OPINION: Give rental its due, Mr. Parsons

By James Loperfido -- Video Business, 6/8/2007

JUNE 8 | Editor’s note: The following is a letter written to Time Warner chairman CEO Richard Parsons in response to Parsons’ comments at a Merrill Lynch media investor conference June 7 in London. Parsons reinforced the comments of other Warner Bros. executives this week that video-on-demand is a more efficient and profitable rental vehicle than packaged media distributed through bricks-and-mortar rental stores. He said some films have seen multiple times their normal VOD buy rates in trials of simultaneous release with DVD and expressed confidence that downloading of films will expand the market for studios, rather than cannibalize it.

Dear Mr. Parsons,

In my role as chair of the Independent Dealers of Entertainment Assn. (a division of the Entertainment Merchants Assn.), I have the great honor of representing thousands of video selling and video renting stores across the U.S. Our membership represents the gambit of what can generally be considered neighborhood entertainment centers.

We would like to bring a few facts to your attention that you may know but need to be restated.

• The video rental experience is the corner-stone of the video packaged goods industry.

• Video rental nurtured the industry in a way that allowed it to become the $25 billion behemoth it is today. 

• Rental is debatably an $8 billion business that only recently has shown signs of maturity (as opposed to $1 billion for VOD).

• The above represents over 30% of the industry and by your own admission represents roughly 20% of your (our) business.

• Most studies also agree that the rental experience instigates one-quarter of all DVD sales.

• Previously-viewed DVD income is predominantly poured back into new DVD purchases.

• Most in the packaged goods business carry a significant inventory that may dwarf the supposed 60% packaging and shipping savings discussed in your interview.

• The video rental experience works. It satisfies a growing population in a way that no other delivery method has come close to duplicating.

• We may be the industry’s simplest and most personal form of distribution.

• Most industry projections show a minor shrink for the rental segment through 2010.

• There is no revolution, no crying masses pleading for a shift from packaged media to electronic delivery.

My point in saying all this is that we disagree with your views on video rental. We believe that, as it relates to rental windows, you are trying to change something that simply isn’t ready nor needs to be changed. We, in fact, believe you are firing a shot across the industry’s bow that is premature and may resonate in a destructive way from which we may not recover.

No one is denying the sense of awe or the not so light touch that electronic delivery offers us in the future.

Rather, let us help you find better ways to promote what we already have—what works today. Ask retailers, most will say that we have “just begun to squeeze the water from our washcloth.

By the way, I was sorry to hear your comment that, “It will be a cold day in hell that I would actually get up from my apartment [in Manhattan] and go to a video store and rent a movie.” I think you are missing out on an experience you may undoubtedly enjoy and one that would more fully explain our position.

In this regard, some say the independent video store has become a social metaphor uniting the fairly wide cross section of interests in our neighborhoods under one roof. Simply, I believe we have become part of the American fabric. Stop in a store, you just may agree.

In closing, we look forward to an opportunity to discuss this subject candidly with you or your assigns.

James G. Loperfido is chair of IDEA