DVD & music orgs share concerns, mull wedding

The biggest industry orgs representing the DVD and music industries are officially talking merger.

The consolidation of both industries and the growing overlap in the two markets along with common issues resulting from the digital and Internet revolution has led the 46-year-old National Assn. of Recording Merchandisers and the 23-year-old Video Software Dealers Assn. to launch official negotiations to explore a merger.

It would be a reuniting of the not-for-profit orgs that split nearly two decades ago.

Such a move would also prompt consideration of a merger between the two national trade shows of the orgs, each of which has declined considerably from the days when they drew considerably more attendance, business and overall hoopla.

Perhaps the biggest concern facing each org is declining vendor support for the annual shows. Studios once spent lavishly at VSDA’s confab, providing the bulk of the group’s revenue. But as big box dealers take an ever-increasing share from indie retailers, the annual gathering has become less important for suppliers, and Hollywood attendance has been declining for years.

Music labels also used to mount splashy product presentations at NARM shows, but those days are also long gone.

Over the past year or two there have been discussions between the two groups about co-locating the annual shows. Those talks led to the recent merger discussions, according to NARM prexy Jim Donio.

The VSDA’s Home Entertainment 2004 is scheduled for July 14-16 at the Venetian Resort Hotel Casino in Las Vegas. The 46th annual NARM Convention & Marketplace is set for Aug. 21-24 at the San Diego Marriott.

Reps for both orgs said it was too early to comment on the potential ramifications of a merger of the orgs or the trade shows, although this year’s shows would not be affected.

The VSDA’s convention is one of three shows operated jointly by Home Entertainment Events, which is jointly owned by the VSDA and Advanstar. Any change to the VSDA show would have to be approved by both parties, or, according to the contract, each party has to be given the option to buy the other party out of its interest in the partnership.

Lawyers for the two groups are currently hammering out a letter of intent to formalize the merger talks, which could still take months, officials from the two groups said.

If they do get together, it would bring the groups full circle. VSDA began in 1981 as an offshoot of NARM and until ’86 the groups shared a staff and headquarters.

VSDA is now based in Encino, NARM in Marlton, N.J.

In recent years, both groups have seen membership rolls plunge, as both the CD and DVD businesses shift away from specialty shops to mass merchant chains.

Piracy has also taken a toll, particularly on musicstores, which have suffered from the sharp drop in CD sales seen since 2001.

VSDA currently counts about 1,200 member companies, down from a peak of nearly 4,000 a decade ago; NARM has fewer than 400.

Although only a handful of members formally belong to both groups, the rank and file of each is increasingly eyeing the other’s turf as both music and vidtailers look to diversify to offset declining sales and rentals.

Both memberships also face a threat from the growing business of legal downloads, which could further undercut CD and DVD sales.

Cooperation between the groups has also been growing.

In April, NARM and VSDA joined forces with the National Assn. of Theater Owners, along with game retailers to form the Coalition of Entertainment Retail Trade Assn.

Washington-focused coalition will coordinate lobbying on piracy legislation and other issues of shared concern among the groups.

“We’ve been marching down the hallway together on issues in Washington and, equally important, in dozen of state houses,” VSDA president Bo Andersen said. “We already know that our government affairs interests are almost perfectly aligned, so that’s an element” in the merger talks.

(Jennifer Netherby contributed to this report. Netherby and Paul Sweeting are reporters for Daily Variety sister publication Video Business.)

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