SIMPLIFIED VIDEO REVENUE-SHARING PROGRAM IS DEVELOPED

DAN ALAIMO

LOS ANGELES -- A southern California retailer has launched a new company to provide simplified revenue-sharing options for supermarket video-rental programs.

Matthew Feinstein, vice president of Marbles Entertainment here, which operates leased-space video departments in 10 Lucky/Sav-On and Vons stores, has formed Supermarket Video Inc. SVI is working with the major studios to develop a shared-revenue buying program that would involve no upfront costs to retailers and minimal complexity, said Feinstein.

"We've been talking with the major studios' execs and they realize that, by pumping in a lot of copy depth into the supermarket video departments, they could make these stores into destinations again," said Feinstein. "Other supermarket video chains, they also agree with us that the only way that this can be done is through revenue sharing. But we need a new model for revenue sharing. We are working with studios right now in developing new models in order to accommodate this," he said.

To help get the company started, Feinstein recruited Kimbirly Orr, who holds the title of vice president for business development. Formerly, Orr was director of membership and then director of meetings and conventions for the Video Software Dealers Association, Encino, Calif., and later was director of sales and special events at KidScreen Magazine here.

According to Orr, SVI will pay a fee to acquire the movies and then will revenue-share with the studios and supermarkets. "We'll deliver rental-ready product to the supermarkets. It's that simple. There are no hidden costs. There are no other fees. We pay for the movies. We deliver rental-ready product. Then we split revenues with the retailer," she explained.

"Supermarkets pay nothing up front. They just receive product. We pay for the product," said Feinstein. The name "Supermarket Video Inc." was the name of a company that ran leased-space video departments but was no longer in use at the time Feinstein incorporated.

SVI will be meeting with studios and retailers this week during the Video Software Dealers Association show here to complete agreements. "In some cases, we are meeting with retailers alongside studios and their current distributor to develop programs respectful of a retailer's needs," said Orr. The company hopes to have 500 to 1,000 store fronts from 35 to 50 chains signed up in the coming months, she said.

There will be minimum transaction fees, which are required by the studios and vary from studio to studio, Feinstein said. "Some of these minimum transaction fees in previous revenue-share deals didn't make sense for supermarket retailers. We are making sure that they are low enough to make sense for the supermarket," he said. To participate, retailers need to have a rental department point-of-sale system that can track transactions, he added.

SVI also will help retailers on the back end of the product cycle. "We can work with the video buyers at the supermarkets to let them know when they have to take something off a shelf, or when they can start selling something off, or help them with their buys," said Feinstein.

Another component of the SVI program will be marketing and advertising assistance. "If the studios are pumping all this product into the grocery stores, they want to make sure that the retailers are going to advertise it. So we are going to help them with all of the advertising ideas and marketing tips from our past experience," he said. Marbles Entertainment always had strong promotional programs, industry observers noted.

Creating a separate entity to deal with supermarket shared-revenue programs relieves the studios of the political concerns inherent with going through traditional distribution, he said. "The studios know that they are going to have to do things a little bit different with supermarkets, because the shelf space is different, the foot traffic is different, everything is different. They realize that it is going to be difficult to do something through distribution because you are going to get independent retailers who are upset that a different sector is being offered something else. We are just one direct account, so the studios can do something with us because we will give them large volume. Not only will we be a different sector -- the supermarket sector of video rental -- but we also will be one of their largest big accounts," he said.

SVI product can be processed either by traditional video distributors, like Baker & Taylor, Morton Grove, Ill., or Ingram Entertainment, La Vergne, Tenn., or a fulfillment operation like ComAlliance of Rentrak Corp., Portland, Ore. It will be rental-ready when it reaches stores, said Feinstein.

"To the extent that they get off the ground and are able to help some supermarkets stay in the business or get in the business that wouldn't have been in the business, that's a positive for us, so we will help them," said Ron Berger, chairman, president and chief executive officer of Rentrak.

"Anything that can help to develop an infrastructure for the supermarkets is to be welcomed," added Des Walsh, vice president and general manager of SuperComm, Dallas.

"We are pleased to be their category partner and we will support them with their new endeavor with SVI," said Bill Bryant, vice president for sales, grocery and drug at Ingram. "We are trying to get some relief because there are so many supermarkets that are concerned and unprofitable. So we are doing everything we can to work with the studios to obtain programs that are agreeable."