Coming Soon to Video

Brace yourselves for a barrage of advertising on TV and in magazines, urging you to go rent a video at your friendly neighborhood video store. And once you get there, you’re bound to see a lot more copies of the big theatrical hits.

Studios are undertaking what some say is an unprecedented efforts to reignite the video rental business.

“Consumers have owned their VCRs for so long now that the novelty has worn off,” said Warner Home Video President Warren Lieberfarb. “The industry has to provide selection, satisfaction and service--otherwise it will melt away.”

After years of double-digit gains, consumer spending on video rentals last year was flat or slightly down from the 1996 total of just under $9 billion.

This is not uncommon for a maturing industry--the first VCRs came on the market 20 years ago--but for movie studios that derive the lion’s share of their revenues from video, any slowdown is cause for alarm.

Four studios in recent months have announced sweeping plans to essentially reinvent the video rental business.

The longtime premise of the video rental business is that consumers who don’t find the hits they came in for will leave with one or two other titles and then come back the next day. This is no longer valid, experts say.

Consumers now want the hits, the big hits, and nothing but the hits.

Accordingly, the home video divisions of Warner Bros., Sony Pictures, Walt Disney Co. and Universal Pictures have announced ambitious incentive programs, one of them involving revenue-sharing, designed to boost the number of hit videos in stores. They’re supporting these programs with a blitz of consumer advertising valued at millions of dollars.

In the past, studio incentives for rental titles were limited to so-called “B” titles and consisted mostly of T-shirts and baseball caps. Consumer advertising was reserved for videos priced at $20 or less for direct sale to consumers.

The new programs are making themselves felt. Blockbuster Video, the nation’s biggest chain of video rental stores, has unveiled a new ad campaign, “Go Home Happy,” that stresses the increased availability of hit videos--up to “40% more copies,” the ads state.

The first program out of the box was Warner’s Profit Plus plan, unveiled in November, offering retailers who buy a certain number of new hit titles, including “Contact” and “Conspiracy Theory,” additional copies for free. The quotas are based on retailers’ own historical buying patterns, and the program is being supported by millions of dollars worth of consumer advertising on radio and TV as well as in such Time Warner Inc. publications as People, Time and Entertainment Weekly.

Warner has now announced a second “wave” of titles, including “Devil’s Advocate,” which arrives in stores Feb. 17, and “Mad City,” due Feb. 24.

Lieberfarb said the entire industry needs to band together and remind consumers that “renting a video is one of the best entertainment bargains around.”

Victory Seyedin, president of Planet Video, a 33-store regional chain based in Waukesha, Wis., said the Warner program has allowed him to bring in more copies of Warner hits than he otherwise would have been able to.

“I think we’re all going to benefit [from] it,” he said. “The more hit product there is available, the better our business.”

Seyedin said the growth in cable and satellite pay-per-view has given consumers new avenues other than the video store to find the latest hit movies.

“And if we don’t have an adequate supply of hit product, what we’re doing is encouraging people to try cable or satellite,” he said. “This way, we’re able to bring in more copies of hit movies at a reasonable price, and thereby satisfy consumer demand.”

In the wake of the Warner announcement, three other studios have weighed in.

Buena Vista Home Video, Disney’s video distribution arm, announced it will give retailers an average exclusive, or “window,” of at least 60 days on all rental-priced titles released in 1998 so they stand a better chance of turning a profit. Last year, Buena Vista offered retailers windows of as little as 30 days, and in the case of “Evita,” got burned when the mighty Blockbuster Video chain drastically cut back its buys in retaliation.

Like Warner, Buena Vista is supporting its incentive program with increased consumer advertising. Buena Vista President Michael Johnson is reluctant to attach a dollar amount, but he does say, “It’s time to get our message out, and we’re going to spend more in consumer marketing than ever before and really raise the bar.”

Buena Vista is also developing a revenue-sharing program that retailers can implement through their distributors. Retailers could bring a huge quantity of hit titles into their stores for a fraction of the regular cost, in return for a share of the rental revenues.

“We already offer revenue-sharing through Rentrak Corp. and SuperComm [a Disney division that works primarily with supermarkets], and now we are exploring ways to widen the offering of revenue-sharing to other distributors,” Johnson said. “We have always been in this business as a way to get more product on the shelves, and for the retailers who believe that the financial model of revenue-sharing works for them, we want to be there with them.”

Columbia TriStar Home Video, a unit of Sony Pictures, announced a plan that appears virtually identical to Warner’s. Retailers who meet or exceed sales goals on “I Know What You Did Last Summer,” “Seven Years in Tibet” and five other upcoming hit video releases get an additional 20% units for free.

And Universal is putting the finishing touches on an incentive program of its own that Universal Home Video President Louis Feola said will consist of “increased consumer advertising, coupled with a way to facilitate more copies of movies on shelves.”

“This year, the slowdown in the video rental business has been pretty dramatic,” Feola said. “The number of households that rent on a regular basis is down nearly 15% from 1995, our own research shows, while the average number of tapes rented at each visit is also down, from 2.9 in 1995 to 2.7 this year.”

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Thomas K. Arnold is editor in chief of Video Store magazine, a weekly trade magazine serving the home video industry.