A mind-numbing array of rental buying programs have retailers wondering if they are in a gold mine or a temple of doom.
On the supply side, there is talk of increased copy depth, national promotions and customer satisfaction resulting in growing revenues. There is a marked uptick in the rental market that will benefit supermarkets as much, if not more, than any other class of trade.
But retailers unanimously say what they want most is for the studios to simplify the programs and just sell the movies at the lowest possible costs, leaving behind the convoluted terms and conditions of the new buying plans. In conversations with SN, some barely concealed their anger with the many programs that take much of their time while not helping much to confront the marketing offensives of the big specialty chains.
"They just don't lend themselves to my operation," said Bill Glaseman, video specialist, Bashas', Phoenix. "I think these programs are mainly for the big guys and the studios are just protecting themselves by offering them to everybody. I just think that in a lot of cases, they are not helpful," he said. Bashas' video departments don't have the room to stock the many copies some programs would require him to buy, he said.
"I spend all of my time trying to figure out what is the best deal instead of what I should buy," said Jamie Molitor, director, video operations, Dierbergs Markets, Chesterfield, Mo. "It seems like I don't have the time to look at the titles anymore. I'm spending all my time evaluating the programs."
"It seems like the studios are forgetting who the customer is and that becomes irritating," said a video executive with a Midwest chain, who asked to not be identified. "I almost think they are going to ruin the whole industry without even realizing it."
Buying videos used to be simple. There was one price from a distributor with occasional incentives such as promotional goods and special pricing on multipacks of B titles. Now the choices include bonus goods on certain titles based on the retailer's meeting purchase requirements on other titles, buy-back programs, leasing programs, revenue-share programs, and various permutations of the plans that seem to change quicker than retailers can track the results.
For example, November's "The Horse Whisperer" is offered with four different plans. Meanwhile, co-op and market development funds are being cut in some cases as the studios increase their consumer ad dollars, a trend viewed with mixed emotions by retailers.
Of the eight retailers interviewed for this story, each said what was really needed was lower prices.
"They throw a lot at you at once so it is somewhat overwhelming and confusing as to which direction to go," said Gary Schloss, vice president of general merchandise, Carr Gottstein Foods, Anchorage, Alaska. "We would rather have just everyday good low prices than a bunch of gimmicks designed to get you to buy more."
"There is too much out there," said Laura Fisher, video coordinator at Martin's Super Markets, South Bend, Ind. "If the studios want retailers to buy their products, they should take all the money that they are investing in revenue sharing and everything else and just take it off the cost of the movies. Then we can all order more."
"We've had mixed results with the programs," said Mike Kirby, director of operations in charge of six Hardings Friendly Markets stores, Plainwell, Mich. Harding's video departments have limited space, he noted. "They force us to carry too much and we've been burned on a couple of the titles we participated in. It was too many copies for our format, we didn't get the turnover we needed and it limited the number of other titles we can carry."
"Like a lot of people, I just want to see the studios bring their prices down, period," said Bob Gettner, video buyer/coordinator, B&R Stores, Lincoln, Neb. The studios say they can't do that because retailers would not buy enough to make the price cuts worthwhile. "But you can't say that unless you've given it a try," he said.
"Distribution in general has supported that retail request for lower costs and communicated it to the studios," said Bill Bryant, vice president of sales, grocery and drug, Ingram Entertainment, La Vergne, Tenn. "But ultimately the studios will make the decisions on what they will or won't do, and you would really need a crystal ball to know how it will unfold," he said.
"The good news is that there are a lot of choices for them. From a profit standpoint, the number of feature sell-through films appealing to an adult audience continues to increase. That gives them a very profitable option," he said.
But on the supplier side, there is a different perspective: the programs are working. The increased copy-depth and guaranteed-availability promotions are bringing more customers back into the rental fold, the studios say, resulting in increased revenues industrywide, which supermarkets are participating in.
The programs and increased promotional spending by the studios are "absolutely revitalizing the video rental business," said Des Walsh, vice president and general manager, SuperComm, Dallas, a Disney subsidiary that licenses software to distributors.
"The trade-off is more than worthwhile. It is far better to be part of a business that is growing again, even with increased complexity, than to have a business in decline that is devoid of complexity," he said. Two segments of the rental marketplace are best positioned to take advantage of this trend: large video specialty stores and, because of their customer traffic, supermarkets.
"Supermarket retailers are ideally situated to benefit from these programs, if they devote the resources to manage them effectively," said Walsh.
But a distribution executive who asked not to be identified said there are too many programs, creating a new-release-driven business that will be more susceptible to encroachments from new home-delivery technologies. "They are eroding the entire video rental market, in my view," the executive said.
Even then, the executive added, as independent stores go out of business and the big chains raise their prices, supermarkets can thrive in rental. "What the smart supermarkets are saying is, we can inherit the entire convenience end of this business."
The strongest evidence that the rental market is improving comes from Tom Adams, president of Adams Media Research, Carmel Valley, Calif., a respected industry analyst who works closely with the studios. Last month, Adams revised his estimates for total rental spending by the year 2000 from $9.2 billion to $11 billion. This was based on the impact of increased copy depth and did not take into account recent rental rate increases by the big specialty chains. "If you can get both a 5% or 6% volume increase and a 5% or 6% average price increase, then you start to talk about really cranking up the revenues," he said.
The confusion of the many different programs will sort itself out, Adams predicted. "This is an appropriate time to experiment with different approaches because it is way too soon to assume that any given approach is going to offer the best payoff."
