JohnIan
01-30-2007, 03:19 AM
"Electronics chains set lower DVD pricing"
by Susanne Ault - 1/26/2007 - Video Business (http://www.videobusiness.com/article/CA6410220.html?nid=2705)
Mass merchants often get a bad rap as the drivers of DVD price declines, but the lowest new release pricing came from the electronics channel in 2006, according to NPD Group research.
Average pricing on the Top 50 new releases actually rose by a dime, to $17.26 at mass merchants last year, according to NPD. At the same time, pricing in the electronics channel fell 23¢, to $16.94. Music and video specialists, which typically discount less than other channels, were about a dollar higher on new releases than mass merchants, though pricing in the specialist channel also has declined over the past couple of years.
“What I think is interesting is how similar it is,” said Russ Crupnick, NPD VP and senior entertainment analyst. “It’s a result of competition, where nobody wants to be the odd man out. There has been this emerging force in mass, which has pretty massive market power. [And others] including electronics in general have wanted to be on par in terms of consumer value perception.”
Through 2006, mass merchants, including Target and Wal-Mart, controlled 51% of unit sales volume, according to NPD figures.
NPD declined to break out pricing for individual retail accounts. But studio and retail sources believe that electronics chain Circuit City, which often prices new releases at $14 during their first week of release, is undercutting virtually every major national retailer on average new release price.
The share of new releases selling between $13 and $13.99 grew about one share point from 2005 to 2006, going from about 2.8% to about 3.8% of the market, according to NPD. At the same time, the share of titles priced at $15 to $15.99 fell from about 8.3% to about 6.8%.
Circuit City’s average new release pricing dipped below $16 in 2006, after hovering around $18 in 2004, studio sources said. Mass merchant Wal-Mart and electronics chain Best Buy, the sources said, are nearly at $17.30 to $17.50 for new releases in 2005 and 2006.
“DVDs help drive traffic to our stores,” Circuit City spokesman Jim Babb said. “We don’t discuss details of our pricing strategy, other than to note our prices are designed to ensure we are competitive in the marketplace.”
Other observers believe competition between chains is driving prices down.
“I believe lower pricing is strictly a competitive move from one competitive big-box retailer to the next,” said one wholesale source. “The nice thing about DVD is that it can run in a circular each week. They have something new on the front cover each time, which they can’t always do with other products. It makes for a really colorful front page that’s constantly changing, that keeps you coming into the store.”
One senior studio executive said the increase in high-profile DVD premiere movies also might contribute to average price declines. The executive noted that between 2005 and 2006, the number of made-for-DVD releases soared 50%.
“We know that as an industry, we are pushing out more [straight-to-DVD] films, which are by definition new releases,” he said, “and many do not command as high of a price as bigger box-office titles. Therefore, this pulls down the average price consumers pay for all new releases.”
by Susanne Ault - 1/26/2007 - Video Business (http://www.videobusiness.com/article/CA6410220.html?nid=2705)
Mass merchants often get a bad rap as the drivers of DVD price declines, but the lowest new release pricing came from the electronics channel in 2006, according to NPD Group research.
Average pricing on the Top 50 new releases actually rose by a dime, to $17.26 at mass merchants last year, according to NPD. At the same time, pricing in the electronics channel fell 23¢, to $16.94. Music and video specialists, which typically discount less than other channels, were about a dollar higher on new releases than mass merchants, though pricing in the specialist channel also has declined over the past couple of years.
“What I think is interesting is how similar it is,” said Russ Crupnick, NPD VP and senior entertainment analyst. “It’s a result of competition, where nobody wants to be the odd man out. There has been this emerging force in mass, which has pretty massive market power. [And others] including electronics in general have wanted to be on par in terms of consumer value perception.”
Through 2006, mass merchants, including Target and Wal-Mart, controlled 51% of unit sales volume, according to NPD figures.
NPD declined to break out pricing for individual retail accounts. But studio and retail sources believe that electronics chain Circuit City, which often prices new releases at $14 during their first week of release, is undercutting virtually every major national retailer on average new release price.
The share of new releases selling between $13 and $13.99 grew about one share point from 2005 to 2006, going from about 2.8% to about 3.8% of the market, according to NPD. At the same time, the share of titles priced at $15 to $15.99 fell from about 8.3% to about 6.8%.
Circuit City’s average new release pricing dipped below $16 in 2006, after hovering around $18 in 2004, studio sources said. Mass merchant Wal-Mart and electronics chain Best Buy, the sources said, are nearly at $17.30 to $17.50 for new releases in 2005 and 2006.
“DVDs help drive traffic to our stores,” Circuit City spokesman Jim Babb said. “We don’t discuss details of our pricing strategy, other than to note our prices are designed to ensure we are competitive in the marketplace.”
Other observers believe competition between chains is driving prices down.
“I believe lower pricing is strictly a competitive move from one competitive big-box retailer to the next,” said one wholesale source. “The nice thing about DVD is that it can run in a circular each week. They have something new on the front cover each time, which they can’t always do with other products. It makes for a really colorful front page that’s constantly changing, that keeps you coming into the store.”
One senior studio executive said the increase in high-profile DVD premiere movies also might contribute to average price declines. The executive noted that between 2005 and 2006, the number of made-for-DVD releases soared 50%.
“We know that as an industry, we are pushing out more [straight-to-DVD] films, which are by definition new releases,” he said, “and many do not command as high of a price as bigger box-office titles. Therefore, this pulls down the average price consumers pay for all new releases.”