Six years ago, the children’s genre was one of the bright spots in home video. Retailers large and small were competing with each other to see who could better attract kids and their parents.

After years of being an afterthought in most locations, all of a sudden children’s sections were being moved to the front of the store, castles and playpens became centerpieces of preteen-only zones, colorful cartoon murals soon adorned adjacent walls and cash registers rung up increasing sales and rentals.

Today, the rush to turn video stores into miniature daycare centers has subsided. Thanks to sellthough pricing and mass-merchants eager to control the market by undercutting specialty retailers, children’s and family videos are no longer the cash cow they once were.

In 1996, kidvid has become a two-tiered caste system. On the mass-merchant tier, Suncoast Motion Picture Co. and Blockbuster Video join the likes of Wal-Mart, Target and Price Club, making their profit by selling videocassettes in high volume at low prices. On the specialty retail tier, children’s and family videos have become sellthrough and rental loss leaders used to lure families in through the front door of regional and local operators.

The big winners are consumers who are seeing more high-quality titles than ever before while paying far less for them, and the major motion picture studios that happily ship tens of millions of units in this category annually.

As the Video Software Dealers Association (VSDA) Convention opens this month in Los Angeles, here are some of the major trends on the minds of children’s video suppliers and retailers.

Product

‘I’ve been in the children’s video business for more than 15 years, and I can tell you that it’s almost impossible to accurately predict major trends,’ says Wendy Moss, senior vice president of marketing at Sony Wonder.

‘What seems to be popular today are productions that share a family experience, big theatrical properties and cartoons.’

Moss says the 1990s have been an era in which parents insist that home videos provide a family experience for themselves and their children.

At TitleTown Video in Galesburg, Illinois, president Jack Oakley says the shift to the family category has been unmistakable.

‘Not only are we seeing more family titles in distribution, but this genre has posted better numbers than others within the category,’ he says.

But following a family formula, even with high-quality production values and better-than-average scripts, will not win over consumers, says Sallie Fraenkel, vice president of marketing and operations at Showtime Original Pictures.

Showtime only launched its home video label last January, but Fraenkel says her division of the cable network has learned a lot in six months.

‘I think it’s safe to say the market hasn’t quite lived up to our expectations,’ she says. ‘What we’ve learned is that you have to elevate your properties by casting better. You need a strong appeal kid [actor] or a strong appeal adult actor to get people to watch. That strategy is starting to pay off for us now.’

Another development in children’s video that consumers appear to be responding to is label branding, according to Twentieth Century Fox Home Entertainment president Bob DeLellis.

‘Branding your product, especially if you can deliver quality, definitely tends to go over better with consumers, otherwise you end up getting fads that die out,’ he says. ‘You have to be careful; this is not an easy market to make money in.’

Art Gross, co-owner of 29th Street Video and Laser in Pueblo, Colorado, says his customers often turn up their noses at family videos found lacking.

‘People sometimes complain about us not having more family titles, but neither will they rent just anything with a family sticker on it. It has to be a good family film like The Santa Clause, he says.

‘Parents know a tired formula when they see it, that’s why The Big Green didn’t do so well. How many come-from-behind-in-sports kids movies have we seen over the years? The Disney animated films, those always sell.’

Often recognized as the first and best-executed video brand in the business, Walt Disney Home Video has been in the forefront of a new trend in family titles direct-to-video features based on its established animated properties.

‘The Return of Jafar shipped more than 10 million units,’ says Marcel Abraham, executive director of public relations at Disney.

‘Direct-to-video productions offer enormous potential if you have the right properties and enough resources to get them to market without cutting corners.’

Abraham says the studio will release three more in 1997, including a Lion King sequel, and Honey We Shrunk Ourselves, the studio’s first live-action production in this category.

Cartoons are also seeing a major resurgence because of television series such as The X-Men and Animaniacs.

Hoping to ride the wave of that popularity and its Hanna-Barbera library is Turner Home Entertainment, which has launched a home video brand based on its Cartoon Network cable channel.

‘We want to create a long-term brand that consumers will want to come back to,’ says marketing manager Tracey Beeker.

‘High-quality ‘A’ titles are what’s hot, and our strategic goal is to build a large catalog of them that can generate revenue long into the future.’

Marketing

In addition to big-budget television and print advertising campaigns, high-profile cross-promotions and value-added discounts are what many studios are now using to entice parents into buying children’s videos.

‘Consumers will support products that offer something extra,’ Beeker says. ‘But that something extra has to be quality and they want cash back.’

A typical example is how Turner plans to support The Real Adventures of Jonny Quest video and television series. Not only will consumers get a booklet containing $40 in rebate values, but coupons will also make their way onto more than 20 million Pillsbury product boxes. During September, more than one million Pizza Hut pizza boxes a day will be delivered to consumers with Jonny Quest information emblazoned on them. Millions of General Mills cereal boxes will also be tagged.

Abraham says Disney has a similarly ambitious program for Homeward Bound II: Lost in San Francisco, due on July 31.

DeLellis says another premium that parents and kids respond well to is licensed merchandise, if it’s included as a gift with the purchase of the home video.

‘If the free gift is a quality item, it can really help sell the video,’ he says. ‘With our September Scholastic titles Stay Out of the Basement and A Night in Terror Town, we’ll be including a different 3-D patch with each SKU. Lunch boxes, T-Shirts and pencils are well received too.’

Sony Wonder is taking a different tack with its licensed merchandise. To support its lead children’s title for fall, Sesame Street: Elmo Saves Christmas, Moss says parents who purchase the video will receive one coupon booklet worth $75 off licensed merchandise only, plus another booklet worth $45 off Konica camera supplies. Consumers will also be able to send away for an Elmo Christmas ornament.

In-Store

At retail, finding ways of competing with mass-merchants for sellthrough sales has taken on a new urgency. After years of under $20 list prices and consumers unwilling to rent children’s fare for the same rate as feature films, kidvid has become a loss leader for many video retailers.

If a video store can’t count on a new release rental or accessory purchase when it sells a hot new children’s video, chances are the outlet just lost money on the transaction.

‘We have to buy and sell children’s and family at cost,’ Gross says. ‘If I buy from my distributor, I can’t get the same price that the Sam’s Club is selling the same title for down the street. So instead of ordering from East Texas Distributing, I buy from Sam’s.’

At Video Headquarters in Keene, New Hampshire, president Ken McAleer says children’s and family sellthrough has become more of a promotional item than a revenue source.

‘The kids movies and cartoons do bring in extra business,’ he says. ‘Parents usually don’t bring their kids in and walk right out again. Usually they look through other sections as well. But we still wind up having to give away things like T-shirts.’

Since his price on new sellthrough hits is usually $2 more than what local Wal-Marts, Kmarts and Target stores sell the same titles for, TitleTown’s Oakley says he’s created a premium called ‘Movie Bucks’ to help sway customers to buy from him.

Each buck is worth a dollar off any item in stock, he says. When The Aristocats came out earlier this year, Oakley gave out four Movie Bucks with each purchase of the movie.

‘It’s a way I can offer a tangible value to my customers that will encourage them to shop more,’ he says.

But such incentives aren’t much help if people no longer watch home videos. New technologies such as digital satellite systems, personal computers and the Internet are siphoning off home entertainment time that used to be devoted to watching videocassettes.

‘I don’t know what brings people into video stores anymore,’ Gross says. ‘There are too many distractions. People don’t come in specifically for a great new children’s title or a video game. They come in when it rains or when it’s too hot.’