THREAT TO SELL-THROUGH IS MORE REMOTE

DAN ALAIMO

Video-on-demand may never have an effect on sell-through video.

Most consumers buy videos to watch repeatedly and to collect, said retailers and other video industry executives polled by SN. An electronic, pay-per-showing system that involves no physical product will have little attraction for these consumers.

"The consensus is that video-on-demand will have less of an impact on sell-through than it will on movie rental," said Dan Black, buyer at Raley's, Sacramento, Calif. "Kids watch videos numerous times. People are not going to pay $2 every time they want to watch it on TV when they can buy it and keep it," he said.

"I don't think sell-through has peaked yet, and I don't think it will for a few more years," said a buyer for a major Northeastern chain, who asked not to be identified. This buyer, who contends that video rentals will be in decline within a few years because of video-on-demand, doesn't think the in-home delivery technologies will have an impact on sell-through until much later.

"People are not going to forsake their entire system. They can't afford it. They have a lot of events and memories on VHS. As they upgrade, they will get into something different, but that is going to take a long time, and probably longer than the video-on-demand timetable," said the buyer.

"Sell-through video is still an excellent value and the average person is very cognizant of value," the buyer said.

The key to preserving the sell-through market is making sure that movies shown by video-on-demand are copy-protected in some way to prevent illegal duplication, said a video executive with a Midwestern chain, who also asked not to be identified.

"If you have a 60- to 90-day window on a rental title, then it appears on a premium cable channel, and then they bring it out for sell-through, that reduces the number of units you are going to be able to sell," the executive said.

"But if they bring it out directly to sell-through, and not put it on video-on-demand for 60 to 90 days, I'm not sure that will have an effect," the executive said.

"I don't see video-on-demand as a major problem for sell-through unless people are taping the movies to sell themselves," said Kerry Smith, district manager for Scrivner's Boogaart Retail Division, Concordia, Kan.

Jed Laird, managing director of Veronis, Suhler & Associates, a New York research firm, said he believes video-on-demand will eventually eliminate video rental, but he is less sure of its impact on sell-through. "That could continue to be a good market," he said.

But technologies to enable "virtual ownership" are being discussed. These would allow people to purchase the rights to watch or listen to a piece of entertainment software anywhere there is access to the "information superhighway."

"The technology of permanently allowing you to own a movie also will exist, so sell-through could be replaced as well," said Laird.

Whether this will hold any attraction to consumers is another matter. "There is something that makes people want to have something tangible in their hands when they pay for it," said Rick Ang, director of video operations at Bel Air Markets, Sacramento.

"There is always going to be the need for American consumers to own," said Rick Karpel, executive vice president of the Video Software Dealers Association, Los Angeles. "I don't see electronic delivery hurting sell-through at all."