VIDEO DISTRIBUTOR RESISTS UNIVERSAL'S SHIPPING POLICY

RANDY WEDDINGTON

OWENSBORO, Ky. -- The last word about recent distribution shakeups isn't in yet, as video distributor WaxWorks/VideoWorks here has made a company issue of the shipper changes made by Universal Studios Home Video, Universal City, Calif.

The distributor continues to supply Universal product though gray market sources, say industry insiders. It is no longer studio-sanctioned. "We still have their product and we're going to continue to have it," said Kirk Kirkpatrick, WaxWorks vice president of marketing. The wholesaler aired concerns about the studio's controversial decision via open letters (including one from a supplier) to readers in back-to-back editions of the "Hotsheet," its biweekly sales catalog.

The first letter, on the inside front cover of the Nov. 20 edition, was from Mitch Budin, a spokesman for DreamWorks Home Entertainment, Glendale, Calif.

DreamWorks offered to write the letter and Kirkpatrick then agreed to print it, he told SN.

Though Universal supplies DreamWorks titles, this product isn't being restricted in availability to the distributors recently chosen by Universal for its own material (Ingram Entertainment, La Vergne, Tenn., and VPD, Sacramento, Calif., for both sell-through and rental product, plus Valley Media, Woodland, Calif., for sell-through only) -- as the letter pointed out.

Addressed as "An Open Letter to Retailers," Budin's message read in part as follows: "We know that your success is based in large part on WaxWorks, our distribution partner. WaxWorks has earned the reputation of championing the causes important to the independent retailer.

"It is because of their expertise and professionalism that we fully support WaxWorks and together plan on supplying you some of the biggest hits of the upcoming season...

"All of us at DreamWorks thank you for your support over the past years and we pledge to you our on-going support..."

In reaction WaxWorks customer Theresa Daniels, manager, McMaken Super Market's McVideo, Brookville, Ohio, expressed "absolute" agreement, calling for "independent retailers to stick together on this" in support of the distributor.

The DreamWorks letter made no mention of Universal Studios Home Video, unlike the follow-up message from WaxWorks President Terry Woodward in the Dec. 4 "Hotsheet."

"We've never done that before," said Kirkpatrick, referring to "a letter from our president regarding an issue like this. That's how important it was to us."

Woodward's letter, with a "Dear Customers" salutation, included the following: "Like you, we can compete in any arena with any company when the playing field is level. We feel Universal's recent decision to limit your distributor choices is a dangerous step in the direction of limiting your ability to choose your wholesale partner...

"Pricing and service do not improve when only one distributor is appointed to service your needs. Competition in distribution is vital and healthy.

"Our long-term commitment to our partners remains solid. We believe that you have the right to choose which partner best serves your needs..."

And while the dispute continues, Universal's product is still present in the WaxWorks catalog. The Dec. 4 issue lists "The Adventures of Rocky & Bullwinkle" and "Bring It On" from the studio in January (which have since been reportedly postponed until February), but in place of the retail price and dealer cost normally posted is the advice: "Call Your Sales Rep."

The reason for this advice was that "we didn't have the pricing at the time," explained Kirkpatrick.

About Universal's new strategy, Kirkpatrick said, "It's not keeping us from getting the product, but it just was not a good business decision." He added that "nobody has been able to explain why we were excluded."

In originally announcing the plan early in October, home video President Craig Kornblau had told SN that "we did a thorough review of each of the distributors. We looked at their strengths and their weaknesses. We looked at their stability. We looked at who we thought would be our best partners for the long term, and we picked those who would play to their strengths and were in the best interests of Universal in moving forward."

About his company's reasoning, Kornblau said, "We believe that this is in the best interest of the industry. By cutting back the number of distributors we've now given the remaining distributors economies of scale, and we've created a much more focused Universal and distribution sales force."

But the scenario may not play out that way. "It looks like we're going to be selling more product by not being an authorized distributor than if we were," said Kirkpatrick.

By not having to comply with the formal restrictions and goals of copy-depth buying programs, he continued, "we're just able to sell at the netted-down price ... $50 or so. You can buy the quantity you want, so we've actually picked up accounts because of that. That's how silly this is."

The company's customers are so far appreciative. "We're very happy," said McVideo's Daniels. "As long as we can, we'll keep getting Universal titles through WaxWorks if we have a choice."

But other retailers, concerned about the undisclosed source of this product, have reservations. "Obviously, if you're messing around and you get caught, you're going to lose ad dollars, so there are some negative aspects," said Greg Rediske, president, Video Management Co., Tacoma, Wash. "From WaxWorks' standpoint they've got nothing to lose. But the people they're buying from do."

Still, the situation may require a pragmatic approach. "There are plenty of sideways sellers out there doing it all the time," Rediske said, "so I don't know why a reputable distributor couldn't do it either."