KidScreen Retail: Sell-through the driving force in kidvid market

As the home video rental business continues to adjust to market factors, sell-through has stepped forward as the driving force in the kidvid market, fueled by the growth of original, theatrical-level direct-to-video productions....
October 1, 1997

As the home video rental business continues to adjust to market factors, sell-through has stepped forward as the driving force in the kidvid market, fueled by the growth of original, theatrical-level direct-to-video productions.

Kidvid suppliers are actively seeking ways to exploit already existing franchises that have presold name recognition for the direct-to-video category, which was once thought of as the exclusive haven for movies deemed tacky, tasteless or just plain second-rate.

Disney was the first studio to fully seize the potential of sell-through and direct-to-video. In 1994, it debuted its first major direct-to-video title, The Return of Jafar, the sequel to Aladdin. Other Disney releases have included the live-action Honey, We Shrunk Ourselves, Pooh’s Grand Adventure and November’s Beauty and the Beast: The Enchanted Christmas.

Slated for 1998 are sequels to The Lion King and Toy Story. The company has opened an animation facility in Canada exclusively for direct-to-video production.

‘We’ve believed in this entertainment category since the start and set out to make great entertainment for it with major stars and all-new music,’ says Walt Disney Home Video spokesperson Marcelle Abraham.

Traditionally, the children’s market performs better at sell-through than at rental because the higher replayability factor of children’s tapes makes purchasing the more economical choice for parents. Studios that have gotten a whiff of Disney’s success have been scrambling to produce new direct-to-video features to grab a slice of the exploding sell-through market.

For example, Universal has released several successful sequels to the animated film The Land Before Time. Fox has just released a live-action/animated Casper prequel.

On the TV side, Nickelodeon has produced two original direct-to-video Rugrats specials.

‘Everyone is taking sell-through to the next step and asking how they can differentiate their various titles,’ says Catherine Mullally, vice president, entertainment products, worldwide at Nickelodeon. ‘One way to do it is to bypass the first broadcast venue, whether it’s film, cable or broadcast TV.’

Glenn Ross, senior vice president of Hallmark Home Entertainment, believes that a crowded marketplace of original productions is more beneficial to companies like Disney because competitors have been too busy racing to get out products, as opposed to building consumer confidence in a brand name.

‘When parents see a hundred animated kids films and can’t differentiate one from the other, they are going to go with the brand name that they know because it promises them something,’ he says.

For Hallmark, that means licensing the Crayola brand name for a series of six videos released September 30, and banking on Crayola’s reputation to draw the interest of children and the trust of parents.

‘Every studio wants a piece of the action, and there’s definitely a market for direct-to-video,’ says Kirk Kirkpatrick, vice president of marketing for Waxworks, Inc., a top distributor of home videos. ‘But,’ he adds, ‘you’re only as good as your last movie.’

Disney set the standard for the sell-through market when it began releasing titles from its classic animation library on a limited-time, rotating basis, backed by heavy promotion. The children’s sell-through market has grown more than 50 percent over the past five years and accounted for US$2.6 billion in sales in 1996. Rentals for the children’s sector grew only nine percent during the same time, according to The Children’s Video Market, July 1997, a study by New York-based marketing firm Packaged Facts.

‘In any video store, most Disney titles don’t rent well because so many people own them,’ says Kirkpatrick. ‘When you can sell 10 million copies of a movie like The Hunchback of Notre Dame at [US]$15 a piece, that’s a lot more than selling half a million copies at [US]$89 a pop.’

Sell-through has been a boon to mass-market retailers, grocery stores and the like, but only recently, albeit reluctantly, have video stores made it part of their business. Video stores accounted for only seven percent of all sell-through in 1996, according to the Packaged Facts study.

‘Grocery stores benefit the most from sell-through because they can use tapes as loss leaders or event titles,’ says Kirkpatrick. ‘They can sell it virtually at cost and make money off potato chips and other food items.’ The problem with video rental stores, he adds, is that they are not focused on selling, or may not even know how to do it well.

Nickelodeon’s Mullally thinks that video stores are starting to get the message. ‘When you see mom and pop stores, which traditionally shy away from sell-through, beginning to stock those titles, you understand that this is a trend that’s going to stick,’ she says.

The battle between mass-market retailers and video stores is being fought with coupons, product tie-ins and special offers. Mass-market retailers can offer tapes at lower prices, but video stores can combat with rebate offers or discounts on future rentals to drive traffic back to their outlets.

While retailers vie for the best pricing method to attract consumers, video suppliers are upgrading marketing and promotion. Studios like Disney market their direct-to-video releases with the same multimillion-dollar promotional zeal as they do their feature-length theatricals. Beauty and the Beast: The Enchanted Christmas will have a suggested retail price of US$26.99, but will be promoted with a US$5 mail-in rebate offer in conjunction with the purchase of Lever 2000 products. Other promotional tie-ins include discount coupons for Mattel products, and savings bonuses on other 1997 Disney Video Collection titles and merchandise.

Hallmark has partnered with Mott’s to promote the Crayola videos on the back of 150 million Mott’s Apple Juice disposable juice cartons. ‘You have to be logical about the kind of marketing dollars you spend,’ says Ross. ‘You can’t spend yourself into a deficit.’

The price of sell-through videos is down overall. Most major motion pictures are released at US$19.95, but within six to nine months, drop to US$14.95. Nickelodeon’s Mullally says that this five-dollar swing makes the difference between a consumer thinking about buying a video and making an impulse purchase. Nickelodeon prices its new titles at US$12.95 for an hour’s worth of material, which it considers a value because most children’s tapes run 30 to 45 minutes. Preschool and older library products are priced at US$9.95.

Total children’s home video retail sales are estimated to reach US$4.2 billion by 2001, with US$3.8 billion of that coming from sell-through, according to Packaged Facts. ‘Kidvid is healthy and getting stronger,’ Ross says. ‘The only thing that can hurt it is if there’s a glut of product on the market. Those who are building brand name and catalog are those who will stay in the business for the long term.’

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