LOS ANGELES -- There will be fewer big hit movies released direct to sell-through in the fourth quarter this year. But that doesn't necessarily mean supermarket video sales programs will suffer, according to retailers, distributors and studios polled during National Video Week here earlier this month.
With less of a glut of hit products, retailers will be able to focus more on the ones that do come out and also take advantage of more catalog programs that offer higher margins, the show-goers said. Additionally, the explosive growth of DVD creates another video sell-through opportunity for supermarkets.
"The fourth quarter should be very good," said Bill Glaseman, video specialist at Bashas' Markets, Chandler, Ariz. "DVD is going to be a much more important factor for us. The titles that I see coming up indicate to me that we should do rather well on both sell-through and rental," he said.
Having a lot of big titles is not always a good thing. "Sometimes the big titles don't rent or sell. But it looks like we should do quite well with what I know is coming out so far," he said.
"I think there are going to be some pretty good titles coming out and I'm looking for some others to be announced that will hopefully do well for us," said Denise Darnell, video supervisor at Southeast Foods, Monroe, La. The studios are not likely to leave a market void unfilled, she noted. "Quite often, it gets overfilled. Everybody tries to squeeze something in at the last minute."
Without titles like "Titanic" and "Lion King 2," matching last year's numbers is going to be difficult, said Clifford Feiock, video coordinator for Nash Finch Co., Minneapolis. To compensate, "we are aggressively seeking more secondary types of titles. But it really hinges on whether the studios will make it a 100% guaranteed sale for us, which not everybody will do," he said.
According to a presentation made by Warner Home Video, Burbank, Calif., during the supermarket issues breakfast at the show, last year's fourth quarter included the following titles: "Lost in Space," "Quest for Camelot," "The X-Files Movie," "Hope Floats," "Gone With the Wind" and "Lion King 2" in October; "Godzilla," "Small Soldiers," "Armageddon" and "Dr. Dolittle" in November; "Land Before Time 6," "The Mask of Zorro," "The Parent Trap" and "Madeline" in December. Although "Titanic" sold heavily during the fourth quarter of 1998, it was released Sept. 1, so it is not included in most lists of fourth-quarter titles.
This year's slate is much lighter, according to Warner: "Scooby Doo and the Witch's Ghost" and "The Wizard of Oz" reissue in October; "Jack Frost," "Mickey's Once Upon a Christmas," "Winnie the Pooh: Season of Giving," "I'll be Home for Christmas," "Iron Giant," "Austin Powers: The Spy Who Shagged Me," "Big Daddy," "Wild Wild West" and "South Park" in November; and "The Olsens: Switching Goals," "Dudley Do-Right," "Inspector Gadget" and "Muppets From Space" in December. "The Mummy" will street Sept. 28. Distribution sources say it is possible that Disney might release "Tarzan" in December, taking advantage of a market niche and greatly enhancing the overall fourth-quarter line-up.
The lack of sell-through hits is because other studios avoided competing with "Star Wars: Episode I" earlier this summer, said Mike Saksa, vice president for marketing at Warner Home Video. But "Star Wars" won't be released in the fourth quarter. "So you don't have a lot of theatrical product coming out this year," he said. The solution is higher margin catalog product, he said.
"It's going to be a very soft fourth quarter for new releases," said Patrick Beare, director of national sales, rack services/video for Valley Media, Woodland, Calif. "A lot of studios didn't release titles this summer because they knew that 'Star Wars' and 'Austin Powers' were going to knock them out. So they waited to release them later in the year. That means they will come out at sell-through in the spring and summer of next year."
It's up to distributors like Valley to provide alternative in-and-out programs of catalog product, he said. "That's one of the services we offer," he said.
A program of classic horror movies to coincide with "The Mummy's" September release will have good legs, added Valley's Richard Plummer-Raphael, vice president of national sales, audio and video. "One of our biggest disappointments with seasonal product, like a Halloween title, is that it is over in one day. I like this because you get two months out of what normally is a one-day event," he said.
By fine-tuning assortments of pre-packs to minimize returns, margins will be enhanced for retailers and their suppliers, said John Fincher, national account sales at Baker & Taylor, Morton Grove, Ill. "The focus is going to be on profit, not on sales. It is going to be on putting the right mix of product together for the customer, and making sure that the products that you do put in have enough margin on board that it is worth the investment of floor space," he said.
Fewer big titles mean good news for margins, he noted. "The last three years, the plate has been so full, retailers had a hard time scheduling it all. So maybe we will get a greater quality impact from our promotions this year on those hit titles. There may be fewer hit titles to promote, but maybe that will mean fewer returns, which could equal more profitability."
"There was a lot of real strong product out last year," said Bill Bryant, vice president, sales, grocery and drug for Ingram Entertainment, La Vergne, Tenn. "Not that the product is weak this year, it just doesn't have the same magnitude."
The key is offering low-priced catalog product, Bryant said. "More and more of our retailers are getting into the $9.98 product both on an in-and-out basis with cardboard displays and with permanent metal racks that we supply. Wherever we see the fixtures placed out in the main selling area of the store, we see tremendous success both in the turns and in margins as well," he said.
There was general agreement at the video show that "Star Wars: Episode I" would not come out in the fourth quarter and Fox would not comment on its release plans.
"It will be a dynamic fourth quarter," said Steve Feldstein, vice president of corporate and marketing communications at Fox Consumer Products, Beverly Hills, Calif. "Those retailers that merchandise the product well will be successful. They need to take advantage of the multitude of cross-promotional opportunities, especially with the staple items that are all sold in supermarkets. There's a good recipe for success there."
Meanwhile, many at the show said that Disney might drop "Tarzan" in. But Mitch Koch, senior vice president and general manager at Buena Vista Home Entertainment North America, Burbank, Calif., wouldn't speculate on the title. "I really doubt that 'Tarzan' will come out this year, but we don't announce things," he said. "Tarzan" is still playing strongly in theaters and there would be little time to put together a comprehensive marketing program. "You can't rush a film that big into the marketplace," he said.
To compensate for the lack of one big title, Buena Vista is releasing three direct-to-video, holiday-themed titles together Nov. 9: "Mickey's Once Upon a Christmas," "Winnie the Pooh: Season of Giving" and "I'll be Home for Christmas." "The creative and execution of this event are perfect for the supermarket environment," said Koch.
There will be a tie-in with General Mills putting graphics from the video on the boxes of Cheerios and Lucky Charms cereals, resulting in a relatively simple cross-merchandising opportunity. "I like this one because it is like plug-and-play cross merchandising. Retailers don't have to put out a real extensive effort to take advantage of it. They could certainly build a big event around it, but we think this helps merchandise the video, brings in our tie-in partners and is one of the most seamless executions," he said.
One title that will be among the best sellers of this fourth quarter is "The Mummy," from Universal Studios Home Video, Universal City, Calif., and it will do well on VHS and DVD, said Craig Kornblau, president. "I think DVD is going to come into its own in the fourth quarter and the lead will be 'The Mummy,' " he said.
DVD is "wildly" exceeding his expectations. "The numbers that we are seeing from DVD are staggering. When you consider what we are going to ship and ultimately sell to consumers on 'The Mummy,' I'd never dreamed that we would be at these numbers this quickly. This format is being embraced by the consumer," he said.
There will be a "huge impact" from DVD in the fourth quarter, Kornblau said. "We are also going to have tremendous success with our VHS business. But for Universal in particular, I believe it is going to be an incredible quarter, both in terms of our hits and the catalog. We have spent a lot of time focused on our catalog, so a lot of that is going to pay off in the fourth quarter," he said.
"DVD growth is going to continue to be huge," said David Walmsley, director of home video for A&E Television Networks, New York. "I think consumers are going to be looking for DVDs everywhere. The supermarkets should be as focused on DVD as the other big retailers are," he said.
A&E is projecting even bigger DVD sales in the first quarter than in the fourth quarter. "In the old days when VHS was starting to boom, we found that January was a tremendous month for selling and renting videos. So I think the big story for the fourth quarter is that everybody is going to go out and buy these DVD players. Then in the first quarter of 2000, as long as there is some electricity to juice them up, there is going to be a lot of software sales activity. Stores should be prepared for the first quarter and be ready for all those new machines that are going to enter the marketplace," he said.
"Our best season in the supermarkets is actually January because that's when consumers want budget-oriented promotions to feed the new VCRs and DVD players that were under everybody's Christmas tree," said Greg Glass, director of sales, video and DVD for Simitar Entertainment, Maple Plains, Minn. "As a company, we were never a huge force in November-December in supermarkets, but in January we think we have another home run with our budget DVD products," he said.
"Retailers are going to find the public beginning to look for some lower priced DVD programming, because the people who buy these machines are certainly people that frequent supermarkets every week, if not more often," said Michael Olivieri, president of WinStar Home Video, New York. "To some extent, you will see the sales of DVD in supermarkets beginning this fall," he said.
Supermarkets will also do well this fourth quarter selling the first Barney DVD title, "Let's Play School!" "We did the DVD release not because we think there is this huge demand for children's DVD, but because DVD is a great format for an educational property like ours, said Debbie Ries, vice president of sales for Lyrick Studios, Richardson, Texas. "We think it will help drive interest in DVD because it is the first children's product that capitalizes on the format. We have games that will work in your computer, we have the direct links to Web sites, we've got five different products on it," she said.
The lack of big hits in the fourth quarter will be good news for a new holiday title, "Barney's Night Before Christmas," Ries noted. "We think grocery is very important because we put a lot of money into our displays to make them look very attractive and to attract the attention of the child in the store as well as the mom," she said.