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Company Town | 1996-97: Review and Outlook

Videocassette Business Still in Fast-Forward Mode


If 1996 taught anything in the video business, it was not to count out the videocassette. Last January, pundits were writing VHS off in favor of emerging technologies such as a format shaped like an audio CD expected to revolutionize the industry--and the fast-growing satellite dish business.

As it turned out, DVD's launch stalled over copyright protection issues, satellite dish sales slowed measurably and consumers bought more prerecorded videocassettes than ever before, proving there was still plenty of life left in the VHS format.

"I'm very optimistic about 1997," said analyst Curt Alexander of Media Group Research in Providence, R.I. "The crash and burn of wireless technology, along with the fact that DBS [satellite TV] business growth has slowed measurably is very good news for cable and, down the road, the video industry."

With digital versatile disc, or DVD, the year's big no-show and rental revenue flat, the sell-through side of the business once again commanded the spotlight. By the time the dust settles on the fourth quarter, easily the most competitive ever, analysts expect the sell-through sector--generally defined as tapes priced $29.99 and under--to finish as much as a billion dollars ahead of the $4.6 billion from 1995.

"There doesn't seem to be an end in sight to the number of videocassettes people are willing to buy," said analyst Tom Adams of Adams Media Research in Carmel Valley, Calif. "There is a limit, but we just don't know where it is yet. The sell-through business has quite a ways to run yet."

Several trends seem likely to continue this year.

What sticks: With videocassettes being sold at more outlets than ever--from video stores to gas stations, supermarkets and the corner drug store--gleaning accurate sales figures will continue to be a big challenge. The number of units shipped for sale can vary widely from the number of units actually sold at retail, which is why the expression "it's not what ships, it's what sticks" has gained vogue among video distribution executives.

"No one cares how much you ship anymore--how much will you sell?" said Kirk Kirkpatrick, sales vice president at WaxWorks, a Kentucky-based distributor.

Shipping figures will probably remain a prime source of bragging rights within the industry, however--as seen by 20th Century Fox Home Entertainment's recent maneuvering on behalf of "Independence Day." Several weeks after archrival Buena Vista Home Video announced "Toy Story" shipped 21 million units, FoxVideo issued a news release calling "Independence Day" the biggest video of the year based on "unprecedented retail orders of 21,954,575 copies," although studio executives privately admitted the initial number shipped was less than 21 million and that the orders spanned the entire holiday season.

Winners and losers: Jockeying aside, "Toy Story" and "Independence Day" were the big winners of the holiday season, which has become the video equivalent of the summer movie season. "The Nutty Professor" is considered the biggest surprise of the season, probably because expectations were low. "Mission: Impossible" is widely considered a disappointment, despite Paramount Home Video's protestations to the contrary.

Of the so-called Big 5 of the season--"Toy Story," "Independence Day," "Twister," "The Nutty Professor" and "Mission: Impossible"--only "Mission: Impossible" failed to make VideoScan's top 10 for the year.

Other perceived failures include "Flipper," "Muppet Treasure Island" and "James and the Giant Peach," with the latter two titles falling short of what the industry has come to expect from Disney releases. Tania Moloney, vice president of publicity and marketing for Buena Vista Home Video, contends that "Muppet Treasure Island" and "James and the Giant Peach" had each sold 5 million units before Christmas, though VideoScan figures are considerably lower.

On the plus side, both "The Wizard of Oz" and "The Sound of Music" sold millions of units, despite having aired on TV zillions of times, which bodes well for more major classic re-promotions in the coming year.

Longtime sell-through champ Buena Vista finished the year with 20% of the market, according to VideoScan projections. Warner Home Video, which distributes MGM/Home Video as well as HBO Video, finished a notch below at 18.5%, a few pegs above FoxVideo (12.9%), considered one of the most aggressive sell-through marketers in the business. Universal Studios Home Video, which is expanding its direct-to-video productions markedly this year, finished fourth at 9.8%, followed by Paramount Home Video at 8.4%. Like its theatrical counterpart, Columbia TriStar Home Video continues to lag behind at 6.6%. The now-disbanded Turner Home Entertainment finished farther down the scale at 2.2%.

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