After a stormy year the video rental market, once predictable, still shows signs of instability and further controversy. Old rules are being replaced as new, unproven business models proliferate.
Not long ago, for instance, a theatrical box office of $100 million and above virtually guaranteed a film's sell-through video release. This year, however, retailers have already seen two such titles -- "The Truman Show" in January from Paramount Home Video, Hollywood, and "There's Something About Mary" in February from Twentieth Century Fox Home Entertainment, Beverly Hills, Calif. -- released instead at rental pricing.
Several factors contributed to these decisions.
"Studios base their choices on what will be most profitable for them," said Kirk Kirkpatrick, vice president of marketing at WaxWorks Video Works, Owensboro, Ky. "In these cases the choices may have been influenced by product needs for copy-depth programs. And timing is a part of it, since both will be repriced for sell-through before the fourth quarter."
"The studios are maximizing rental profits on these titles since they're not really oriented to the sell-through market," said Greg Rediske, president of Video Management Co., Tacoma, Wash. "Besides, this time of year isn't exactly the biggest for sell-through, and 'Mary' has lots of revenue-sharing potential anyway."
"The Waterboy," another theatrical hit, will be similarly priced when it streets March 16. "It's common for us to bring this caliber of film to rental," commented Dennis Maguire, senior vice president of sales and distribution for Buena Vista Home Entertainment, Burbank, Calif. "We always try to reinforce the message to consumers that video stores are the first place to go to find Hollywood's biggest films. We've had great success with taking 'Con Air,' 'Scream 2' and 'Good Will Hunting' -- all $100 million-plus films -- to video stores first."
"Fewer R-rated films are being released straight to sell-through," said one distribution source, "even though both sell-through titles and R-rated titles have been growing. This is partly because a $100 million box office doesn't guarantee collectibility, particularly when the film isn't targeted to repeat viewers, who are typically younger."
The greatest effect on many retailers, however, comes from a patchwork of competing copy-depth programs that have complicated buying procedures.
"Buying programs have become extremely convoluted," said Bill Glaseman, video specialist at Bashas' Markets, Chandler, Ariz.
"Copy-depth programs have become as hard to understand as the tax code," commented Kirkpatrick, "and they have as many loopholes. They're complicated, misused, abused and difficult to administer."
These programs are nevertheless abundant. In January, for instance, of the 60-plus titles prebooking at rental pricing from one distributor, only a few had suggested retail prices of about $100 without any copy- depth or revenue-share options available to reduce costs. Among leases, buy-backs, bonus copies, discounted copies and multipacks, along with new strains of revenue-sharing, retailers have more choices than ever.
Effectively selecting among them, though, has become difficult. "The problem is that there are too many copy-depth programs to use them all," said Clifford Feiock, video coordinator at Nash Finch Co., Minneapolis. "If you took advantage of half of them you'd be so overspent you'd never make money."
The complication is that most program titles have elevated purchase requirements. "We hate the programs with ridiculous goals," said Wanda Munsell, video specialist at Harmons, West Valley City, Utah. "You get punished for buying B-titles."
Smaller retailers and single stores are especially disadvantaged by most plans. "We can't participate in any of the copy-depth programs because of their unrealistic minimums," said Ryndie Liess, video manager at Country Mart, Hollister, Mo. "We're only able to bring in some prepacks on rare occasions."
Multipacks, like "buy-two, get-one-free" offers, have long been a mainstay of the B-title rental market, but they're now being applied to A-titles as well. Universal Studios Home Video, Universal City, Calif., recently offered an assortment of multipacks for its January "Out of Sight" release. It has announced a similar plan for "Meet Joe Black," which streets April 6.
"Universal has finally found the answer with their 'Meet Joe Black' program," said Kirkpatrick. "It's easy to administer and it's fair. There aren't many ways for retailers to cheat, and it accomplishes the studio's goal of getting more pieces into the market."
Retailers agree that this is a program they can use. "Short of just lowering the price, the easiest program is Universal's," said Glaseman. "We plan to take advantage of it with 'Meet Joe Black.' "
"The simplest programs, like Universal's, are the best for us," added Munsell. "Extra time for complex ordering and returning tapes is a luxury we don't have."
Other programs are used by retailers on a pick-and-choose basis according to their various situations.
"Besides the Universal prepacks, we find it handiest to use the Columbia bonus-goods programs," said Renee Clay Thomas, video supervisor at Clay Stores, Hardy, Ark. "We don't do the buy-back programs. We're not on revenue-sharing so our department managers aren't accustomed to dealing with returns."
"Price-reduction programs like those of Artisan and Trimark make the most sense for us," said Rediske.
"We've gone on a couple of leasing programs," said Glaseman, "but only when it made absolute sense. You have to be careful not to bring in more product than you really need."
The balance between customer satisfaction and profitability is indeed becoming more precarious than ever as a result of copy-depth focus.
"As copy depth grows it's inverted in its ability to be profitable," said Kirkpatrick. "It's a diminishing return. If we see satisfaction in one or two weeks, the numbers don't work."
With more copies generating fewer turns per copy, some video chains have lengthened rental periods to exploit the situation. Most supermarkets have yet to follow suit, however, as they plot new courses through a changing market.
"If you give a tape to a customer for a week, they're going to pass it around to friends and neighbors and you lose revenue," said Kirkpatrick. "It diminishes the perceived value of home rentals, and the perception is as important as the actual value."
Another area of interest to rental retailers is the growing number of art films -- titles like "Shakespeare in Love," "Waking Ned Devine" and "Life Is Beautiful" are still doing well in theaters. While this type of movie often does best on a market-by-market basis, many video executives are poised to capitalize on the upcoming video releases later this spring.
"There's definitely a strong market for bigger art films," said Rediske. "Where they make sense is in urban markets, appealing to the upscale customers -- an attractive clientele for supermarkets. They're a lot better than buying junk B-titles."
Whatever the long-term holds for the video-rental market, the immediate future at least shows no sign of a product shortage. The announced slate includes several theatrical winners.
Prebooking this week are "The Waterboy" from Buena Vista; "Bulworth" and "Polish Wedding" from Fox; "What Dreams May Come" from PolyGram; "Ringmaster," "Strangeland" and "The Temptations" from Artisan; "Safe Men" from Universal; and "Living Out Loud" from New Line.
Other titles with upcoming prebook dates include "Simon Birch" March 16 and "Beloved" from Buena Vista March 23; "Pleasantville" March 2 and "American History X" March 2 from New Line; "Home Fries" March 8 from Warner; "Bride of Chucky" Feb. 19 and "Meet Joe Black" March 22 from Universal; "Another Day in Paradise" April 19 from Trimark; and "I Still Know What You Did Last Summer" March 16 from Columbia.