The video rental market, source of considerable controversy in 1998, still shows profit potential, according to video industry experts.
"The first quarter of 1999 will be much better than in 1998," said Kirk Kirkpatrick, vice president, marketing, WaxWorks Video Works, Owensboro, Ky. "We're a product of our box office. Theatrical income was up in 1998, so video will be up for the next few months. There are already several hot titles announced for January and February."
Among the titles are box-office heavyweights "The Truman Show" from Paramount, "Saving Private Ryan" from DreamWorks, and "There's Something About Mary" (which may come out at sell-through pricing) from Twentieth Century Fox. There are also moderate hits like "How Stella Got Her Groove Back" from Fox, "Out of Sight" from Universal, and "Disturbing Behavior" from MGM.
Other recent theatrical films that should be released on video early in 1999 include "Ever After," "Bulworth" and "Slums of Beverly Hills" from Fox; "54," "Beloved," and "Mafia!" from Buena Vista; "Practical Magic" and "Soldier" from Warner; "Snake Eyes" and "A Night at the Roxbury" from Paramount; "Rush Hour" from New Line; "Bride of Chucky" from Universal; "Ronin" from MGM; and "Knock Off," "Urban Legend," and "John Carpenter's Vampires" from Columbia TriStar. Each of these features grossed over $10 million theatrically.
Meanwhile, late-December releases like Universal's "Blade," New Line's "Baseketball," Warner's "Lethal Weapon 4" and Buena Vista's "Halloween H2O" will still be renting in the first quarter. Also, retailers and distributors agree that sell-through- priced movies are playing an increasingly important role in video rental, especially with supermarkets that offer guaranteed-availability programs.
An abundance of popular titles, however, isn't the only issue of concern to retailers experiencing little if any rental growth. Another is the questionable success of the many copy-depth programs started by studios to build business.
"Many of the copy-depth programs were implemented because of legal obligations," said a distributor. "There is less and less participation in them as they continue."
"There is too much indecisiveness in these deal-of-the-day programs," said Jamie Molitor, director, video operations, Dierbergs Markets, Chesterfield, Mo. "They haven't put any thought into any of them. They're a knee-jerk reaction to retailer complaints about favoritism."
One complaint is that studios may have overestimated the impact of more copies on the rental market.
"Getting more product does not grow the pie," said Kirkpatrick. "We need to get more business, not satisfy people faster."
A more practical solution to the copy-depth problem may lie in the growing sell-through market.
"Sell-through pricing for more new releases is the answer to copy depth," said one video buyer, "not bonus copies or returnable copies. We tried all of the programs in the beginning, but some of them cut into the rental legs so much that the titles weren't profitable. Tripling our buys on lease programs just isn't feasible either. And as the bonus-copy programs have continued, escalated goals have been set according to goals on earlier titles that were already elevated. As a result, some new goals are wildly unreasonable. With a sell-through title, though, there are no restrictions or complicated paperwork."
Sell-through releases can provide a beneficial tool to supermarkets using a guaranteed- availability program.
"Supermarkets with a guaranteed-availability program are capitalizing on those sell-through titles skewed for more mature audiences," said Bill Bryant, vice president, sales, grocery and drug, Ingram Entertainment, La Vergne, Tenn. "There has been a recent trend toward releasing more mature product -- anything strong, over $100 million at the box office -- at sell-through pricing."
"Our guaranteed rental programs are generally on sell-through titles with adult appeal, like 'Armageddon,' " said Greg Rediske, president, Video Management Company, Tacoma, Wash. "Sometimes we use titles like 'Small Soldiers' with family appeal, but we rarely do children's titles."
"We've been running guaranteed-availability programs on sell-through titles with some success," said Molitor of Dierbergs.
In October, Seattle Safeway stores guaranteed availability of both "Hope Floats" and "The X Files," promoted on banners in video departments. Stores visited by SN carried about two dozen copies.
To manage these programs effectively supermarkets may need to change their operating procedures.
"Supermarkets need to plan to sell off used copies earlier than usual," said Bryant, "since so many retailers are selling off early because of shorter legs."
"Competition from other media is one of the reasons video is suffering," said Kirkpatrick of WaxWorks. "One thing we haven't promoted well is choice. That is video's big advantage."