SPRING FORWARD 2000

MARY ANN FARLEY

Despite some studios' efforts to make their buying programs for video rental product more palatable, distributors and video buyers alike are still grumbling about how complicated these programs continue to be, and they see little relief ahead.

The fact that some suppliers are making returns easier -- or are doing away with them altogether -- is satisfying buyers only marginally, and all continue to ask why the studios simply don't lower their prices and drop the buying programs entirely.

"The intent of these programs was admirable, but the results have been questionable," said Kirk Kirkpatrick, vice president of marketing at WaxWorks VideoWorks, Owensboro, Ky. "We're still spending more time explaining the programs instead of the product. This is very difficult, especially for supermarkets, who do not use video as their main form of profit. They have other things to do than figure out each program."

Buyers across the board agree. Dale Cooper, video buyer for rack jobber The Movie Exchange, Oaks, Pa., said studios still aren't sensitive to the fact that independent retailers have a limited amount of open-to-buy dollars, and for them, buying programs just don't work.

"As far as copy-depth programs go, they're a little more obtainable than they've been," he said, "but it depends on the goals. If you, as a retailer, can't participate, you're going to pay inflated costs for goods, and you're going to go out of business. Our position is, just lower the price. I can't see any reason why the studios can't do that."

Yet studios bristle at such suggestions, noting that the programs exist to satisfy customer demand. They believe that at a lower price, retailers would simply purchase fewer units, and consumers would turn elsewhere for their entertainment, such as pay-per-view.

"Video is a big revenue stream for studios," said Trevor Drinkwater, vice president of rental at Warner Home Video, Burbank, Calif. "There's a high risk in lowering the price. Our objective is to satisfy consumer demand, so if we cut the price, some retailers may not buy the extra product they need."

He said studios have tried lowering prices in the past, but couldn't make up the revenue. "A buying program is nothing new for grocers," he said. "It's a promotion for performance."

In regard to supermarkets, Drinkwater said Warner understands the importance of the convenience factor in driving rentals, which is why it's paying more attention to the difficulties they're experiencing with either lease or copy-depth programs.

"Having video in grocery stores is very important," he said, "so we're trying to work through any barriers in implementing [the buying programs]. We're trying to be flexible and open to alternative ways of satisfying the program's objective, while still making it fair for everyone to compete."

Bill Bryant, vice president of sales, grocery and drug, at Ingram Entertainment, La Vergne, Tenn., said he's encouraged by studio efforts to make the programs easier, and he does see some supermarkets selectively participating in programs that are simple and cost-effective. "But at the same time, buyers are less patient with complicated, high-maintenance programs that require extensive store involvement on the back end of the selling period," he said.

Ryndie Liess, video manager at Country Mart, Hollister, Mo., agrees. "The programs seem to be a little easier," she said. "We're getting a better break, as the number of copies has become more reasonable. Also, I now don't have to send any back."

Still, Kirkpatrick questions whether the programs are earning anyone any extra revenue. "Retailers are working much harder for their money," he said, "as are distributors, and even studios, who now have to police and explain everything."

How does all this add up heading into the spring?

While it's a given that video rentals lighten up once the weather gets warmer, Kirkpatrick believes any slowdown will be offset by event titles such as "Star Wars, Episode 1: The Phantom Menace," due April 4. "Spring is always a slower time of year," he said, "but any season is still driven by product, and there's some excellent product this spring."

Some titles already announced are Buena Vista's "The Sixth Sense" (March 29), Universal's "For Love of the Game" (April 4), Columbia TriStar's "The Messenger: The Story of Joan of Arc" (April 4), Buena Vista's "Happy Texas" (April 11) and "The Insider" (April 11), Warner's "Three Kings" (April 11), New Line's "The Bachelor" (April 18), Universal's "End of Days" (April 18), Buena Vista's "Music of the Heart" (April 25) and MGM's "The World is Not Enough" (May 16).

Also on deck are "Man on the Moon," "The Talented Mr. Ripley," "Toy Story 2" and "Stuart Little."

Kirkpatrick said supermarkets can have a hard time understanding video's seasonal nature, noting that "video has its own kind of rules." This shouldn't deter them, however, from attempting some spring promotions, he added.

"There are so many promotional opportunities on event titles," he said, noting that when "Men in Black" came out on video, WaxWorks hired the Louisville Symphony Orchestra to perform rap artist Will Smith's song "Men in Black" at a store located in Cincinnati-based Kroger's Louisville KMA. The 2 1/2 hour performance, which took place in a tent, included well-known sci-fi theme songs the likes of "Star Wars," "Close Encounters of the Third Kind" and "Star Trek," among others. "To not ride the coattails of something like this isn't smart," he said. "The publicity you'll generate will have greater value than the money you'll make."

A promotion doesn't have to be this ambitious, of course. Liess said that giving customers a 50-cent credit toward the rental of the next new release if the title is returned before 6 p.m. not only gets the video back in stock for another evening's rental, but also gets the customer back into the store.

Karen Welch, video buyer at Clyde Evans Markets in Lima, Ohio, does something similar: When customers rent one title, they get a second title free. If rentals seriously dip, she'll offer two-for-one catalog rentals for 99 cents.

"Springtime just isn't good for rentals," she said. "People go out, and school is still in session. In the summer, rentals pick up a lot, when it gets very hot out, or when kids start getting bored." She's thankful for the spring arrival of "Star Wars, Episode 1," which she believes will be "huge. That alone will drive traffic." She's ordered the 48-pack for rental and sell-through.

Bryant believes the overall spring season is a strong one, and says that with just a few promotional pushes, a slowdown doesn't have to happen. "Several supermarket chains have begun cross-promoting with national brand cola companies and the results have been quite impressive," he said. "With the purchase of a feature sell-through title, they're offering a 12-pack." With this type of offer, "sales in some supermarkets have increased four times normal," Bryant continued. "The video sales results have been quite phenomenal."

He said many supermarkets have added DVD to their rental mix during the last nine months with a great degree of success. He anticipates that consumer demand for DVD will only grow throughout the year. "By the fourth quarter, all supermarkets will need to show some representation of sell-through DVD in all store locations that presently sell entertainment products," Bryant said.

Kirkpatrick shares this view. Regarding buying programs, he said that "people are asking is there any light at the end of the tunnel, and I say yes. It's bright and it's DVD. We're seeing even greater embracing of the format. When dealers can purchase a DVD for 75% less than a VHS tape, yet rent it for the same amount, the format looks quite attractive."