Record low DVD prices at retail
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jeremy – 09/28/07
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$4 catalog sales at Target, Circuit City
By Susanne Ault -- Video Business, 9/28/2007
SEPT. 28 | Leading retailers including Target and Circuit City have recently advertised a wide selection of popular catalog features discounted to $3.99, a price point that is seen as a new low in a period other than the fourth quarter.
“It’s unprecedented to see national retailers outside of the fourth quarter promote $3.99 DVDs,” said Jeff Baker, Warner senior VP-general manager of theatrical catalog and sales. “It’s a negative precedent in the business to do that type of lower budget pricing outside of the fourth quarter. You would need to see some uplift in unit volume velocity to compensate for that lower pricing to maintain profit margins, and I have not uniformly seen at retailers the necessary uplift in volume.”
Titles featured in recent $3.99 deals seem to span many studios. At Target, $3.99 was tagged to Universal Studios Home Entertainment’s The Constant Gardener, The Nutty Professor, Along Came Polly and others. At Circuit City, $3.99 was tagged to Universal’s The Bourne Identity, Paramount Home Entertainment’s The Wood and Sony Pictures Home Entertainment’s S.W.A.T., among others.
It is unclear if retailers or studios led the discounting charge in these deals. Studios often contribute to retailer sales, crafting temporary repricing programs on titles to be used in various sales.
Hastings Entertainment, for instance, used Universal incentives to drop the price of titles including Jaws 2 and Dragonfly to $4.99, which it advertised in a newspaper circular last month. Best Buy also has been promoting $4.99 movies.
NPD Research shows that the percentage of catalog titles that consumers purchase at $3 to $4 and $4 to $5 price points has been steadily increasing at mass merchants and electronics stores. Within the electronics retail channel, the share of $3 to $4 catalog DVDs grew from 0.1% in the first eight months of 2005 to 1.8% in 2006 and 3.2% in 2007.
The story is similar at mass merchants, where 0.4% of catalog titles sold in 2005 were $3 to $4, growing to 0.7% in 2006 and 0.8% in 2007.
Another increasingly popular price point is $4 to $5. At electronics stores, 0.7% of catalog sales were in that range in 2005; 1.3% in 2006; and 4.6% in 2007. At mass, the percent was 1.5% in 2005; 3.3% in 2006; and 3.8% in 2007.
Average catalog pricing also has dipped steadily. Among electronics retailers, it was $17.90 in 2005, $16.53 in 2006 and $15 in 2007. At mass, it was $14.56 in 2005, $12.59 in 2006; and $11.46 in 2007.
Warner’s Baker said the studio has been involved in recent repricing initiatives leading to $4.99 sales, but that is where the company draws the line with offers outside the October to December frame.
Several studios did not comment by deadline.
Sales are proving helpful to retailers, who are seeking foot traffic in stores year-round.
“It’s part of our regular effort to drive excitement in the catalog, and if you see $4.99 titles, people are going to get excited,” Best Buy spokesman Brian Lucas said. “It’s not that much more than renting a title.”
Mike Barry, DVDEmpire.com’s director of business development, added, “Studios have been very good at giving us incentives on promoting their catalog titles. This has been a definite shift over the last year or so.”
Some retailers do see frequency of sales as potentially problematic. Customers are starting to expect upcoming reductions and might delay buying new releases at original pricing.
“We’re at the point now when you can buy two or three relatively new reprices for the same price as one brand new DVD,” said Chris Anstey, Virgin Megastores senior product manager. “As a result, the new release doesn’t blow out and, out of panic, the prices drop. It’s a vicious cycle.”
