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Sell-Through Revs Up

For the first time ever, sell-through vid revenues were greater than revenues from rental releases in 1990, according to Paul Kagan Associates. Kagan estimated sell-through will increase its lead over rental in years to come, marking a long awaited eclipse in the industry.

Industry estimates were part of a flood of data provided at the Feb. 14 “The Future Of Home Video” seminar at the Beverly Hills Hotel.

The Kagan data echo recent figures provided by Alexander & Associates, a Manhattan research firm, showing that 1990 sell-through business jumped 16% over the previous year. The Alexander study reports a total of 231 million video purchases during 1990, when 12 major films went out as sell-through titles. In 1989, only five hit movies were marketed as sell-through vids.

Alexander & Associates also reports only a negligible increase in rental activity for the year, which they attribute to an increase in VCR penetration.

According to Kagan, domestic supplier revenues rose to about $3.9 billion in 1990, from $3.4 billion in 1989. Revenues from rental releases remained flat at about $1.9 billion, while sell-through increased from $1.5 billion in 1989 to $2 billion in 1990.

Total consumer spending on video in 1990 was $10.3 billion. About $7.6 billion was spent in the rental market and $2.7 billion was spent on sell-through.

In 1989, consumer spending was reported by Kagan at $9 billion, with about $7 billion from rentals and $2 billion from sell-through. Estimates for coming years showed sell-through taking an increasing share of total consumer video dollars.

The average video household spent $120 last year on rentals, according to Kagan, and about $42 on sell-through. Rental spending was about the same as in 1989, though sell-through spending rose about $3.

While household spending on rentals stayed the same, overall industry figures for rentals increased slightly as the number of VCR households increased by 6.1 million, or 5.5%, per Kagan.

Coincidentally, seminar panelists represented four of the most dramatic sell-through success stories of 1990: Pacific Arts (represented by marketing veep George Steele), RCA/Columbia Pictures Home Video (Paul Culberg, exec v.p and chief operating officer), Live Home Video (David Mount, prez and chief exec) and Buena Vista Home Video (Richard Cohen, exec v.p of BV worldwide).

Live’s Mount predicted double-digit growth will continue in the sell-through business and that rental growth will continue at a single-digit rate.

He cautioned, however, “There will be some constraints on sell-through because of retailer woes.” Mount cited several mass merchant chains that recently filed for Chapter 11 or experienced other financial problems.

In spite of recent successes, panelists warned against a mindless rush into sell-through. Said BV’s Cohen, “It’s much more expensive, difficult and complicated to launch a sell-through campaign. More manpower is involved as well as money.”

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