Kidvid. It’s exploding. Some industry estimates peg the children’s video market in the United States at US$1.2 billion, or roughly 10 percent of the US$12 billion to US$15 billion that Americans spend on the rental and purchase of home video each year.

‘[Kidvid] is 400 times what it used to be,’ says Wendy Moss, senior vice president of marketing at Sony Wonder, who recalls a time when home video was the new kid on the block. Moss and others note that the kidvid category now embraces audio, toys, books, and even home PCs because of all the cross-promotions, licensing efforts, marketing partnerships and media exploitation.

‘Our sell-through business doubled in 1996,’ says retailer Tom Warren, owner of the eight-store Video Hut chain, which is based in Fayetteville, North Carolina. ‘While we don’t break out [sales of] children’s [titles], I know [they were] up at least that much because of all the good feature titles.’

Borders Books and Music also says its children’s video sales are increasing. Sell-through is up 15 percent for the 140 Borders stores that carry home videos.

And, this past holiday season, the three-title Wallace and Gromit gift set was the top seller at Borders, beating out even last year’s hit titles Independence Day and Twister. Although the titles were not positioned in the children’s video section, they ‘drew shoppers to other titles that led them back to our children’s assortments,’ says Kevin Maher, kidvid buyer for Borders.

All this enthusiasm about the kids video category is ech’ed in distribution. At Star Video Entertainment, co-founder Artie Bach says children’s video is ‘absolutely’ growing, especially since Star has expanded its sell-through activities.

Beyond the obvious benefits for retailers of a growing home video market for kids products, Gary Ross, president of superstores at the retail giant Musicland, says that this booming market also fuels spending in categories other than video. ‘The numbers don’t tell it all,’ he explains, if just children’s product is considered. That’s because a parent or grandparent, initially inspired to buy something in the kids video section, typically ends up spending money in other sections of the store, even if it’s just buying a cappuccino in the coffee shop.

This growing kidvid business is winning over retailers like the Staples office supply chain. Staples is trying video for the first time. ‘We did Toy Story and sold some pieces during Christmas,’ says John Jankowich, electronics buyer for Staples. ‘Right now, we have Bambi. Children’s video is a category we are still looking at, that we will be in from time to time for the present.’

The implications of Staples selling children’s videos, though, are enormous. For one thing, Staples is about to merge with Office Depot, and that would be 1,100 storefronts. That wouldn’t be a bad spot for Bambi, which the chain has positioned at US$16.99.

Some kidvid marketers might frown at at US$16.99 price point. But pricing is becoming more competitive, says Randi Sharas, manager of merchandising and sales for GoodTimes Entertainment. The most popular price for kidvid now sits at US$9.95.

GoodTimes is responding to the downward pressure on prices, says Sharas. ‘We’re continuing with our Animated Classics series, but we are repositioning 14 titles to lower price points,’ she says. ‘We have developed a niche for ourselves in the budget kidvid category.’

On the rental side, prices keep dropping for kidvid, and in some cases, disappearing altogether.

Video Connection, a 23-store operation based in Toledo, Ohio, that is part of the larger 1,000-unit Movie Gallery company, targets families with a Club Kid program. ‘For [kids age] 12 and under, we have a special family section where rentals are [US]$0.49 and you get the second free,’ says John Day, president of Video Connection. ‘We have family-type movies on the weekend [and] new releases for [US]$1.99. We do sell-through of previously viewed tapes at [US]$5.95 for Club Kid members. If they need a movie for a school project, we let them rent it free for five days. We also have special discounts for Club Kid members,’ says Day, who believes that such emphasis on family and children’s fare helps ward off inroads from Sam’s Club and heavy discounters.

And some retailers no longer charge rental fees. For example, says Richard Morgan, owner of four Great American Video stores in Idaho, his stores have been using free video rental for kids for four years. And it’s been so successful, he adds, that other retailers are catching on.

At the recent East Coast Video Show, Dan Atkins, owner of five-store Movie Station, headquartered in Oak Ridge, Tennessee, led a discussion group on various children’s video rental programs. He was deluged with questions about Movie Station’s Kid Club, a yearly membership program that, for US$29.95, allows families to rent two movies per day absolutely free and keep them for three days.

In explaining why the company makes such an offer, Atkins says the program is intended to lure family members into stores with children’s product that is not only exciting and fresh, but what could be better? free. Once in the store, customers often take home more than the free kids titles. ‘About half the time,’ says one manager, ‘they rent other children’s titles that they do pay for.’

But, with all the growth in the kidvid business, some suppliers argue that there can be too much of a good thing.

‘The market today poses a real challenge because of the tremendous amount of product available and the fact that there is so much animated product on television,’ says Rick Mischel, senior vice president of acquisitions and home entertainment at LIVE Entertainment. ‘So what we’re finding is that animated children’s TV series, with few exceptions, are not working as well as they used to. We still see a market in holiday specials and family feature films, both animated and live action, and popular book-based projects.

‘Fortunately, we have found some niche product, too. We have the animated version of This Land Is Your Land: The Animated Songbook of Woodie Guthrie. It’s an animated songbook of Woodie Guthrie’s songs,’ says Mischel. ‘We also just finished a direct-to-video animated [musical] feature of Tom Sawyer. That’s something we are hoping will attract partners.’

To capture customers’ interest in kidvid, suppliers and retailers are becoming more active in promotions.

In one of the most dramatic examples of cross-media activity, Universal Studios Home Video is taking its newest The Land Before Time title into a partnership campaign with Burger King, Sound Source Interactive, and Kitchen Sink Press with a CD-ROM packaged with the videocassette in the first such multiformat combination.

Cross-merchandising is the key for video retailers, says LIVE Entertainment’s Mischel. ‘We were greatly helped by Wendy’s [Restaurants] on Bruno the Kid. We put together an animated movie version of the TV series,’ he says. ‘And in our direct-to-video Christmas specials, we had the partnership of Glade, Tony’s Pizza and JCPenney.’

For its part, Disney’s Buena Vista Home Video has sought to grab customers with rebates, such as US$5 off at the time of purchase. The offer has proven worthwhile for Video Hut, says Warren. ‘We put the regular titles right next to these and we have a 35 percent margin. And people are buying them. We also do more business with preorder than ever. What we find there is that maybe six or seven percent of the people don’t ever come back and relinquish their deposit. We keep it. That kind of pays for the 25 cents we’re giving away on our loss-leader children’s product,’ he says.

Disney also deserves credit for introducing the sturdy clamshell packaging for videocassettes that stands up better against repeat use of videos by kids.

Although not all suppliers will acknowledge Disney’s massive role in this area, Lorraine Solviero, marketing director of Best Film & Video, says Buena Vista has built up momentum in the marketplace for other manufacturers to supply their products in clamshell packaging. ‘We are starting to put our children’s [titles] in a clamshell, but we also have every title available in the regular slip sleeve too,’ says Solviero, because not all stores have fixtures to display the bulkier box.

In other trends, Borders Books and Music says animation is going strong. ‘Also, anything in the way of a book franchise [is faring well],’ says Maher, pointing to Rainbow Fish. ‘Arthur Songs for Kids is doing phenomenally well for us,’ and Goosebumps and The Magic School Bus lines are also top sellers. And staples like the Barney line continue to hold their ground.

Another trend that is gaining momentum in kidvid is the move toward digital versatile disc as a new format.

Sony Wonder, for one, is developing titles for DVD. ‘On DVD, Sony Wonder is out front,’ says Moss. ‘We’ll have Sesame Street 25th Birthday, a musical celebration.’ And Sony Music Video is also producing DVD versions of Beavis and Butt-head: The Final Judgment and Street Fighter the Movie.

But regardless of what new trends are established in kidvid, programming that emphasizes values will remain important to consumers. Sharas of GoodTimes points to The Wind in the Willows to be followed this fall by Willow in Winter as a title that touches upon the issues of responsibility, fairness and true friendship through the journeys of a group of animal friends.

On the retail side, the emphasis on values is also important, says Mark Wattles, chairman of 500-store Hollywood Video. Wattles wants Hollywood Video to be a family-friendly store, and he believes Hollywood Video needs to present as wholesome an atmosphere as possible, which means exclusion of the profitable X-rated category. ‘We don’t even carry NC17 titles,’ says Wattles. He notes that Blockbuster Video also eschews the X-rated category. ‘There are a lot of families who would rather not patronize a store that has X-rated [movies].’

However, many retailers take issue with Wattles, believing that to be competitive with such retailers as BJ’s, Price/Costco and Sam’s Club, a video specialty store has to offer everything. ‘I think you need to be a full-service video store,’ says Day of Video Connection. ‘People who come in for adult or NC17 [titles] get their other videos here, too, and that includes children’s.’ Day also contends that adult-only sections are invisible in Video Connection stores, not even marked by signs.

And what also remains a key in the kidvid market is quality, says Joseph Messina, president of Virginia Records.

To meet the demand for quality products, Virginia Records is introducing a new character named Froggy. This new children’s character hosts titles featuring nursery rhymes, which Virginia Records plans to launch first in audio, then on video. Country music stars Pam Tillis and Brian White are among the artists who have come on board to narrate the titles.

To ensure that the products are quality titles, says Bill Hanff, a Virginia Records executive, ‘we are going into this very deliberately, very thoroughly. There’s a lot of directions we could go. We could rush the productions. But we aren’t.’