VIDEO INDUSTRY HOPES LATEST HITS WILL HELP SUMMER RENTALS REBOUND

Published: Tuesday, May 26 1992 12:00 a.m. MDT

The home video industry would like to avoid a rerun of last year.

Following a decade of rapid growth, rental activity slipped for the first time in 1991, due largely to the recession, lackluster releases and the Persian Gulf war's effects on television viewing habits.Volume dropped around 10 percent from 1990, while revenue fell 8 percent. Video purchases, though, were higher.

This summer, the industry is pinning a comeback in rentals on a string of movie hits like "JFK," "Hook," "Cape Fear," and "The Addams Family" out in videocassette.

At the same time, the industry giant, Blockbuster Entertainment Corp., based in Fort Lauderdale, Fla., is working to expand its product line in the United States and overseas while staying ahead of competing technology in cable TV, including pay-per-view channels.

"It is still product driven, this business," said Steven Apple, executive editor of Video Insider magazine. "If Hollywood has a bad year, we will have a bad year. (And) when a big title is advertised on TV, the public tends to go to their video store."

Consumers have been steadily flocking to video stores since the early 1980s. Revenue from video rentals hit $10.2 billion last year, while purchases reached $4.6 billion, far outpacing the $8.9 billion book business and the $7.5 billion music industry.

Blockbuster remains the undisputed industry leader with around 2,800 stores worldwide and a 13 percent market share of all U.S. rentals, larger than its 300 biggest competitors combined.

While many smaller video stores were going out of business last year, Blockbuster managed a 37 percent jump in revenue from acquisitions, sales, rentals and other fees. "We believe it's just too tough for anybody to catch up to us," Vice Chairman Steven Berrard told stockholders at a recent annual meeting. "No single company has the presence or recognition of Blockbuster."

Blockbuster's rapid growth over the years came from the purchase of Erol's Major Video and Britain's Ritz chains, and from expanding its product line with things like brand-name popcorn, cotton candy and blank tapes.

Among its coming attractions: four-night book audio tapes that would retail for $4 and an in-store video preview system created in conjunction with International Business Machines Corp.

In addition, Blockbuster is developing a joint marketing plan that would sell or rent home entertainment hardware and software developed by Dutch consumer electronics giant Philips Electronics NV. Philips owns a 4.5 percent stake in Blockbuster and has an option to buy 5 million more shares by Dec. 15, which would increase its holdings to 7 percent. The arrangement seems to have pleased many investment professionals, who regard it as a sign of Blockbuster's long-term strength.

"It's extremely positive that a $30 billion electronics giant like Philips, which has its finger on the pulse of technology, wants to get involved with Blockbuster," said R. Jerry Falkner, a securities analyst with Southeast Research Partners, based in Boca Raton.

"It flies directly in the face of the many critics that say technology is going to obsolete the video store." Negative media reports that characterized Blockbuster as a "casket case" vulnerable to new cable technology caused a sharp drop in the company's stock about a year ago.

But Blockbuster Chairman Wayne Huizenga maintains that a workable system for video on demand - selecting programming at home to be delivered on telephone or cable lines - won't arrive until the next century. Time Warner Inc. and TCI International Inc. are testing expanded channel systems, but Huizenga drew a distinction between expanded capacity and the technological breakthroughs required to produce video on demand.

"We have the distribution system in place. We're here today. We're a reality," he said.

In fact, videocassette recorders can be found in 77 percent of American homes, compared with 61 percent of homes that have cable.

Huizenga also derides pay-per-view, which offer subscribers the same movies out in video stores at scheduled times, as something that "already has failed to impact the marketplace."

Even a recent pay-per-view survey seemed to back up those sentiments.

The survey found that viewers see rentals as cheaper and more convenient than pay-per-view, and that the "barker" channels, which promote pay-per-view movies, did more to feed store rentals than cable linkups.

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