ENCINO, Calif. -- The time is right for supermarkets that have gotten out of the video rental business to take another look at it, said Bo Andersen, president, Video Software Dealers Association.
Complex buying programs and competition from big specialty chains contributed to the decision by many to get out, but the overwhelming success of DVD is a compelling reason to reconsider this category, he said. SN interviewed Andersen in advance of VSDA's convention, Home Entertainment 2002, scheduled for Las Vegas, July 16-18.
"There was a difficulty in managing the programs and uncertainty over how VHS was going to be priced and managed by suppliers. In my view, that made video unwieldy for a good number of supermarket companies," Andersen said. The hype over copy depth at the big video chains "made them very vigorous competitors," he added.
"I think it's a shame that there was any significant departure from the industry. Through that period, there was money left on the table by supermarket companies, and the studios may not have done enough to keep the category alive in supermarkets," Andersen said.
This is the first VSDA convention in about a year and a half because of changing show dates. In that time, DVD has seen exceptionally strong growth in both rental and sell-through. "DVD is the trend that overwhelms everything else. In a manner of speaking, it blocks out the sun," Andersen said.
"I see a revolution in the pricing of DVD product and in some of the VHS product. That makes for easier category management with a bigger return on investment. That ought to make people jump back in," he said.
Surprisingly, DVD has not cannibalized VHS proportionately to its growth, he said. "We still see more than three DVD [rental] turns gained for every VHS turn lost." About 70% of rentals are still VHS, although DVD's share is growing, Andersen said. "We have seen solid growth by DVD," but it is incremental to the video industry, he noted.
For supermarkets, the sell-through pricing of DVD and some more aggressive pricing by the studios on VHS make video a renewed profit opportunity, he said. "More copy depth can be brought in, and it will return a better ROI. The end result will be more customer satisfaction and better economics for the supermarket company," he said.
This year's VSDA show will be very different from past versions, with a much greater emphasis on private business meetings and a smaller exhibition area, Andersen said. There will also be big stars and entertainment, including comedians George Carlin and Penn and Teller, a presentation to actor Sylvester Stallone, an opening-night pool party with the Playboy Bunnies, and a Wednesday night dance party. Educational sessions will include a "Technology Super Session," a research panel on "The Future of Home Entertainment," a session on balancing DVD and VHS product, and a seminar on video games.
Andersen acknowledged that the show will be downsized. "No one should expect to see the throngs that attended VSDA in the past. Our industry has seen significant consolidations in recent years, among both retailers and distribution, and many recent trade shows outside our industry have reported reduced attendance due to a continued soft economy and lingering apprehension about air travel. We anticipate that our show attendance will reflect these trends," he said.