DVDs in bargain bin: Good for sales?

November 27, 2005|By ELAINE DUTKA | ELAINE DUTKA,LOS ANGELES TIMES

HOLLYWOOD / / Oh, the indignity of it all. Jimmy Stewart, despite his ties to Clarence the angel, has landed in the bargain bin for the holiday season. He's not alone. When it comes to DVD sales, Stewart and other stars of the Golden Age of Hollywood are leading the way in the race to the bottom.

This year, DVD sales, which studios count on to turn costly movies into mega-moneymakers, are experiencing a precipitous decline in growth. To counteract the plunge, home video executives are slashing prices.

Although new DVD releases have been relatively stable, hovering in the $15 to $25 range, other titles have dropped sharply. Austin Powers in Goldmember and the Lethal Weapon sequels can be picked up for just under $5 at Best Buy, and Wal-Mart is pricing Trading Places and Fatal Attraction among others at $5.50. Meanwhile, DVDs of primarily public domain movies, including some starring Stewart, Danny Kaye, Shirley Temple and the Three Stooges, are being marketed as affordable stocking stuffers in Target's $1 racks.

Not everyone agrees with the pricing strategy. Consumers become reluctant to fork out $25 for A-list titles when they're accustomed to paying a fraction of that, critics say. Dumping movies into bargain bins robs them of their identity and turns them into "commodities," said Barry Gordon, senior vice president of worldwide programming for Image Entertainment, a leading producer and distributor of independent fare.

The industry might be shooting itself in the foot, agreed Steve Beeks, president of Lions Gate Entertainment. "Price reduction is a sound part of any marketing strategy," he said, "but it's a matter of balance. You don't want to drop prices to maintain sales level -- we're in it for the long run."

Part of the slowdown can be blamed on rising gas prices that cut into entertainment spending -- and hurricanes Katrina, Rita and Wilma didn't help. But part can be attributed to weak theatrical releases and fewer hits and family-friendly blockbuster sequels that drive DVD sales.

According to the trade association DEG, DVD revenue that increased by 39 percent in 2003 and 32 percent in 2004 will expand by only about 8 percent this year. And with 52,000 titles on the market (11,500 released in 2005 alone), shoppers are more selective. Studios no longer can toss out a DVD and count on it striking gold.

"The challenges Hollywood faced attracting people to the box office have transferred to the DVD world," said Gary Arnold, senior vice president of entertainment at the Best Buy retail chain. "We've been less successful with consumers than we have been in years past."

At $25 billion annually, home video revenue is more than twice that of the box office, so double-digit growth is more elusive -- particularly now that saturation has set in.

DVD players have become fixtures in 75 million of the nation's 110 million households as prices for the machines dropped to less than $50. Although consumers who have only recently switched to the DVD format bought more than expected, they are typically less affluent and less enthusiastic buyers." In an effort to step out from the rest of the pack, some studios -- including Disney, Universal, Lions Gate and Fox -- are releasing titles the Monday after Christmas, instead of the typical Tuesday release. Gaining an edge is a challenge in the fourth quarter, when more than a third of all software transactions occur.

Adding to the pressure, 50 percent of a DVD's sales takes place during its first week on the market -- up from 40 percent two years ago. "Opening on DVD has become as cutthroat as opening in theaters," said Kevin Kasha, senior vice president of acquisitions and programming for New Line Home Entertainment. "If your product doesn't sell big in the first 30 days, you're often off the shelves."

Red-hot TV-on-DVDs, however, are a bright spot for the industry, now responsible for 25 percent of all home entertainment spending. And sales, according to Nielsen VideoScan, are expected to increase by 28 percent this year.

But there's a flip side, Best Buy's Arnold said. Watching a season's worth of Lost or Desperate Housewives is time-consuming, taking people out of the purchasing cycle.

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Elaine Dutka writes for the Los Angeles Times.

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