Magazine article Variety

Aisle of Might: Markets Rule Dvd

Magazine article Variety

Aisle of Might: Markets Rule Dvd

Article excerpt

Big grocery chains control large chunk of U.K. retail sales

You won't find them pontificating on panels or mingling at parties in Cannes, but the DVD buyers for the U.K.'s supermarkets are now among the most important players in the British film and TV business.

Following the demise of DVD stores and retailers such as Woolworth's, the big-four grocery chains - Teseo, Asda (owned by Wal-mart), Sainsburys and Morrisons - control around 40% of the U.K.'s $2.8 million DVD retail market. That puts them in pole position to influence what consumers buy, how much they pay, and what kind of margin, if any, distributors can hope to earn. But some distribs complain that these grocery giants often have little knowledge of the products they are acquiring, and less interest in the long-term sustainability of the sector.

It makes for a fractious relationship, with the studios and supermarkets engaged in a constant round of battles and boycotts, while indies scrap for attention.

"The supermarkets are the most influential commercial players in the U.K. film industry, and bizarrely, they couldn't care less about that status," says one frustrated indie. "It's all canned carrots to them. There's no emotional connection to film; they are just interested in pushing down the price."

Another indie CEO says the dominance of Teseo and Asda, the two biggest players, isn't good for the marketplace, since they use DVD sales as a loss leader. "There's a massive pressure on pricing, but if they don't stock your DVD, you lose a big chunk of the market," he says.

Recent films being sold below wholesale price included "The Hunger Games" at £9.99 ($16.10) and "The Avengers" at £8 ($13). "Harry Potter and the Deathly Hallows: Part 2" was virtually given away by one chain for S3 ($4.85) to shoppers who spent £50 ($81) on groceries.

"It's a difficult subject to discuss publicly," notes one indie, "because they are our partners, and we make a lot of money from them." In fact, such is the power of the supermarkets that all distribs quoted in this article requested anonymity.

Still, not all comments were negative. Some distribs noted that however tough the supermarkets may be to deal with, they are keeping the DVD alive by pushing it under the noses of customers who only set out to buy bread and milk. "The supermarkets are purely about impulse buying," says one studio topper. "I love the fact that they are committed to this category. They are still opening lots of stores, and that gives us the chance to sell DVDs."

The supermarkets are also expanding into the digital space. Teseo led the way last year by acquiring the Blinkbox VOD service, which is now integrated with its physical DVD retailing operations. Sainsburys will launch its digital store around the end of this year, and both Asda and Morrisons are expected to follow.

Distributors hope that the supermarkets will become more sophisticated strategic partners when they are no longer limited by the physical space of their stores. Teseo has even experimented with financing direct-to-video production, and striking exclusive retailing deals for specific indie titles. The weak results of such efforts, however, indicate that store managers haven't quite caught up with corporate ambition.

"The supermarkets aren't great at selling everything," says a studio exec. They are great at big hits, but not at higher value items like TV box sets or Blu-ray."

While limited shelf space and narrow range are tough on catalog titles and indie fare, the stores' instinct for consumer tastes sometimes can create surprising DVD hits, driven largely by eye-catching covers. …

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