DVD Success Mixed At Retail

In a story previously published entitled ""DVD Price War"" (February 11) seriously competitive pricing of DVD-Video titles was reported to be impacting privately owned brick-and-mortar home video and Internet retailers who are struggling to maintain profitability as they find themselves in the midst of a cutthroat online retail price war to which there appears to be no end.That situation continues to cause shifts in retail as numerous, particularly small retailers are becoming less bullish on their DVD software business. Smaller, hardware- and optical disc-focused specialty dealers are reporting that their customers are increasingly migrating to buying DVD movies on the Internet, in video rental stores and major consumer electronics chains such as Best Buy.Ken Craneís, a prominent specialty optical disc dealer in Westminster, California has decided to offer the same deep discounts that the major Internet DVD retailers are offering. Craneís new pricing is 30 percent off suggested retail whether the customer shops in the store, places an 800 mail order, or buys online at www.kencranes.com. Recognizing the steep competition in price and selection that the major Internet and consumer electronics chains pose, increasingly, specialty electronics dealers are dropping DVD software completely or forging cross-promotion relationships with strong video software dealers. Some small dealers continue to carry a choice selection of DVD movie titles to offer as incentives to customers buying DVD-Video players, not expecting to see an incremental revenue stream resulting directly from the software. The larger chains, particularly Best Buy and Tower Music & Video, are forging ahead with even stronger commitments to the DVD format, reporting that DVD movie sell-through now parallels or is even ahead of DVD-Video player sales in their stores. Tower, known for its vast selection of music and movie software, has announced that the international chain will now merchandize and sell DVD players to take advantage of the surging growth of the category.There is no question that the DVD category will, in the near future, move out of the early adopter mode. That is largely the mode that specialty dealers are operating, in which DVD movie titles are merchandized next to DVD players to bolster the formatís impression on consumers as a format that is here to stay. Increasingly, the major consumer electronics retailers are pursuing stronger independent merchandizing of DVD titles and pulling their DVD movies into a dedicated department with an impressive selection of titles. Still, at the same time the brick and mortar retailers acknowledge that the fastest growing channel of distribution is the Internet, which does not have the restraints that floor space dictates. Internet competition is a serious threat to their businesses and the savvier and well-capitalized brick and mortar chains and specialty stores are venturing into online retailing. Still, the Internet is a treacherous marketplace where ""shopping for the lowest price"" is the norm and profitability is uncertain. What brick and mortar retailers need to prosper is both selection and price that will attract repeat business. Increasingly, retailers are expanding their software assortment to include both Divx and ""open"" DVD titles, in addition to merchandizing DTS Digital Surround-formatted DVDs, LaserDiscs and CDs. Such is Southern California-based Dow Stereo & Videoís strategy to generate repeat business by making the chainís stores ""destination points"" for more sophisticated high-end niche consumers. Such assortments will continue as long as the niche markets support the demand and customers require it. While no one is disputing that the DVD category will continue its upward trend, there is much apprehension and mixed success at retail that presents an uncertain future for some consumer electronics dealers.