Six years ago, the term ‘straight to video’ carried with it the negative connotation of product that couldn’t cut it at the theaters. And, for the most part, it was a well-deserved reputation. The direct-to-video (DTV) market was primarily a dumping ground for small independent producers, who were churning out low-budget schlocky adult fare, and for the studios, who were quietly unloading their B-movie titles.

All that changed in 1993, however, with the release of Disney’s The Return of Jafar, the direct-to-video follow-up to its 1992 theatrical megahit Aladdin. One major distinguishing factor was the quality of Jafar’s production, which was on par

with that of its theatrical precursor. Equally important was the marketing muscle Disney put behind it. Disney brought to bear the full

force of its promotional expertise for the release of Jafar, which included a comprehensive merchandising program, cross-promotions and a massive multi-media ad blitz. In short, for the first time, a studio was treating a DTV release as if it were a theatrical event.

Witnessing the sales success of Jafar-which sold 10 million copies in the first year it was released-every other Hollywood studio since has been using the Disney experience as a template to launch their own kidvid franchises. In 1998, the major studios put out 30 made-for-video releases (of which 24 were kids and family titles), up from nine such titles in 1997, says Jan Saxton, an associate analyst at Adams Media Research (AMR), a Carmel Valley, California-based company that conducts research on the video business. According to Saxton, close to 80% of last year’s DTV releases, led by Disney’s The Lion King II: Simba’s Pride (which so far has moved 15 million units), were kidvids. As an aggregate, the 30 titles AMR identified pulled in revenues of US$720 million, accounting for close to a quarter of last year’s total video sell-through take of US$3.3 billion.

Not surprisingly, money is the chief reason why the studios are opting more and more to take their kids movies to the small screen. Across the board, the costs of producing and promoting DTVs are significantly less than theatrical releases. According to AMR’s research, last year, the average DTV release-not including Simba’s Pride and Pocahontas II: Journey to a New World, which tallied US$247 million and US$81 million, respectively-grossed US$12 million, against production costs of US$1 million and manufacturing and marketing outlays of US$2 million to US$4 million. Compared with the US$30 million to US$40 million the major studios are spending at a minimum on marketing a major theatrical release, sources say, going direct to video appears to be a financially sound proposition.

That said, however, how the major studios decide whether to release a kids movie direct to video or theatrically has as much to do with the nature of the property as it does with how the numbers shake out. ‘Generally, once a property has established itself as a theatrical release, we do consider direct to video as a viable alternative,’ says Bob Chapek, senior VP of marketing for Buena Vista Home Entertainment, Disney’s home video division. ‘But,’ he adds in the same breath, ‘if there’s a theatrical window available, we’ll go theatrical with it.’

Such an instance occurred in January with BHVE’s Doug’s 1st Movie. Originally slated as a DTV release in the spring, the animated movie, starring the main character in the Disney’s Doug TV series on ABC, was snatched up by Disney’s theatrical division for a March 26 release when it realized there was a paucity of major theatrical kids movies coming out in the spring, says Chapek. Disney’s decision to take Doug to theaters, says one Disney source, was also influenced to a large degree by the boffo results Paramount has had with The Rugrats Movie.

The success of The Rugrats Movie isn’t necessarily making it any easier for some producers to find theatrical distribution, forcing them to go the DTV route. In January, Canadian prodco Nelvana, for instance, decided to shift its Babar: King of the Elephants feature from a theatrical release to home video (to be released in the U.S. by HBO Video on June 11), when it couldn’t find a distributor who would pony up the necessary promotions money, says Michael Hirsch, co-CEO of the company. The advantage of going direct to video for Nelvana, Hirsch says, is that ‘you can promote a DTV release for a few million dollars.’ At the same time, he adds, the popularity of each property plays a major factor in determining what format it will be released. The movie will still get a theatrical release in France (on April 1) and Canada (staggered release that began late last month)-two markets where awareness of the character is stronger than it is in the U.S.

In any case, having a presence on TV or a theatrical legacy of some kind is almost mandatory in order to ensure strong sales of DTV.

‘If you’re following on the heels of The Land Before Time theatrical release, it serves to anchor your franchise in the marketplace,’ says Bruce Pfander, executive VP of Universal Studios Home Video. ‘It allows you to capitalize on the equity that the theatrical movie has established with consumers.’ Universal is putting that formula to work for the animated movie An American Tail 3: The Treasure of Manhattan Island, the first DTV release in the franchise, which will be coming out in the fall.

Dan Capone, director of marketing for Warner Bros. Family Entertainment, a division of Warner Home Video, agrees. ‘Direct to video works best when you have not just awareness, but high awareness and high popularity,’ says Capone, citing Billboard Dad and Scooby-Doo on Zombie Island as two examples of Warner DTV features that benefited from their popularity as TV shows. According to AMR, Billboard Dad and Scooby-Doo ranked 10th and 11th in terms of DTV sales last year, and Universal’s The Land Before Time VI: The Secret of Saurus Rock grabbed fifth spot. Last year’s two biggest-selling DTV kids titles, Disney’s Simba’s Pride and Pocahontas II, both had theatrical predecessors.

Columbia TriStar Home Video is also turning to an established property, the Berenstain Bears, for a DTV launch. The studio is planning an animated DTV feature based on the book series from Stan and Jan Berenstain (first introduced in 1962 and followed by a TV series on CBS in the mid-’80s), for release in the year 2000. Buzz Potamkin, president of independent production company Project X in New York, is executive producing the feature.

With more companies using the Disney strategy of treating a theatrical release as an eventual launching pad for their kidvid franchises, the DTV business is quickly becoming the exclusive purview of those players that have the resources to mount the necessary marketing and merchandising campaigns-namely the major studios. As a result, the small- to medium-sized producers, such as Barney producer Lyrick Studios, are finding it tougher to maintain shelf space at retail.

‘If the retailer knows something big is also streeting on the same day, they can’t feature Barney videos as prominently,’ says Sue Bristol, VP of marketing at Lyrick, ‘because they’d be missing out on sales, even though Barney videos would be selling as many units next week as the release du jour from the [major] studios that has a lot of marketing dollars behind it.’

To combat the event tactics the major studios are employing, Lyrick is carefully monitoring DTV release windows, in order to ‘capitalize on gaps during the year, when nobody is going to be out there with a major DTV title,’ says Dan Merrell, director of product marketing at Lyrick. It has also leveraged its audio, book and plush animal businesses to cross-promote with its releases, such as Barney: Sing & Dance with Barney, released on January 12. Lyrick also launched its first national TV ad campaign, which touted the tape. Consequently, retail sales during the first four weeks Sing & Dance was released were 50% higher than they were for the same period for Barney: It’s Time for Counting, which came out in January `98, says Merrell.

‘You have to be more aggressive than we have been before,’ says Merrell. ‘I think consumers expect it, because they’re being hit with so many different product messages.’

More, in fact, may be too much. Although sales of DTV titles climbed in `98 by 16%, per-title revenues dropped by 19%, according to AMR’s research. It’s an industrywide trend, which video analyst Derek Baine, of Paul Kagan & Associates, attributes to the glut of product making its way directly to sell-through. ‘The market is not growing quickly enough to support all of video sell-through. There’s a lot of price competition. A lot of business has shifted to the Wal-Mart stores, where you’re selling videos at razor-thin margins, as opposed to tapes sold at a Musicland or a Blockbuster Video,’ says Baine.

The major studios are starting to realize this fact. ‘You’re a little more careful now about the properties you release to sell-through, and what your volume expectations might be,’ says Universal’s Pfander. ‘The fight to get to a higher number [of sales] is a lot tougher than it used to be. The market, because of the wealth of product, tends to diversify quite a bit. The upside of that is that [the market is] accepting a broader range

of product.’