Flat fee, rev sharing to be introduced

MGM Home Entertainment knows all video retailers have an enormous appetite for the video version of “Hannibal,” the top-grossing theatrical release of the year so far, but the studio hopes to entice independent and smaller rental stores to devour more copies than usual. Studio has initiated a bold new pricing strategy of a flat fee that’s nearly half of the traditional wholesale price.

MGM will release videocassette copies of “Hannibal,” one of the studio’s biggest grossers with $165 million at the box office, Aug. 21 at a wholesale cost of $45. Typically, the dealer’s wholesale cost is close to $80.

However, that price is irrelevant to Blockbuster, Hollywood Video and about half the total video retail market, because they use revenue-sharing programs to bring in more copies at a nominal fee and then split rental proceeds with the supplier, much like theatrical exhibitors.

Wooing vid dealers

When revenue-sharing was introduced several years ago and began giving an edge to the biggest dealers, studios began to offer a mind-boggling array of incentive programs to other non-revenue-sharing retailers that would allow them to better compete with the dozens of copies of every title Blockbuster was offering in the first few weeks of release.

The offers reduce the price to as low as $35 per copy, but retailers must order large numbers of copies and fill out volumes of paperwork. Often there are several different, complicated programs to choose from at each studio on a single title.

MGM’s move is the first of its kind for such a major hit.

Spotlighting product

Robert Wittenberg, MGM’s exec VP of sales, said the studio decided to offer the lower flat price to return focus to the product rather than the complicated programs.

“We believe if we can go to the market and sell ‘Hannibal,’ we can be more successful and merchants can be more successful than spending time explaining programs. We’ve become an industry of program providers instead of product providers,” he said.

No price has been announced for the DVD version, but it’s believed MGM will maintain traditional DVD sell-through pricing.

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