WARNER, DISTRIBUTORS TO REVENUE SHARE NEW RELEASE DVDS

Dan Alaimo

PORTLAND, Ore. -- New release movies on DVD from Warner Home Video are now available on a revenue-sharing basis from Rentrak Corp., here, and two video distributors. The program began last month.

Pay-per-transaction distributor Rentrak is making DVD and VHS movies from Warner, Burbank, Calif., available through an unusual alliance with conventional video distributors, Ingram Entertainment, La Vergne, Tenn., and Video Products Distributors, Folsom, Calif. Warner is the second major studio to revenue share, following Columbia TriStar Home Entertainment, Culver City, Calif.

"The margin potential with revenue sharing is far, far higher than with direct purchase," said Andrew Miller, director of Rentrak's supermarket division. "You have zero risk. You are profitable from the first rental turn."

The program is what is known in the video trade as an "output deal," where retailers agree to take all movies from Warner Home Video, including those from sister companies New Line and HBO. Under such an arrangement, Warner gets a wider distribution for its titles, and the retailers get favorable terms, Miller said.

There is no upfront fee, the retailer keeps 65% of the rental revenues, and at the end of 29 days, retailers have the option to sell off half of the inventory acquired through the program, Miller said. There is a $1.05 minimum transaction fee, a six-month term, and a 50-cent per-unit end-of-term fee, he said.

"It boils down to much lower product cost and much higher profits, and it is a very simple program," Miller said.

The 29-day sell-off option gives retailers a potential competitive advantage over the mass merchants, he noted. "On strong 'A' product, you are able to come into the previously viewed market 29 days after street date at retails of $8 or $9 or $10, well under what it would have cost to purchase new, and you make a lot of money," he said. While many supermarkets offer video rental, no mass merchants do and therefore don't offer previously viewed DVDs or tapes, he added.

"We recognized a growing opportunity to reach out to the video rental industry with innovative new programs that put more Warner Home Video titles on store shelves in both the VHS and DVD format," said Trevor Drinkwater, Warner's senior vice president, domestic sales.

"The supermarkets will benefit in that they will definitely get more copy depth, which we feel that they need in some instances, and it will allow them to have a little bit lower upfront cost," said Rodney Satterwhite, Warner's vice president, retail business development.

"As the predominant distributor of Warner Home Video products to the supermarket channel, Ingram Entertainment is pleased to offer Warner DVD and VHS new releases to supermarket retailers that wish to revenue share rental product," said Bill Bryant, Ingram's vice president, sales. "Each retailer may now decide whether or not to revenue share Warner Home Video product, and from which supplier to utilize, if revenue sharing is the preferred method of acquiring Warner product for rental departments."

Bob Geistman, Ingram's senior vice president, said, "With our fulfillment expertise and Rentrak's data management and audit ability, our mutual clients will enjoy the highest level of service at all stages of the transaction."

At Video Products Distributors, Tom Kielty, senior vice president, sales, said, "The inclusion of Rentrak speaks to the professional level of commitment from Warner Home Video, and the strength of this option."