UNFAIR STUDIO, VIDEO CHAIN DEALS ALLEGED

DAN ALAIMO

LAS VEGAS -- Alleging unfair pricing practices between the major Hollywood studios and large video specialty chains, like Blockbuster Entertainment, Dallas, a group of dissident retailers staged a meeting during the Video Software Dealers Association show here last week.

During the meeting, Bob Webb, president of the Independent Video Retailers Group, Decatur, Ill., outlined the suspected violations of antitrust laws and solicited funds for additional research and a possible lawsuit.

Retailers in attendance, including some involved in supermarket video operations, seemed very sympathetic to his views, with some agreeing to commit money. The issue is an important one for supermarkets, whose video operations can't match the size or buying clout of major video specialty chains.

In his state of the industry address during the VSDA's Business Session, Jeffrey P. Eves, president of the VSDA, based in Encino, Calif., noted the association's obligation to represent all members of the industry and announced the formation of a task force to evaluate and report back on issues affecting independent retailers. The VSDA is committing $100,000 to the task force and expects a task force report to be ready for the East Coast Video Show, which will be held Oct. 6 to 8 in Atlantic City, N.J.

The dissident retailers' meeting, which drew a crowd estimated at 1,000 by the organizers to a site away from the Las Vegas Convention Center on the first day of the convention, drastically cut show traffic, according to exhibitors. The VSDA, which counts Blockbuster and studios among its members, would not allow the IVRG to stage the meeting at the convention center. The event was publicized with signs proclaiming, "Independent Retailers at War," and had a distinct militaristic flavor.

"At what point are we going to say enough is enough?" Webb asked. Acknowledging that no one in the group had first-hand knowledge of the big video chains' deals with the studios, he added, "what we really seek is to know the truth and we will live with that truth, whatever it is."

Competitive fairness is one of the hottest issues to be raised during a VSDA convention in many years, said industry observers.

The dissident retailers said that ever since Blockbuster cut special revenue-sharing deals with the major studios, began stocking new release titles in greater depth than ever, and guaranteeing availability of these movies, using the tagline, "Go Home Happy," their business has suffered drastically.

For example, Webb cited research that showed retailers within 3 miles of a Blockbuster store have suffered an 11% decline in revenues from 1997 to 1998, while those beyond 3 miles of a Blockbuster saw revenues increase 8%. As a result, the number of video retailers getting out of the business is accelerating, said Webb.

This has affected supermarkets with smaller video operations as much as independent video chains.

"It's affecting every single person in the industry except for the large public chains," said Matt Feinstein, vice president of Marbles Entertainment, Los Angeles, which operates 15 video shops in Vons and Lucky supermarkets in southern California.

"I'm sure supermarkets are not getting the same deal as Blockbuster," said Rich Thorward, president of Entertainment Resources, Edgewater, N.J., another of the presenters at the meeting.

In an address during the VSDA's Business Session, John Antioco, chairman and chief executive officer of Blockbuster Entertainment, denied that Blockbuster is keeping 70% of the revenues it shares with studios and also said that the chain has no exclusive deals. He stressed his commitment to building the entire video business along with Blockbuster's revenues and profits.

In his presentation, Webb made extensive use of an article appearing in Forbes magazine June 15, 1998 quoting Sumner Redstone, chairman of Viacom, New York, corporate parent of Blockbuster and Paramount Pictures, Hollywood.

The article quoted Redstone as saying Blockbuster paid nothing for some tapes under revenue-sharing agreements and had to share as little as 30% of the rental transaction revenues. This reflects pricing that other video retailers cannot obtain on their own, either through shared-revenue distributor Rentrak Corp., Portland, Ore., or through upcoming shared-revenue programs from traditional distributors, and is therefore unfair, Webb said.