Are technologies like the online services, pay per view, vending machines, TiVo and recordable DVDs undermining the video business?
While the advance of technology is inevitable, industry sources told SN that video retailing continues to hold its own.
New technologies like these are "going to continue to be a bigger factor all the time," said Bob Gettner, video buyer/coordinator, B&R Stores, Lincoln, Neb., primarily because of their convenience. "As technology gets better and better, more people find it easier just to dial it on their remote and not have to return it."
At video distributor Ingram Entertainment, La Vergne, Tenn., Leslie Baker, vice president of sales, grocery and drug, said, "Several grocery retailers are experimenting with rental vending machines. However, the tests are still in the beginning phases and initial results won't be available for several months."
Vending machines "have come and gone and come and gone for 20 years," said Andrew Miller, director of the supermarket division at Rentrak Corp., Portland, Ore. Miller has worked with machines for 15 years. The resurgence of interest has been spurred by McDonald's test of DVD vending machines in Colorado. But according to Miller, the burger giant's model is one that supermarkets can't follow effectively.
"McDonald's is renting movies for a dollar, and that's because of their dollar value meal promotions," he noted. "They're not trying to make money, they're trying to drive traffic. An outside vendor cannot possibly have a video machine operation renting DVDs for a dollar; it's not possible. The question is, can you rent them for $3? I've got to tell you, everything logical said yes, but it just doesn't work. It's not the video business. There's no touchy feel, there's no shopping. It's not showbiz."
Miller claims that there is "always somebody talking about how rental is dying and some technology -- video on demand, pay per view -- is going to replace it with the push of a button. It's hasn't happened yet. The studios are going to go where the bucks are, and they give home video a 40- to 50-day window [before a movie goes to pay TV]." Because of that, he noted, "none of these other alternatives is ever going to be a meaningful threat. But the day the window goes is the day the rental market goes."
That day, he feels, will never come because the window is too lucrative. Studios are "making a killing on DVD sell-through. It is an unbelievable business. It's a $20 billion business being done with our 'old-fashioned' technology, and the gross margins for the studios are outrageous."
Ray Wolsieffer, video specialist, Bashas' Markets, Chandler, Ariz., believes video vending units can be used to add incremental revenue in fringe locations. Management there is currently looking at adding the machines to some of their stores. "We have stores where we'd like video, but we don't want to do the actual department, so we're looking at possibly some type of mechanism."
"The future for video on demand has always been bright -- and will continue to be so," said Sean Bersell, vice president, public affairs, Video Software Dealers Association, Encino, Calif. "What I mean is that we've been hearing for more than a decade that video on demand is the next big thing, and it just hasn't caught on. Americans' favorite way to view movies is on home video, and it has been for several decades. We don't believe that that's going to change in the near future."
While calling video on demand a "neat" technology, Bersell said that it "has just not been embraced by the consumer in the way, for instance, that the DVD has been in the past several years." High-definition DVD, on the other hand, which should establish itself in the next year or two, should provide "another big jolt to the home video market."
"Recordable DVDs are something everybody is looking forward to," said Laura Fisher, video coordinator, Martin's Super Markets, South Bend, Ind. "I think that will have a big impact on the VHS world."
"The threat of video on demand has been around for many years, with almost no impact on our business," Baker noted. "TiVo and recordable DVDs will be two technologies to watch in the coming years. However, we anticipate no immediate impact."
