice president of sales at MGM, said that feedback on the flat-rate pricing has been "primarily positive."
"Wholesalers are uniformly positive, and retail is predominantly positive," he said. "In both cases, it's largely rooted in the abolishment of [copy-depth] programs, and all of the aggravation that went with that."
Although buyers said they might not get any better deals with the flat-rate pricing, most seemed to think that such a plan would be considerably less time-consuming.
"When I first started buying videos, that was the only way you could buy them, and it was a heck of a lot easier than the programs," said Marilyn Aldrich, video buyer, Dahl's Food Markets, Des Moines, Iowa. "I would just as soon see the prices of the tapes come down."
According to some reports, however, some retailers feel the $45 flat price is too high and say that they could buy the tape for less under the old programs.
Gettner of B&R Stores said he expected the price to be about the same whether he bought the movie through the studio's copy-depth program or at the flat price.
Jan Schreier, video manager at Prescott's Pic 'N' Save, West End, Wis., said she usually ends up paying $45 to $55 for new-release movies through copy-depth programs anyway. She said buying for all three of Prescott's stores that have video departments helps her obtain better prices on rental movies because she can usually purchase enough to obtain the lower prices.
"When they have those deals where the more you buy the more you get, then one store will buy them and we'll split them," she said. "But if we don't have to do that, it's even nicer. I like one price straight across."
Bill Bryant, vice president of sales, grocery and drug, at video wholesaler Ingram Entertainment, La Verne, Tenn., said he thinks retailers will appreciate the simplicity of the flat-rate program.
"You almost have to be a math major just to figure out what's going on as far as price and how long you have to have it on the shelf, when you have to return it and all this stuff," he said. "One thing about flat pricing is that you can just buy the number of units you want, and then you just keep them all, you don't have to worry about sending them back."
He said one of the major problems with the current programs is getting retailers to comply with return dates. With flat-rate pricing, he said, "when you're through renting it, you just mark it down and sell it off. It's a much-preferred way to buy product."
Several studios declined to comment on flat pricing. One studio spokesman who asked not to be identified said he doubted his company would adopt a flat-pricing structure. When asked why, he said it was "based on what we've seen so far," but he declined to elaborate.
Wittenberg, however, said he expected the "Hannibal" experiment to exceed MGM's expectations.
"We feel that 'Hannibal' is a film that can cut through all the clutter, and so far that's proved true," he said, noting that the company is already making plans to introduce its next release, "Heartbreakers," at a flat rate as well. The price for that title, a romantic comedy that makes its video debut in October, will be $40, he said.
He said there have been a "small number" of retailers who have balked at the $45 price tag for "Hannibal," but he downplayed that reaction.
"There will always be those select few who take exception to whatever you do," he said. "Frankly, if everyone said it was the right price, we'd be worried."
He said the idea to offer a single flat rate was borne from his company's attempts to construct a pricing schedule. When he said he was having trouble understanding the logic of the scheme, he decided that his customers would have similar difficulties.
"This is allowing us to focus on selling the movie to the retail community, which is what we're supposed to be doing, instead of working out programs," he said.
Aldrich of Dahl's pointed out that retailers have to stock the major titles no matter what the price if they are going to be in the video-rental business.
"Face it, if they are top box office, it doesn't matter whether they are $30 or $100, you are going to buy so much of it anyway," she said.
The flat price for "Hannibal" will not affect those retailers who purchase movies from the studio in revenue-sharing agreements or those who buy movies through the programs offered by Rentrak, Portland, Ore.