WARNER SPOTLIGHTS FOURTH CATALOG PROMOTION

ANNE SHERBER

PALM BEACH, Fla. -- Supermarkets will have another opportunity next year to bolster their lagging VHS sales with the latest installment in the series of catalog promotions that Warner Home Video, Burbank, Calif., rolled out here during the Warner Spotlight announcement.

In making the announcement to retailers and distributors over a two-day meeting, Aug. 9 and 10, the studio cited research that indicates VCR penetration is expected to reach 89% by 2001 as well as ACNielsen figures that indicate catalog titles account for 80% of VHS sales and 89% of profits.

Warner Spotlight is the fourth in what has become a series of annual events for the studio. The previous catalog promotions were 1998's 75th Anniversary Collection, 1999's Century Collection and 2000's Century 2000 Collection.

"We cannot control new releases. We have no real influence over the outcome. But catalog is something over which we have complete control," commented John Quinn, Warner's senior vice president of sales, in making the announcement.

Although the studio has been an enthusiastic proponent of DVD from day one, Warner's sales and marketing executives were quick to assert that VHS is still a viable format. Mass merchants enjoyed a 7.5% increase in VHS sales in the past year, according to Videoscan, a Los Angeles-based company that collects video sales and rental data from various classes of retail. Forty-three percent of all videocassette purchases are made from mass merchants. Additionally, ACNielsen Research data indicates that 68.9% of all VHS sales from mass merchants are catalog titles.

However, research that Warner distributed to the 150 retailers and distributors attending the event demonstrates that VHS catalog product may not be the best product category for supermarkets, which appear to be concentrating their efforts on sales and rentals of "A" product.

Although total sales of VHS product are up slightly this year, sales of videocassettes fell almost 11% in supermarket and drug channels despite significant growth in the DVD format. Supermarkets and drug stores account for only 3% of all video purchases made, compared with a 43% market share for mass merchants.

Executives pointed to sales figures, compiled by Paul Kagan Research, Los Angeles, which indicates that DVD sales are still incremental and have not yet begun to cannibalize VHS. The Spotlight promotion is comprised, primarily, of VHS product.

The year-long promotion will feature eight waves of releases, four in each of two categories -- Features and Family Entertainment -- and will involve a total of 80 Warner and New Line Home Video titles. The first release date, Jan. 16, 2001, will be a part of the Features category. It will highlight some of the studio's star-driven product and will include sell-through reprices of "Any Given Sunday" and "Magnolia," as well as a slew of catalog product repriced at $14.95.

The next Features category release, April 3, will focus on comedy and include sell-through reprices of "Frequency," "Ready to Rumble" and "The Whole Nine Yards." The third release, June 5, will feature many of Warner's action titles and include newly repriced "The Cell" and "Space Cowboys."

The final release in the Features category will be Sept. 4 and include new to sell-through titles "Red Planet," "The Replacements" and "Pay It Forward" as well as a special edition of "The Color Purple." All the releases also will include more than a dozen titles priced at $14.95 and below, many of which have been a part of the studio's earlier catalog promotions.

The Family Entertainment releases, streeting March 6, May 1, July 3 and Aug. 7, will focus on, in order, Scooby Doo, Superheroes, Cartoon Crack-ups and Mary-Kate & Ashley Olsen. Many of the releases will feature product repriced at $9.95, which is appropriate for supermarkets that do well with temporary and speed-table promotions.

"We've had a lot of success with the previous catalog promotions," noted Mark Merriam, director of product management for Border Entertainment, an Austin, Texas-based Blockbuster franchisee. "Putting the product on endcaps using a three-month time-frame is a successful strategy for us." Merriam said that the front-of-store traffic and impulse purchases at the register that many large video retailers rely upon are very similar to patterns in supermarkets and other high-volume channels of retail.

To market the promotion, Warner will do title-specific television, radio and print advertising as well as banner ads on Yahoo! and AOL. The studio plans cable-television promotional events on Warner-owned TBS, TNT and the Cartoon Network.

In addition, there will be a series of consumer promotions, communicated through a coupon book inserted in every piece of product in the event, which will entitle consumers to a wide range of products and services including a buy-three-get-one-free offer from Warner; 500 free hours on AOL; buy-one-get-one-free offers from Blimpie, Flowers USA and Golden Valley Microwave Popcorn; upgrade offers from Club Med and Princess Cruises; and dollars-off coupons from Fuji Film and Max Factor.

A Web site will have additional promotions, video clips and movie trivia.

"Overall, we've done this for three years and we are able to execute it better each time," said Mike Saksa, vice president of marketing for Warner.

"We have the feedback of our customers and are able to offer the increased promotional support that they've asked for."

Feedback for the program seemed generally favorable among retailers and distributors. "They've laid out the whole year, which is helpful," said Kirk Kirkpatrick, vice president of Owensboro, Ky.-based distributor Waxworks. "It makes it easy to plan and that helps everybody."

However, a number of distribution executives complained that many of the same titles involved in the studio's previous promotions will also be included in the Warner Spotlight. The promotion announcement comes on the heels of the release of "Any Given Sunday," the first of Warner's Rental Direct titles, and many of the distributors present felt that there could be some backlash among sales reps.

According to Steve Cooper, vice president of video sales for Woodland, Calif.-based Valley Media, which distributes video to Pathmark, "This title will represent the first time that distributor sales reps will be selling repriced product that they did not sell in its initial rental release."

"There is some resentment on the part of sales reps," concurs Kirkpatrick. "We wish we could rep their whole line."

Cooper said that the studio recognizes that there may be some resentment and is offering distributor reps various bonuses to try to counteract any negative effect.

But according to Richard Goffman, Valley Media's director of marketing, even though Warner is now distributing its rental titles directly to retail, there is no reason to believe that the studio will try to take the sell-through business away from distribution. The trend in sell-through, he said, is back to distribution.