VIDEO PIRACY TAKES BITE FROM RETAIL: VSDA

DAN ALAIMO

LAS VEGAS -- Movie piracy, whether online file sharing or the sale of illicit copies, takes over $1 billion out of retail coffers annually, said Bo Andersen, president, Video Software Dealers Association, Encino, Calif., during the group's convention here. Representing over 4% of the industry's total sales and rental volume estimated at over $23 billion, piracy was the hottest topic at the recently concluded video show.

"The bigger dollar losses are on the sell-through side because the displaced sales there are larger dollars, and presumably equal or better margins [than rental]," Andersen told SN.

"So it seems to me that supermarkets that already operate on a low-margin basis see that margin disappear rather quickly to piracy. We can't let it grow," he said.

The $1 billion number is based on established industry statistics, combined with average prices for rentals and sell-through DVDs, and "it is very conservative," Andersen said.

"Piracy, particularly the culture of lawlessness on the Internet, can wipe out the economics of home video in supermarkets. I'm finding it daunting and yet extraordinarily important that VSDA and retailers and supermarkets respond as best works for their businesses. VSDA will respond and will try to bring the right messages to members to use in their stores, if they can fit them into their businesses."

Although they said the impact of piracy on their operations is difficult to measure, several supermarket video executives interviewed at the show by SN expressed support for industry initiatives.

Giant Eagle, Pittsburgh, plans a marketing campaign to educate consumers about piracy, said Chuck Porter, director, Iggle entertainment and video. While details are still being worked out, Porter said this effort might involve playing public service announcements now being shown in theaters on in-store monitors, or using some other type of materials, whether developed in-house or by VSDA.

"We are very concerned about what is going on with piracy in the industry," he said.

"It's an important issue," added Jeff Holdsworth, category merchant, photo/video, Wegmans Food Markets, Rochester, N.Y. "We need to act on it, continue to enforce the policies that are out there, and make sure what happened to the music industry doesn't happen to us."

"Piracy is impossible to measure, but technology always wins," said Brad Ufer, video merchandiser, Coborn's, St. Cloud, Minn. "So I think we need to find a way to embrace the new technology and be a part of it while protecting our business as much as possible."

From K-VA-T Food Stores, Abingdon, Va., Randall Tipton, director of video and floral operations, said, "I do think it is a serious threat and that we need to support the industry."