BURBANK, Calif. -- Just two months since launching Warner Home Video's Rental Direct program, supermarket retailers interviewed by SN appear to be adjusting to the new direct-purchase model, but not without some initial complications and complaints.
Warner here has characterized customer reaction as "very positive" to its new program for rental-priced VHS product, initiated in September. "We've gotten a lot of retail compliments," John Quinn, Warner executive vice president of sales, told SN.
Some specialists, however, had mixed complaints with that praise, especially relating to start-up confusion. "On Warner's first round they had tapes going to the wrong stores," said Paul Richardville, director of video/photo, Reasor's, Tahlequah, Okla. "We had to fight that."
And some observers were unimpressed. "Warner has really messed up their direct rollout," said one. "They're getting there, but what a sloppy piece of work."
Initial glitches came because "we ended up taking on more customers than anybody in the industry estimated there would be," said Quinn. "But now we know what the number of customers are," he added, referring to the accomplishment of one of the program's announced goals -- an industry census. "And we're staffed accordingly, so that process is improving quite rapidly."
This extensive undertaking has required video retailers to establish accounts directly with Warner sales in order to receive rental-priced VHS titles, which are then shipped exclusively through Ingram Entertainment, La Vergne, Tenn.
As a result buying has become more complicated for supermarkets. "Warner Direct is causing us extra problems and extra work," said Harold Grogan, video specialist, Ingles Markets, Tucker, Ga., "but we're getting through it."
The program has also removed a substantial amount of product from regular distribution channels -- between 20% to 25% of the rental business, according to industry observers. Warner accounted for 21.5% of rental revenues last year, according to statistics compiled by the Video Software Dealers Association's VidTrac Service.
Some specialists have created an extra distribution step in order to keep using established distributors. "We had Warner/Ingram ship direct to ETD and let them do our processing," said Bill Glaseman, video specialist, Bashas', Chandler, Ariz.
Out-of-the-loop distributors, predictably, have reported mainly negative comments from their customers. "We hear a lot of complaints about Warner Direct from retailers," said Kirk Kirkpatrick, vice president of marketing, WaxWorks/VideoWorks, Owensboro, Ky. "We haven't heard a single retailer say that they love it."
Meanwhile those distributors have found some retailer resistance to the program. "We have several customers who are getting by without VHS versions on some titles," said Kirkpatrick. "They're just buying DVD copies from us."
The program's effectiveness in eliminating sideways selling has also been questioned. "When you force people to buy more than they need, it doesn't work when you have other people there to take up the slack," said Kirkpatrick. "Sideways selling is an art that has been finely tuned by many retailers, not by design but by necessity."
Others wondered whether Warner should even have a role in subsequent sales. "If someone wants to broker their movies, what business is it of Warner's?" asked one observer.
One problem in this area has been a conflict of interest between studios and retailers. "Buying programs were devised to get more copies into the market in order to satisfy more customers and increase rental revenues," said one specialist. "But that hasn't happened. Rentals are still flat, so purchasing budgets are unchanged. Studios want to swamp the market with $40 program tapes, but to get that pricing off a $70 wholesale we have to buy three times as many copies. It stands to reason that we must dispose of the surplus somewhere or else be highly selective about the programs we use."
The latter approach has already been taken by some specialists. "We only ordered two titles -- 'Frequency' and 'Love & Basketball' -- from Warner's October program," said Glaseman.
One factor impacting buying decisions has been the perceived quality of Warner titles. "It's most definitely weaker product," said Richardville. "We're scaling back our order simply because there's nothing there. It's ironic because you'd think they'd want to come on strong, especially during this season, but we haven't seen it yet. Warner didn't even get to first base as far as we're concerned."
But that situation could change. "All of that is cyclical," said Kirkpatrick. "Warner might be the biggest studio a year from now."
In the meantime specialists continue to adjust out of necessity. "Service is easier through my regular distributor," said Greg Rediske, president, Video Management Co., Tacoma, Wash. "Warner's customer service is a little slow, but it is what it is."
And some are handling the transition smoothly. "We've had no problems with Warner Direct," said Theresa Daniels, manager, McMaken Super Market's McVideo, Brookville, Ohio. "We've heard horror stories about other retailers, but we've been really fortunate."