UNIVERSAL CITY, Calif. -- The future for supermarket video remains promising, with new and varied products on the horizon, and many untapped promotional opportunities. But to take advantage of it, studios and retailers must find ways to bring the magic of Hollywood into the stores.
This is true on both the rental and sell-through sides of the business, said Andrew Kairey, executive vice president of Universal Studios Home Video here.
"There is a real task in front of all of us, as suppliers, as well as retailers, to really bring back and raise the level of excitement in the industry," Kairey said in an exclusive interview with SN.
"What it really requires is a true partnership to take place between the supplier and the retailer. That partnership is not just one side coming up with ideas and trying to initiate and execute them, but both parties identifying the products they can marry together, and what type of promotions they can create to raise that excitement level," he said.
"We certainly need to raise the bar on the marketing side to be able to bring that excitement into the business."
On the rental side, supermarkets can take advantage of the frequency of consumer visits. "There is a tremendous level of comfort within that store for shoppers. As a result, there is the opportunity to really have them be in the rental market," he said.
But many of those already in the rental business need to call more attention to it. "Do something that makes it stand out, with more merchandising, a little friendlier, more approachable environment." For example, Kairey suggested removing some of the physical barriers that obscure many video rental departments from supermarket traffic.
He sees even greater potential on the sell-through side. "That's where demographics make the most sense. The primary purchaser of videocassettes is the female of the household, and that is who the suppliers are targeting with much of their advertising, and that certainly matches up to the supermarket demo."
In sell-through, supermarkets increasingly have the opportunity to move beyond just merchandising the big-hit event titles with innovative catalog promotions, he said. "That's one way they can differentiate themselves from the rest of the retail community."
As part of a major product expansion this year, Universal will be emphasizing catalog. "We have some very aggressive plans in terms of repricing the library and creating unique opportunities in product assortments that can be price-point-driven," said Kairey. This will include products being repriced from the rental market at a $14.98 price point, and more $9.98 products as well.
Another area of growth for Universal will be direct-to-video products, an area the studio has already seen great success in with its "Land Before Time" children's line. "We will be building up our direct-to-video library, bringing out between four and six titles a year. So that is a very accelerated growth rate," he said. The direct-to-video program will start this year with four titles.
There also will be significant growth for Universal in films created for the theatrical market. From Universal Pictures, there will be between 20 and 25 movies a year coming, with another 15 to 20 films from October Films, which handles more independent productions. Also, Universal Studios Home Video has the video distribution rights for many of the products coming from the new DreamWorks SKG studio, Kairey noted. All that will mean not only big rental titles, "but also big sell-through opportunities in the future," he said.
Meanwhile, Universal will continue its aggressive efforts in cross promotions that fit perfectly with the demographics and product mix of supermarkets. A key to implementing these is taking an account-specific approach with retailers, noted Charlie Katz, senior vice president of marketing for Universal Studios Home Video.
"For example, in support of our key releases, we do overlays with sweepstakes offering trips to our theme parks in Hollywood and Florida," he noted. Under the Seagram corporate umbrella, Universal has worked with the Tropicana subsidiary on cross promotions, including one last fall on "The Lost World: Jurassic Park."
"We look at the supermarket chains as a key channel of distribution. We will bring in our sister divisions where it is applicable to develop programs that work for the supermarket chains on a regional basis," said Katz. The company has also worked with its music division, as well as with outside partners on cross promotions.
Point-of-purchase materials from partners like Tropicana help drive traffic for all involved in the cross promotion. "When people see the video sign, it reminds them to buy the Tropicana product, as well as to take advantage of the $5 rebate," Katz said.
Advertising is another key component of the cross promotions, said Kairey. By combining the tie-in partner's co-op dollars with Universal's co-op dollars, the studio can create an effective program for the retailer on an account-specific basis, he noted. Television ads and rebate programs add to the overall effect on behalf of the title, he said.
This is especially important as the video industry and its sell-through component mature. Part of the softness the industry saw last year might be attributable to warmer weather patterns across the country, Kairey noted. "There were a lot more leisure activities taking place that we were competing against," he said.
"But you also have a lot of buzz out there about new technology, like DVD. A lot of people are curious about where the new technology is leading the industry."
Kairey also observed that all the merger activity in the supermarket industry could be good for the video industry. "I think that is an opportunity for a video supplier. For example, Ralphs [recently acquired by Fred Meyer Inc.] has not really gotten aggressively into the business. This will be an opportunity for them to observe and learn and possibly take a more strategic position on it. As a result, we may see video going a little bit further."
Direct relationships between studios and retailers are something that needs careful analysis, Kairey said. "In some cases, there is a great opportunity. But there are great challenges that go with serving that many locations on a direct basis. There is the matter of getting compliance, so you don't have street date violation issues, making sure the product gets there on a timely basis from our end, and then making sure you get execution at store level. All those issues need to be evaluated in terms of cost and whether it makes sense to service that type of market."
