PHAR-MOR RAISING RATES FOR ITS VIDEO RENTALS

DAN ALAIMO

YOUNGSTOWN, Ohio -- Phar-Mor is raising its video rental rates, according to a spokesman for the company. The deep discount drug chain had pioneered low-ball video rental rates with prices as low as 49 cents including new releases in some markets. The chain, which has 143 video departments, will increase its new release rates 33%, going from $1.49 to $1.98 for two nights. On catalog titles, it will initiate a flat two-night rental rate of 99 cents, said Gary Holmes, a spokesman. Previously, catalog rates were determined by how long the video was on the market. Newer catalog titles were rented for 99 cents, and the older ones were priced at 49 cents on a two-day basis.

The new fees, which several units implemented in January, will be in place chainwide by the end of spring, he said. The new rates approach the national averages for supermarket and drug chains, noted industry observers. Phar-Mor's change raises the question whether low-ball pricing strategies can work for video rentals over the long term, they noted. Most of Phar-Mor's stores have video rental departments, Holmes said. "This is part of a marketing strategy to bring more people in and sell more product. This allows us to expand the number of copies on key new titles. That is a benefit to consumers of the new policy." The economics of bringing more copy depth on new releases are one reason the retailer is making the change, he said. "The other part is the increasing costs of the most popular titles." Phar-Mor entered Chapter 11 in 1992 when fraud and embezzlement charges were brought against its top executives. SN reported Phar-Mor would have to raise its rental rates to make up for other losses. While the court is now reviewing a reorganization plan, creditors are negotiating with a possible outside investor, said Holmes. Before its difficulties came to light, the company had over 300 stores and was ranked the third-largest video retailer in terms of rental transactions. Last year, Phar-Mor ranked fourth on the list published by Video Software Magazine.