SHARED-REVENUE GAINING

Increased customer demand for new releases is fueling the growth of shared-transaction fee programs. Four of the five participants in this year's roundtable are using or testing the programs from either SuperComm, Dallas, or Rentrak Corp., Portland, Ore. Results so far have been promising, they said. "Shared-revenue, when used correctly, can help satisfy more customer demand during that crucial initial two-month period of a title's release," said Clifford Feiock, video coordinator at Nash Finch Co., Minneapolis. Nash Finch is using SuperComm. With shared-revenue programs, retailers pay a $7 to $12 fee to acquire a tape, and then share the revenues with the supplier. This can be an alternative to paying as much as $70 or more a copy for some titles. It allows the retailer to bring in new releases in much greater depth. This form of shared-revenue is different from full-department racked programs because it just focuses on specific titles. "We want to improve our image against the video rental competition, such as Blockbuster," said Tom Hembree, vice president of operations at K-VA-T Food Stores, Grundy, Va., which is rolling out SuperComm. "Shared-revenue is a very effective way of stretching a budget," said Randy Weddington, video specialist at Harps Food Stores, Springdale, Ark. Harps has rolled out Rentrak to its video departments. But not everybody agrees that shared-revenue is the way to go. Rick Ang, buyer at Video Mart, Sacramento, Calif., which racks video departments in 17 Bel Air supermarkets in the Sacramento area, uses a buy-back program from his distributor to boost new release copy depth. He has no plans to try shared-revenue, especially since, as a racker, his company is already sharing revenues. "We can't cut that pie into any more pieces," he said. Here's what the roundtable participants said about shared-transaction fee programs: SN: What is attractive about this form of revenue sharing? OLSON: What you're seeing out there among the consumers is that they are more new release-minded than they were in the past. So through this test, I'm looking for a way to provide more of those. We will be able to bring in more depth of copy on the popular hits that are coming out. It's a way to satisfy more of our consumers. Another advantage is being able to advertise an almost endless supply of certain titles through a guaranteed availability promotion. With that, you should see an increase in volume for some of the other titles that are in the department. That is, if you get more people visiting your department, your other rentals should pick up a little bit, too. It should go hand in hand. FEIOCK: We are using the shared-transaction fee programs as just another merchandising tool to improve the new release presentation in the store. That's what it all comes down to. Shared-revenue, when used correctly, can help satisfy more customer demand during that crucial initial two-month period of a title's release. Later, selling off those excess copies at retail produces a new revenue stream for us. SN: Tom, you're about to roll out the SuperComm program. Why are you doing that and what's your experience? HEMBREE: We tested it about a year ago in two or three locations, and it was very successful for us. But at that time our computer system wasn't set up to handle a chainwide rollout of the program. But in the past year, we've put a system in place that will handle it. Now we are rolling it out to all our stores with video rental departments. We want to improve our image against the video rental competition, such as Blockbuster. WEDDINGTON: We are rolling out the Rentrak program to all our video rental departments. Shared-revenue is a very effective way of stretching a budget. I really think there is a strong future in shared-revenue. It also helps us bring in some of the lesser titles. FEIOCK: We bring in a couple each of that type of product with SuperComm. For a very low cost, you can try those titles and put two or three copies out for less than what it would have cost to bring in one before. I think that's a big plus.