STUDY POINTS TO RENTAL REVIVAL 2004-07-19 (1)

Dan Alaimo

ROCKVILLE, Md. -- Research involving a select group of affluent "early adopters," usually the first to embrace new products and trends, has revealed some surprising results: a return to video rental and a higher-than-expected preference for renting in supermarkets.

A recent study from ChangeWave Research here showed that 32% of the respondents said their overall rentals of DVDs have increased over the past year, compared to 13% saying they have decreased their DVD rentals, and 23% reporting that they do not rent DVDs.

ChangeWave's sample is comprised of 4,700 people, who are primarily male, professionals or self-employed, with incomes over $100,000, said Tobin Smith, company founder. These consumers seek convenience and many of them find it by renting their videos in supermarkets, he noted.

While Blockbuster was the top choice of 49% of the sample, followed by "local neighborhood video store" with 18%, Hollywood Video with 12% and Netflix with 8%, supermarkets registered 7%. The Blockbuster share was in line with overall share, but the supermarket figure was higher than national averages, Smith said.

"You pick up some eggs and milk, and pick up 'Raiders of the Lost Ark,' it is a time saver. If it is a neighborhood of higher income, time-constrained consumers, they are willing to rent at the supermarket," he said.

"At the end of the day, when you have more money than time, time is more valuable. That's the one thing we have found consistently [with the ChangeWave sample]. The value proposition is time," he said.

"We are not speaking for the world. We are speaking for the higher end, early adopter. They are a time-constrained convenience buyer," he said.

ChangeWave's sample is often predictive of coming trends for the overall consuming public, Smith added. "What we have seen is that when our group adopts a behavior -- in almost every case where it has been massively adopted within our group -- it moves on to the next adopter group, which is the mid-stage." After that comes the late-stage adopters and mass market acceptance.

The sample has accurately predicted the success of satellite radio, digital cameras and personal video recorders, Smith said. As such products come down in price, there may be opportunities for supermarkets to sell them, he added.

The move back to rental by early adopters may indicate a realization that they own many movies which they are not watching, he said. "I would conclude that the early adopters have been there, done that in terms of owning a lot of DVDs." The movies they continue to buy are the ones that take advantage of the capabilities of a home theater environment, or are children's titles that tend to be watched with greater frequency than mainstream movies, he said.

The ChangeWave sample does reflect a movement to new technologies, such as digital video recorders, video on demand, pay per view, and the still new recordable DVD units, and this may predict eventual erosion of the rental market. But the study indicates that these consumers currently view rental as the most convenient way to obtain movies they only want to watch once, Smith said. "These are the guys you'd expect to be downloading, or getting it off their DVRs, and so forth," he said.

TOP 5 SUPERMARKET VIDEO SELL-THROUGH TITLES

Rank, Last Week. Title (Weeks Out), Studio, DVD Retail

1, 1. Cold Mountain, Disney, $29.99

2, 2. 50 First Dates (1), Columbia, $28.95

3, 3. Lord of the Rings: Return of the King (4), New Line/Warner, $29.95

4, 4. Mystic River (2), Warner, $27.95

5, 5. The Last Samurai, Warner, $29.99

N = New

As of July 12, 2004

This chart, tailored for the supermarket video market, is based on information taken from more than 1,000 supermarket rental locations serviced by Ingram Entertainment, La Vergne, Tenn.