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Stagnant Vid Biz

Faced with another year of no real growth, the Aussie homevideo industry is looking to get smarter with marketing dollars by targeting consumers directly, and not just the retail sector.

Wholesale value of homevid (excluding sell-through) in both 1989 and 1990 was around $A200 million, representing a retail value of approximately $A800 million. The outlook for this year is much the same.

“The best we can do is sustain business and increase at levels in line with inflation,” notes Milt Barlow, m.d. at Roadshow Home Video, Australia’s biggest vid distrib.

Although there is no estimate available for sell-through’s contribution, this sector remains the rising star. The Video Industry Distributors’ Assn., taking into account estimations to include non-member companies, reckons it accounted for around 28% of all business in the first eight months of this fiscal year. Last year, for the first time, more sell-through titles (1,453,100% up on 1989) were released than rental (1,385) and major players such as Roadshow are looking at sell-through increasing from 35% to more than 50% of its sales in the coming year.

However, as elsewhere in Oz, the retail sector is sluggish, with February/March on record as one of the worst trading periods yet for video dealers.

“The impression is that smaller stores are suffering but bigger ones are trading well,” says Ken Chapman, m.d. of CIC Video. “From the distributors’ point of view, in terms of units shipped out since July, there’s about 2% growth. If that’s the case, we’re not even meeting inflation levels. But, despite the recession, business hasn’t dropped off drastically. It’s not recession-proof but it hasn’t suffered the drastic effects seen in other sectors of the economy.”

And on the plus side, notes Barlow, the Aussie market is still “holding its own” compared with the downturns seen in other major markets. “It’s still one of the best rental markets in the world,” he notes.

But distribs say it’s time for a change in the way business is done. With little growth, distribs to date have pumped more money into marketing at the retail level. Direct consumer advertising has been steadily rising, as has the quest for cross-linked promotional tie-ins to offset costs, but this year sees for the first time some deliberate moves away from retail to make the marketing buck go further.

At industry level, a magazine has been launched under VIDA’s umbrella, which has a monthly circulation of more than 200,000 copies via dealers, but will climb to 400,000 over coming months as distribution widens. Five majors have grouped to produce a take-home preview of upcoming releases, and distribs are now joining forces on tv campaigns.

A Warner Home Video spokesperson says the distrib’s recent tv venture with RHV to promo “Hard To Kill” and “Q& A,” “put our dollars together and gave us greater buying power. We will see more of that this year.”

At a distrib level, RCA/Colpix/Hoyts is the first to do away with co-operative advertising with retailers, a complex practice most majors undertake. Managing director Gordon Bobbin has set up a six-month trial in South Australia and West Australia that will see coin spent instead on tv and radio campaigns – two weeks after shelf date – to widen the marketing net.

Out with the old

Distrib is spending around $A220,000,10% up, on the trial. “We’re not spending less, but we’re spending it better,” says Bobbin. “Even the retailers in those two states realized there had to be change. The industry has made mistakes in the past… so we’re critically evaluating all the old ways of doing business. And obviously retailers are open to any suggestions to improve their business.”

Bobbin isn’t alone, and he’ll be closely watched. Most of the major toppers say they’re evaluating the effectiveness of current marketing practices. Notes Chapman: “In 1991, the fundamental issue to be addressed is marketing. If the industry reduces its level of marketing to the consumer then the business will contract, there’s no doubt. We need to maintain awareness but spread investment on a more equitable basis.”

Adds Barlow: “We’ve redirected our money over the year to include more consumer advertising and are continuing to look at ways of making co-operative ad dollars work better.” Barlow says co-op deals have become an “unwieldy slush fund” over the past year and adds, “I think there are better ways to use the money.”

Majors’ moves will also be beneficial to the bustling indie circuit, currently dominated by such companies as Virgin, Palace Entertainment Corp., the Home Cinema Group, and the Video Distribution Co. Says HCG’s co-director Michael Schreck, who believes that the current hard year will see the majors become even more driven by A titles: “It’s up to the majors to drive the general public into the stores; it’s up to the independents to offer the general public a wide variety of titles.”

Indies still have problems

Indies are still faced with problems. Schreck’s solution is to appeal to the consumer via stronger titles. “The key is to have a lean and mixed marketing spend; the money you save and make can then be put into better quality product. We’ve increased advertising spending, but we’re spending more on product.”

Adds Palace m.d. Tony Zeccola, who says Palace makes an “enormous allocation” to co-op spending: “Our ultimate aim is to get the consumer into the video store.” To that end the distrib has taken to inviting top renters from various regions to theatrical screenings of new releases to enhance word of mouth. “That’s one way of targeting your marketing dollar to the people you want to reach.”

Holding some dividends back from these strategies is a reluctance by retailers to up overnight rental rates. Last year, according to the journal Video Trader, rates increased by around 6% to just over $A5, but that’s not enough, distribs say, particularly as lead title prices have risen (from $A109 to $A115).

“If video rental is static, and the distribution business is static, there has to be a price adjustment. The market can’t just stay in limbo,” says Chapman. Even a 10% rise in overnight rates would create an extra $A100-120 million which could be fed back into new product and help the market, he argues.

Pricing points for sell-through are not such an issue. Whether as low as $A7.95 or as high as $A39.95, sell-through is blossoming.

Although all majors (except WHV) are involved, industry has coalesced into four main distributors – Video Selection Australia (a division of RHV), CEL, Hoyts/Polygram, and Rainbow – and the general retail sector is slowly cottoning on to consumer demand as the distribs become increasingly aggressive and professional in selling.

“There’s still a long way to go with the mass merchandisers, and a lack of sophistication,” says CEL g.m. Irene Taylor, who believes the retailers will improve as the distribs get better.

Boffo sell-through

And although distribs differ over release strategies, some recent boffo results have crystallized sell-through’s potential.

In December, VSA launched “Teenage Mutant Ninja Turtles” direct to sell-through (a rarity here for a major theatrical title), shipping 200,000 titles net at $A29.95 retail. Five previous animated “Turtles” offerings shipped 300,000 units and “Lady & The Tramp” did 110,000. “Three Tenors” shipped 84,000 units for Hoyts/Polygram.

And a $A1.5 million campaign (incorporating a $A1 million promo tie-in with Red Rooster) has supported an April release of “The Little Mermaid” via VSA, biggest outlay yet for an animated children’s sell-through title.

And at a company level, CEL, which nearly foundered 18 months ago when its parent company almost fell over, has passed on its remaining rental business to RHV to concentrate solely on sell-through, and looks set this year to turn in its first profit in some time, per m.d. Karl O’ Farrell.

All distribs agree however that the market will only support three or four dedicated sell-through distribs. After circling for some years, WHV “has to be” involved this year, per its spokesperson, but it’s assumed it’ll pump its catalog through a third party distributor as does RCA/Colpix, CBS/Fox Video, and CIC.

Industry has also eyed expansion through ancillary moves. RHV has just released video versions of two magazines as part of a move into video publishing. RCA/Colpix/Hoyts is doing limited releases in Video 8 in addition to its distribution venture with computer games maker SEGA. And laser disc is set to have a higher profile, with Hoyts/Polygram and WHV among others entering the software stakes.

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