CHILDREN'S DVD COMES OF AGE

DAN ALAIMO

Children's video was the last frontier for DVD, and retailers are now venturing into it.

Supermarkets and their suppliers see a significant upside in children's and family DVD titles, if nothing else, because the sales numbers so far are so small in grocery stores, while the number of DVD players in households is exploding.

For example, while 12.8% of DVD unit sales in all classes of trade are from children's and family titles, only 1.7% of all DVD sales, including all categories, take place in supermarkets now, according to data from Nielsen VideoScan, Los Angeles. Of that 1.7%, only 6% are children's and family titles. The contrast with VHS sales is significant: 61.7% of VHS unit sales in supermarkets are in children's and family product, reported Nielsen VideoScan.

But with price points on DVD players dropping rapidly -- Sears recently advertised one for $58, and Wal-Mart sells a unit for an everyday price under $70 -- market demand for DVD software is growing rapidly. With many of these inexpensive models being purchased as second machines, and with parents becoming less reluctant to allow children to use the gadgets because of the low price, the children's DVD market is expected to develop quickly, said observers.

Children's DVD offerings as a percentage of the mix in studio shippers are still small compared to titles for adults, said Greg Rediske, president, Video Management Co., Tacoma, Wash., which services 300 supermarkets with sell-through products and 120 with rental programs. "But that is a change from where it was, because it was virtually nothing and now it is becoming more significant all the time," he said.

For B&R Stores, Lincoln, Neb., DVD is now about 20% of children's and family video sales, said Bob Gettner, video buyer/coordinator, but he expects this to grow to 50% by the end of the year. "I just see it continuing to grow every month. Each year, more and more DVD players are sold and their prices are going down so much that everybody is going to have one. It is going to be like the VCR," he said.

So far, DVD sales are still primarily for adult-oriented movies, said Bill Glaseman, video specialist, Bashas', Chandler, Ariz. "But with more DVD players, there will be a bigger presence and more purchases based on the number of units that they sold, and I'm sure some will be for children's," he said.

DVD sales for secondary video lines are still slow, noted Laura Fisher, video coordinator, Martin's Super Markets, South Bend, Ind. She expects this to change in the fourth quarter as studios like Paramount put more product on sampler types of DVDs, combining multiple lines like Nickelodeon's Dora the Explorer, SpongeBob SquarePants and Rugrats. "Of course, the feature-length children's movies have always done well on DVD," she noted.

Although demand for VHS remains strong, consumers know that DVD is the future of home video, said Bill Bryant, vice president, sales, Ingram Entertainment, La Vergne, Tenn. "As a result, titles that consumers want to build home-movie libraries with are being purchased on DVD," he said. That's why retailers are seeing classic children's titles like "Beauty and the Beast" being released on DVD this year with great fanfare. Secondary titles, though, will probably remain a force in the VHS format for some time to come, he added.

"This is the first year that DVD has been seriously embraced by families and preschool audiences," said Martin Blythe, spokesman, Paramount Home Entertainment, Hollywood, Calif. Paramount distributes the Nickelodeon line, which is releasing more titles on DVD. Research from DreamWorks Home Entertainment, Glendale, Calif., indicates that there will be 14 million family households with DVD by the end of the year and almost all will be multiformat households, said Kelly Sooter, head of domestic home entertainment. "So they are continuing to maintain VHS libraries and VHS usage while moving into the DVD category. You are not seeing an abandonment of the VHS category," she said. But households with DVD players will purchase new-release titles in the DVD format, she added.

Meanwhile, other studios interviewed during the recent Video Software Dealers Association convention said supermarkets need to focus on merchandising to take advantage of large, potential sales in children's video.

"The traffic that goes to the supermarket is well-suited to children's video," said Paul Pasquarelli, vice president, sales, Buena Vista Home Entertainment, Burbank, Calif. Cross merchandising remains both a challenge and an opportunity, he noted. For example, a title like "Baby Einstein" could be placed with diapers or in the baby aisle.

"There are a couple of places in the store where we feel children's titles will do extremely well," said Rodney Saterwhite, vice president, retail business development, Warner Home Video, Burbank, Calif., and a former supermarket executive. "One is near the frozen-food area, where mom is shopping for something for the family, and the other is near the cereal aisle because of the sheer volume of traffic," he said.

There needs to be a greater emphasis on merchandising to build impulse sales, said John Reina, senior vice president, Columbia TriStar Home Entertainment, Culver City, Calif.

Too often, grocery stores do not pay sufficient attention to their video displays, and they suffer from a lack of organization and promotion, said Glenn Ross, president, Family Home Entertainment, a division of Artisan Home Entertainment, Santa Monica, Calif. "They see it as a secondary business for whatever sales they can pick up. But they need to see it as a key part of their product assortment."