INDEPENDENT VIDEO RETAILERS CALL BIG CHAINS BAD NEWS

DAN ALAIMO ATLANTIC CITY, N.J. -- The plight of the independent video retailer facing an onslaught of competition from big specialty chains took center stage at the East Coast Video Show here.The issue, which also affects many supermarkets with small- to medium-size video-rental programs, was addressed in several sessions at which heated rhetoric was directed against big chains -- and the alleged

DAN ALAIMO ATLANTIC CITY, N.J. -- The plight of the independent video retailer facing an onslaught of competition from big specialty chains took center stage at the East Coast Video Show here.

The issue, which also affects many supermarkets with small- to medium-size video-rental programs, was addressed in several sessions at which heated rhetoric was directed against big chains -- and the alleged deals they have with the studios. Retailers also were concerned about the complexity and ineffectiveness of the copy-depth programs they're being offered by the studios.

"Blockbuster is forcing change to occur a lot faster than a lot of us were ready for," said Ted Engen, president, Video Buyers Group, Coon Rapids, Minn.

Citing a proverb that says when two elephants fight, the grass below suffers, John Victor Forrest, president, Smokey Mountain Videos & Records, Sylva, N.C, said: "The people in this room today are getting trampled by Blockbuster and Hollywood."

Among the highlights from the show, which ran Oct. 6 to 8, were:

* While the big video stores are participating in a strong resurgence of the video market, smaller-volume video operations are not, said Jeffrey P. Eves, president of the Video Software Dealers Association, Encino, Calif., citing research from the association's VidTrac statistical service.

* The VSDA board of directors increased funding for a task force -- the Independent Retailers Advisory Group -- from $100,000 to $200,000, and will hire a consultant to evaluate the various copy-depth programs. The VSDA is seeking sales data from retailers in order to do this, and when the report is complete, will lobby the studios for changes, said Eves.

* Meanwhile, a group of dissident retailers -- the Independent Video Retailers Group, based in Decatur, Ill. -- met and announced plans to sue the major chains later this month. The IVRG also proposed the formation of a separate trade association to represent independent retailers.

In his speech during the main business session at the show, Eves addressed the independents, many of whom feel that the VSDA hasn't properly represented them. "[The] VSDA is dedicated to the continuing health and prosperity of the home-video industry, and to all who make their living from it."

A member of the VSDA task force -- Ross Lee Flint, president, Video Station Superstore, Taylor, Tex. -- noted that while the IRVG is looking to address the wrongs of the past, the VSDA group is working toward creating a better future.

Repeating a theme he sounded at the VSDA's July convention, Eves described the VSDA as "a big tent" where the interests of all retailers, studios and distributors come together. "An industry trade association has many obligations to many different constituencies. Our influence in the larger world derives from our ability to speak with a single, unified voice on behalf of all our members," Flint said.

Eves went on to outline the goals for the IRAG task force:

* To conduct an in-depth analysis of all new copy-depth programs in terms of their economic implications for independent retailers.

* To test the programs to determine whether they generate higher customer-satisfaction levels.

* To ensure that as changes are implemented, these changes are fair to all retailers, small and large.

Part of the IRAG's efforts will be focused on holding six "town hall"-style meetings across the country. Three, including one at the East Coast show, have already taken place.

The VSDA has increased the budget for the task force so that it can employ the services of Marsh & Co., Stamford, Conn., a management-consulting and financial-analysis firm. Toward that end, the association was asking retailers to contribute their sales data.

Once the analysis is complete, "we intend to use it to aggressively lobby for changes" with the studios and distributors, Eves said. Preliminary findings are expected in January, he added.

Addressing those who characterized the VSDA's efforts as too slow at a time when independent retailers are struggling to survive, Eves responded: "by doing our work professionally, no one will be able to dismiss what we say as uninformed or unsubstantiated, or as merely the sour grapes of failing businesses."

In the Town Hall Meeting at the East Coast show, Eves presented data showing that the video-rental business was up 8% year-to-date. "The smaller the store, the less [it's] participating in what we're seeing on an overall basis. Almost all of the growth is taking place in the larger-size stores," he said.

Retailers on the podium during the meeting acknowledged the need for haste. "Ever since this started, we realized that speed was of the utmost importance," said John Heim, president, J&J Video, Lakewood, Colo. "We've got to do something as fast as we possibly can," said Flint of Video Station Superstore.

Engen of the Video Buyers Group said the studios also need more accurate information. "The Studios really don't know if these (copy-depth) programs are working or not," he said.

Profit margins for the major studios also are the lowest in their history. This is driving the creation of the various copy-depth schemes, Engen said. "The bottom line is, they need profit like anyone else, but the profits for the studios are at all-time lows. They're not making any money," he said.

"All the studios care about is the bottom line," added Flint.

At the Independent Video Retailers Group meeting, President Bob Webb outlined plans for forming a separate trade group for smaller video retailers. "We want to be the voice of independents," he said.

Meanwhile, the IVRG will file a lawsuit in federal court in Chicago alleging violations of the Sherman Antitrust Act and the Robinson Patman Act for discriminatory pricing, Webb said.