LIMITED-PLAY DVDS TAKE AIM GROCERS

BURBANK, Calif. -- Limited-play DVDs may be the ticket to re-engaging lapsed video rental customers in supermarkets, according to executives polled by SN.Buena Vista Home Entertainment here, the video division of the Walt Disney Co., said last month it would test a DVD technology that limits play to 48 hours after the disc is removed from the packaging. The test will begin in August in four cities;

BURBANK, Calif. -- Limited-play DVDs may be the ticket to re-engaging lapsed video rental customers in supermarkets, according to executives polled by SN.

Buena Vista Home Entertainment here, the video division of the Walt Disney Co., said last month it would test a DVD technology that limits play to 48 hours after the disc is removed from the packaging. The test will begin in August in four cities; supermarkets, in addition to other "nontraditional" video retail outlets like convenience stores, will be targeted.

The EZ-D technology from Flexplay, New York, is a collaboration with GE Plastics, Pittsfield, Mass. The DVDs will be sold at impulse pricing estimated at around $5 to $7 by media reports, and Buena Vista is hoping to obtain display positions in checkout lanes and other high-traffic locations. The EZ-D discs will not contain the many extras available on full-featured DVDs, will have a delayed window and will target consumers currently inactive in the video market, the reports quoted Buena Vista President Bob Chapek as saying. When contacted, Buena Vista declined comment.

"The main reasons people stop renting is the perceived inconvenience of returning and late fees," Chapek said in one news story. "The most important finding in our research is that this product appeals to the lapsed renter. It addresses their issues."

Alan Blaustein, chief executive officer, Flexplay, told SN, "The potential for this product in the supermarket will be to provide an impulse purchase opportunity without the need to establish a rental infrastructure."

Most supermarket executives contacted by SN for this report expressed interest in the new technology, while those with video rental responsibilities were less enthusiastic about it than those without.

"I don't think the public is going to go for it," said one supermarket video executive who asked not to be identified. "I don't think they are going to want to buy something that they are not going to be able to keep."

Greg Rediske, president, Video Management Co., Tacoma, Wash., which supplies video rental programs to 120 stores and sell-through to 300, said he was skeptical about the EZ-D test, but agreed that there was some potential for additional sales. "If it works, I have some accounts in rural areas that wouldn't be affected by the delay [in release dates], and there might be some incremental business. It would certainly be worth trying," he said.

"If the customers like it, then it would be worth pursuing," said Bill Glaseman, video specialist, Bashas', Chandler, Ariz. "But for us who are in the rental business, it all depends on what the program is going to be. My immediate guess is it would not affect rentals, at least not in the beginning, but we'd have to see what develops," he said.

"The price has got to be right and it has to be marketed correctly, but then it could have profound implications on this business," said Andrew Miller, director, supermarket division, Rentrak Corp., Portland, Ore., a pay-per-transaction video rental distributor. "In essence, it's a glorified one-way rental that can appeal to whole new channels of distribution."

Those not in the rental business see the EZ-D discs as a new revenue stream. "For incremental sales in the right store, they will do extremely well," said Charles Yahn, vice president, Nonfoods Division, Associated Wholesalers, York, Pa. "But you have to be careful where you place them." In upscale neighborhoods with high DVD penetration, they will sell, but in lower-income areas, they will not, he said.

"I can see that it has its advantages," said George Satterwhite, director of nonfoods, Affiliated Foods, Amarillo, Texas. "The retail is going to be the main problem. It depends on where the price falls. If it is not cost-prohibitive, I would probably use it myself and, that way, I wouldn't have to take the movie back to the store." He sees this technology as a way for retailers without video rental programs to tap that market on an in-and-out basis.

Carl Day, owner, Day's Market Place, Heber City, Utah, sees the EZ-D concept as a way to replace the video rental department he recently took out, while contributing incremental revenues to his video sell-through program. "It's a win-win," he said. "I would play that game."

"If it is going to be a replacement for rental and you can buy the disc for $5, then it's going to be a home run," said Jeff Manning, managing partner, F&M Merchant Group, Lewisville, Texas. "It represents a huge opportunity if you can just get the consumers' mind-set adjusted to it."

In the past year, the "magic price point" for non-best-selling sell-through DVDs at stores like Wal-Mart and Target has become $5.99, noted Neil Stern, retail consultant, McMillan/Doolittle, Chicago. "That gap is getting narrower all the time for the non-hit titles. If somebody is going to come in with hit titles and price them competitively with rental, I think it is a pretty intriguing concept," he said.

But Al Jones, senior vice president, procurement and merchandising, Imperial Distributors, Auburn, Mass., said he didn't think consumers would go for the new format. "It doesn't make sense to me. The customers have to have more time or it has to be cheaper than a rental, then maybe it will work," he said.