DVD POS Activation Plan Could Slash Theft

DAN ALAIMO

ENCINO, Calif. — In a move that could overcome theft concerns over DVDs and other entertainment software in supermarkets, the Entertainment Merchants Association here this month published standards for the point-of-sale activation of such digital products.

These are “threshold standards” for benefit-denial technology that would allow DVDs and video games to be shipped to retail outlets in an inoperable state and subsequently enabled at the point of sale, EMA said. It is also known as “Project Lazarus.”

This would make DVDs, Blu-ray Discs, video games and music CDs more like gift cards, in that they would be all but worthless until purchased. One crucial difference is that the entertainment software would contain content that could conceivably be hacked if stolen, sources said.

The EMA standards do not address the possibility of pay-on-scan, which would make these products even more attractive to retailers.

“If it ever gets up and going off the ground, it could be beneficial in terms of the theft and shrink issue,” said Bob Gettner, video buyer, B&R Stores, Lincoln, Neb.

POS activation “would eliminate shrink and make the products more grocery-friendly,” said Greg Rediske, president, Video Management Co., Tacoma, Wash.

If combined with pay-on-scan, “at that point, [sales of new-release video product] becomes doable, but right now the studios don't want to go anywhere near that with live product,” he said.

Pay-on-scan is the real key to retailer acceptance, said Neil Stern, partner, McMillan Doolittle, Chicago. “It makes it a whole lot easier to be in these categories if someone else has the inventory responsibility,” he said.

“Several companies have experimented with developing this type of technology, and we are hopeful that these efforts will deliver a final product for retail,” said Bill Bryant, vice president, sales, Ingram Entertainment, La Vergne, Tenn. “This technology would certainly increase the confidence of many retailers who have been somewhat reluctant to merchandise DVD sell-through products in non-restricted areas of the store.”

“Key retailers, studios and game publishers are all working on this project,” said Mark Fisher, EMA's vice president of membership and strategic initiatives. “As long as a solution is reliable and secure and is cost-effective through the supply chain, we are confident that it will really happen.” Project Lazarus anticipates retail deployment in late 2010.

“This technology can be a triple win for supermarkets, because it will lift sales of the categories, allow more supermarkets to carry them and result in less shrink. Many supermarkets have shied away from DVDs, Blu-ray Discs and video games because of security requirements and shrink. Investing in some additional POS equipment — which could eventually be leveraged over other categories deploying similar technology — could permit not only more open merchandising, but sales from these categories previously avoided,” Fisher said.

In one supermarket attempt to get into entertainment software in a big way, the biggest shrink problem was with video games, said a knowledgeable industry veteran. “If the games could be activated at POS, it opens that avenue up.” he said.