LAS VEGAS -- There's a deluge coming, but retailers who attended the Video Software Dealers Association convention here earlier this month can't say they weren't warned.
During the VSDA show, studios and other video companies indicated that there will be an unprecedented amount of sell-through product released in the fourth quarter -- more than last year when retailers were overwhelmed by the volume of event titles and shipper programs. Those prepared will reap the benefit of additional sales and traffic, said supplier executives polled by SN at the show. This pattern is the new reality of the video business, noted industry observers.
"We are looking forward to a big fourth quarter," said Corie Tappin, vice president of sell-through at MGM Home Entertainment, Santa Monica, Calif. "We expect it to be bigger than last year for everybody, not just for us," he said.
"There are as many hit releases this year as there were last year. It's harder and harder to find an open window for a release where you don't have tremendous competition going up against you. There's literally a big event every week. That makes it tough for the studios and probably difficult for the retailers, too. But it is a great opportunity for them because of the event titles and the exciting properties that are coming out," said Tappin.
With many of the top titles expected in the fourth quarter still playing in theaters, studios did not make their plans for these movies public. But some of the big titles being talked about as sell-through possibilities during the show were "Men In Black," "The Lost World," "Batman & Robin" and "My Best Friend's Wedding."
Some titles have already been announced, including the "Star Wars Trilogy," "Liar Liar" and three animated features from Disney: "Sleeping Beauty," "The Jungle Book" and the direct-to-video "Beauty and the Beast: The Enchanted Christmas." Other direct-to-video product in the pipeline includes: "Casper: A Spirited Beginning," "Hercules & Xena -- The Animated Movie: The Battle for Mount Olympus" and "Babes in Toyland." In addition, there will be an abundance of children's programs, catalog promotions and movies repriced from the rental market that will be given promotional and merchandising emphasis during the fourth quarter. All have the potential for big sales in the supermarket environment.
"Certainly with the flow of product, the business volume should be up," said Doug Dohmen, vice president of sales at Hallmark Home Entertainment, Los Angeles. "If you look at grocery stores nationwide, you are going to see an amazing array of product," he said.
The sell-through schedule for the fourth quarter is the heaviest in the history of the video business, according to Dohmen. This will create a challenge for retailers to fit it all in and for suppliers to get their products placed. "But people potentially will be out looking to spend an awful lot of money on sell-through video in the fourth quarter, especially during the holidays," he said.
"The sell-through business has become impulse-driven. Every two weeks there's a new piece that flows through and you have to have it," he said.
Debbie Ries, vice president of sales at Lyrick Studios, Richardson, Texas, which produces Barney and other children's video titles, says Lyrick videos are "a different kind of must-have. We are more of a margin product."
From a mass-market retailer's perspective, "It will come down to who will get that space," said Ries. Space will be given to products that have high turn rates, marketing support behind the video and strong margins, she added. Therefore, Lyrick is adding value to the order by working with grocery retailers such as Rochester, N.Y.-based Wegmans Food Markets on account-specific programs. "It gives them a point of difference from the competition," she said.
One of the studios sitting with a potentially huge sell-through title in "Men In Black" is Columbia TriStar Home Video, Culver City, Calif. But no decisions have been made yet on the pricing and timing of that title or another that might go sell-through, "My Best Friend's Wedding," said Nancy Harris, vice president of marketing. "We are using this show to gauge the timing and reaction to these titles," she said.
With "Men In Black," "it just opened and it's hard to really know where it is going to have its home. It could go any time between late November or late February," she said. Assuming "Men In Black" releases in the fourth quarter, "there will be two very dominant titles, unlike last year when there was perhaps a greater array of titles."
The other big title cited by Harris will be "The Lost World" from Universal Studios Home Video, Universal City, Calif., which will also release the Jim Carrey hit "Liar Liar" in time for fourth-quarter sales. Universal executives were not commenting on "The Lost World," but it was clear from their presentation of a trailer at a breakfast for supermarket retailers during the show that the video would be out shortly. Another major title will probably be "Batman & Robin" from Warner Home Video, Burbank, Calif., which is also currently in theaters. Warner was emphasizing its national rollout of digital videodisc products, but while it might grow quickly, DVD is not expected to be a major factor in supermarket video programs this year, noted industry observers.
Otherwise, Harris said some retailers are worried about how this fourth quarter will compare to last year. "There is a lot of product out there, but there is some concern about what kind of units they are going to do because of box office. The titles opened big and then fell off quick. That's a big concern," she said.
The big event titles will serve to drive business for the lesser-known and more profitable videos, noted Wendy Moss, senior vice president at Sony Wonder, New York. "There is going to be a huge amount of advertising and marketing support with the event titles, and that is going to drive consumers into the retailers, which is really important for our business," she said.
Many of the supermarket retailers attending VSDA were interested in Sony Wonder's children's titles, which include the "evergreen" Sesame Street line, as Moss described it. "They have the shelf space for it day in, day out," she said.
Lower sell-through pricing will be a key trend for this fourth quarter, she noted. "We are seeing price points that are very impulse-oriented, which works very well for the supermarket trade and its consumer base," she said.
Low pricing and high-quality product are the keys to getting product placement in supermarkets, agreed Laura S. Smith, director of children's marketing at PolyGram Video, New York. "You must have really good product at the right price that is part of a recognized brand so that moms will instantly recognize those as something their kids will want. I think it is very hard to place one-off in a supermarket right now because there is so much hit product available," she said.
Tom Szwak, senior vice president of sales at Republic Entertainment, Los Angeles, noted that volume of product and lower price points are the two key trends in the fourth quarter. Suppliers approach this price-cutting with some trepidation, he noted. "Of course, all of us want to try and protect our margins as much as possible. We have a $6.98 budget line, but I can tell you we went there with some reservations. But when you see your competitors going to that same price point, we also had to come down to the market conditions of sell-through price points," he said.
"Supermarkets also have a distinct advantage that other retailers don't have -- the ability to merchandise the video product with other consumer products that moms are buying, and they should take advantage of that. It clearly positions them in a way that other retailers cannot take advantage of. Retailers will also see more cross promotions in the fourth quarter," noted Mike Aufricht, vice president of retail marketing for supermarkets and drugstores at Buena Vista Home Video, Burbank, Calif.
"We have a number of cross-promotional partners that are perfect for supermarkets," he said. Among them are: Coca-Cola, Ocean Spray, Lever Brothers and Kid Cuisine.
"We believe we are going to have one of the strongest fourth quarters that we've ever had. It's a different fourth quarter for us, because normally we have a huge tent-pole title, a title that just stands out head-and-shoulders above the rest, like 'Toy Story' last year. While we don't have that type of title this year, we do have a fourth quarter that in total will be the strongest one we've ever had," he said.