REPORT: 4TH QUARTER PROPELS RECORD YEAR FOR HOME VIDEO

NEW YORK -- A surge in fourth-quarter video rental and sell-through helped drive revenue totals to $24.5 billion for video retailers in 2001, according to data released last week from research firm Alexander & Associates, based here.The company calculated that the video sell-through market increased to $11.6 billion in 2001, up 22% from $9.6 billion in 2000. The results from 2001 were bolstered by

NEW YORK -- A surge in fourth-quarter video rental and sell-through helped drive revenue totals to $24.5 billion for video retailers in 2001, according to data released last week from research firm Alexander & Associates, based here.

The company calculated that the video sell-through market increased to $11.6 billion in 2001, up 22% from $9.6 billion in 2000. The results from 2001 were bolstered by a $2.1 billion increase in sales of the DVD format and an especially strong fourth-quarter schedule of releases.

"The fourth quarter was just incredible," said Michael Gorman, research analyst, Alexander & Associates. "On the sell-through side, the fourth quarter had more VHS sales than last year, which is incredible, considering the growth of DVD."

Rental revenues increased to $12.9 billion in 2001, up 4% over rental revenues of $12.4 billion in 2000. That figure differed sharply from data released by the Video Software Dealers Association, Encino, Calif., which released a report on the same day last week estimating that video rental revenues in 2001 were $8.42 billion, or about $4.5 billion less than the figures calculated by Alexander & Associates. VSDA's total represented a 2.1% gain over rental revenues from the preceding year.

"This disparity comes up every year, and we're pretty confident our numbers are correct," said Gorman.

However, Brad Hackley, director of research, VSDA, pointed out that VSDA's data is obtained directly from the scanning systems of a sample of about 2,500 to 3,000 rental outlets per week.

Alexander uses a weekly poll of 2,000 households to calculate its data.

Despite the conflict about total sales on the national level, supermarket retailers said they had an outstanding year-end season.

"I was pleasantly surprised at the fourth quarter that we had," said Bob Gettner, video buyer/coordinator, B&R Stores, Lincoln, Neb.

He said unseasonably warm weather early in the quarter might have slowed rental activity a little, but the overall trend toward staying at home after the Sept. 11 terrorist attacks gave the category a lift.

"As much as I hate to say it, I think 9-11 impacted our business quite a bit," he said.

Laura Fisher, video coordinator, Martin's Supermarkets, South Bend, Ind., agreed that the fourth quarter was strong for both sell-through and rental, adding that her stores' rental revenues were given a strong boost by the incorporation of the DVD format and some new video games into the rental mix this year.

Among video titles, she said "The Grinch" was a huge hit in her stores, as were "Shrek," "Dr. Dolittle 2" and "Cats and Dogs."

Retailers also said they are increasing their DVD selections and assortments in the first quarter to accommodate a surge in demand in the wake of the flood of DVD players found under Christmas trees this past holiday season.

"The DVD players sold under $100 for the first time, and that makes a big difference," said Fisher. "We've kind of beefed up our copy depth on DVD rentals, preparing for all those people who bought DVD players over Christmas."

Gettner said his stores, which carry about a 20% mix of rental DVD, saw an immediate spike in DVD rental activity after Christmas, and noted that he's also expanding his stores' DVD selections by an as-yet-undetermined amount.

He said B&R also plans this year to launch a separate pricing strategy for new-release vs. catalog DVD titles. Currently, all DVDs rent for $2.68 per night -- the same as the price for new-release VHS titles -- with the option of stretching that to three days for an extra $1.