ATLANTIC CITY -- Retailers are grappling with a mature video industry that is subjected to pressures from competing delivery formats.
In a freewheeling discussion on the state of the home video industry during the East Coast Video Show here, retailers vented their frustrations over studio policies on pay-per-view windows, emerging delivery systems and technologies that threaten to further erode their shrinking revenues.
Discussion quickly centered on the need for longer PPV windows. Long a hot topic with retailers, they say the granting of shorter windows on new releases to competing formats continues to undermine their rental business.
Retailers like Peggy Debusmann, president of Video Sources, Hopewell Junction, N.Y., a panel member during the debate, called for longer windows for home video retailers and for the studios to establish a standard policy between various delivery systems in setting the length of individual windows. She challenged studios to "make an industry standard and tell cable [companies] this is the way it's going to be. You'll still get your revenue and keep us happy."
However, John Quinn, senior vice president of sales at Warner Home Video, Burbank, Calif., defended studio policies in setting windows for cable broadcast media in efforts to squeeze as much revenue as possible out of the distribution pipeline to offset today's high cost of film production.
He told the retailers to prove their case in terms of the financial benefit of longer windows. "I've thrown the challenge out to the Video Software Dealers Association and numerous retailers to track and see what really happens to rental activity when windows are different, from 30 to 40 to 60 days. Let's see if we can demonstrate a case as an industry that there is a financial issue here because my PPV people in negotiating a window on every title can say if I go from 30 to 60 days, for example, I'll lose so much income. It's real money measured in millions of dollars. I need to go back to them and show them the financial benefit in a longer window."
Jeff Fink, executive vice president with Live Entertainment, Van Nuys, Calif., asked retailers why they continue to support titles by buying numerous units if the PPV window is unfavorable to them. "The market should dictate if the window is making product unprofitable for you. Then you should buy accordingly. Buys can be generated on PPV," he stated.
But most retailers said they needed to buy heavily on major releases regardless of PPV because of competition among retailers. "We are buying to keep our customers satisfied and hope we will get our money back in a 30- or 60-day period," said Michael Senker, owner of Video Biz, a 100-store chain based in Essex, England.
Retailers and industry executives generally endorsed the transition to DVD as the needed booster shot for home video retailers.
"We are pushing DVD so hard because we believe it's important to have a higher quality, lower cost manufactured product to ensure there is a video place as a revenue stream in the future," said Quinn.
"Yes, there is maturity and decline in video rental. In terms of units a major title can do, that number is dropping. We have to take it to the next level and bring more excitement into the business," he added.
Meanwhile, Digital Video Express (DIVX) was seen as only hindering DVD development and causing consumer confusion. "It's going to cause confusion, which is the dangerous thing. I see it as a VHS/Beta situation where consumers don't know what to do and they don't want to be caught holding the baby. So they may hold back on DVD. DVD is part of our future. DIVX is just a nuisance," said Senker.
Debusmann explained that DIVX will turn video into a disposable product in that consumers can throw the discs out after viewing rather than return them to retail. "Who would think 'Gone With the Wind' would be thrown in the garbage," she said.
"Studios spend all this money on box art giving a certain image to video and home entertainment. Now they're saying let's throw it into the garbage. Consumers will perceive this as disposable, a throwaway item. Would authors like to see their books thrown in the garbage? Think about all the classics being thrown out. I am surprised studios want to give that perception to their product," Debusmann continued.