GROWING PAINS 2003

John Karolefski

Children's DVD is starting to grow up as a category in supermarkets.

As perhaps the last genre to achieve success in the DVD format, the children's segment is starting to benefit from lower-priced hardware, according to retailers and other video executives. That enables families to add a second machine in the home for the child's bedroom or playroom.

So far, full-length titles do much better than programming based on TV shows. Studio support is welcome by retailers, especially since the category is just emerging.

"VCRs are still the predominant hardware unit in the playroom," said Bill Bryant, vice president of sales, Ingram Entertainment, La Vergne, Tenn. "But the continued increase of DVD hardware penetration will increase demand for children's DVD. The decrease in hardware price is a big factor in families purchasing multiple DVD players for their homes."

Before the fourth-quarter holidays, adults with a DVD player were keeping it away from their kids, according to Chuck Porter, director of entertainment, Giant Eagle, Pittsburgh. A second machine in the house for kids has generally not been a DVD player.

"But a lot of families got a second DVD player in December, or the prices dropped so much that they don't mind their kids playing with them," he said.

Another issue facing the children's DVD category is price differential, according to Porter. "There's a big price differential between DVD and VHS on 'Blue's Clues'-type videos."

Porter has had great success with "Monsters, Inc." and other major titles, especially those that include games and other extras. Videos based on TV programming, such as "Sponge Bob Square Pants" and "Blue's Clues," have not fared as well at Giant Eagle. "As children's technological sophistication has developed, so have the bonus features on children's DVDs," said Ken Graffeo, executive vice president of marketing, Universal Studios Home Video, Universal City, Calif. "We've grown from simplistic games and sing-alongs to hours of interactive fun and educational programming that takes the child's experience far beyond just watching the movie." Universal's next installment of the "Land Before Time" series will exemplify this, he said.

Children's DVD has not taken off at the same speed as other genres in supermarkets operated by K-VA-T Food Stores, according to Brenda Vanover, director of video operations for the Abingdon, Va. chain. There has been an increase in the category since Christmas, but sales still do not exceed other categories.

"Children's product availability has been ample, but the majority of pre-school sales have remained on the VHS format," said Bryant. "Large box office titles like 'Monster's, Inc.' and 'Shrek' appeal to the entire family and DVD has represented a much larger percentage of sales on these titles."

The marketing and merchandising of the children's DVD category have been confined to store circulars and special displays, according into retailers. For example, K-VA-T advertises titles in both VHS and DVD formats in its store circulars.

"In-store circulars provide additional visibility for children's product, particularly when the titles are sale priced," said Bryant of Ingram Entertainment. "Children's titles remain an impulse purchase and therefore in-store displays are the best method of promoting these releases."

While Giant Eagle is not yet using special displays for most children's DVDs, it links big titles with storewide activity. For example, it promoted "Monsters, Inc." throughout its stores, and will promote Disney's "Read-Alongs" in March to a lesser degree. "Sometimes children's product doesn't get the amount of presence or awareness-building vehicles needed to support it," said Rodney Satterwhite, vice president, retail business development, Warner Home Video, Burbank, Calif.

The studio is looking to focus on the infant and toddler aisle of supermarkets because the sales velocity of some kids titles don't warrant placement in the video department. One idea calls for setting up a section with 12 to 16 titles in VHS and DVD formats that retailers can rotate. A few chains have been successful with tests of these sections, according to Satterwhite.

He said that part of the catalog program, called Warner Select, is dedicated to children's product and includes enhanced rebates, promotional materials and POP displays.

"We are looking at each portion of our business from a genre perspective and are trying to support it," he said. "We're looking for the children's category to deliver the biggest lift in grocery."

In terms of marketing, Warner's media campaign includes ads in such magazines as Parenting, BabyTalk, Child, Parents and Nick Jr. The brands in the program are Teletubbies, Baby Looney Tunes, Baby Genius, Real Wheels and Scholastic's The Magic School Bus, among others.

Porter of Giant Eagle and other video executives welcome support from the studios for children's DVD, but aren't sure if the market is developed enough yet.

"I do welcome more title selection and studio support on full-length titles," said Vanover of K-VA-T. "However, if it is not a full-length title, in my opinion, it will not sell as well for us. The more games and specials that are put on the DVD, the better it sells. Most children of today are more focused on new technology than, say, 8 to 10 years ago."

She is reluctant to provide a forecast for the year for this emerging category, saying it's up to the studio and their release schedules and price points. "We have to rely on the studios to give us the titles that will sell," she said.

Porter of Giant Eagle looks forward to "huge growth" that will exceed the adult titles.

He admitted that the base is so small that anything positive will be huge growth.

Giant Eagle is starting to bring in more and more product, especially for rental. In February, the lineup includes "The Wiggles," "Hansel and Gretel" and the animated "Ben Hur."

"It's easier for us in rental than sell-through because of space issues," he said. "We get a feel for what's renting, and then we can bring it in for sell-through."

Bryant of Ingram Entertainment anticipates a "significant increase in sales" for pre-school children's DVD. "Titles that appeal to broader audiences will certainly surpass the 50% mark during 2003," he said.