Suppliers urge drug chains to allot more space for impulse-buy DVDs

Drug Store News,  Oct 10, 2005  by Doug Desjardins

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Drug stores have always been ambivalent about DVD, usually dedicating a few square feet of floor space for it at the front of the store. But several small distributors are urging drug store chains to carry a larger selection of DVD titles at impulse-buy prices.

Independent distributor Alliance Entertainment made a big catch in June when it signed a deal with Walgreens to provide DVDs and CDs for 2,500 stores. The deal calls for Alliance to select titles for stores and to handle in-store marketing and merchandising.

That deal seems to have gotten the attention of several smaller players that are trying to forge their own alliances. One company is Tango Entertainment, a Los Angeles-based firm that formed in February and has acquired more than 200 titles that it's selling at a $3.99 price point. Tango chief marketing officer John Bergeson said he's now in talks with the Sav-on and OSCO chains to carry his "Silver Series" DVD line of older films.

"We're about to get into Walgreens, but Sav-on and Osco are still a work-in-progress," said Bergeson. "What we're offering retailers with Silver Series is quality films with recognizable stars like Dolly Parton, Robert Blake and Danny DeVito."

Bergeson conceded that the $3.99 suggested retail price on his titles is high for the low-priced market, but that his titles are feature films with stars people know. "We're really filling a niche because other studios and other companies aren't in this market," said Bergeson.

Other companies are focused on offering drug retailers true impulse-buy product designed to move fast. Digiview Entertainment specializes in DVD titles that can be sold for 99 cents. "It's great product for drug retail because it's all priced at around $1, and it turns very quickly," said Digiview chief executive officer Michael Omansky.

Omansky said that Walgreens now carries titles from Digiview and that the company is in talks with a number of chains ranging from Duane Reade to Rite Aid. And to make its product more attractive to drug retailers that don't want to free up space for DVD titles, Digiview provides special racks and merchandisers that can be installed near counters and take up minimal space.

"We also do seasonal product, and right now we have a lot of titles out there for Halloween," said Omansky. "Drug chains are a natural for us, and so far we've been very successful with them."

Global Multi-Media is going after the same market with product priced at about $1.49. Global president Gary Delfiner said his titles include old films and TV shows that are all dubbed in Spanish, which gives him an edge in many markets being as most low-priced players provide English-only titles. Delfiner said he's due to sign an agreement to provide product to "one of the top three national chains" in a deal he expects to close this month.

And while low-priced product is a growing trend at drug retail, most regional and national chains will continue to bring in summer hits arriving on DVD for the holidays. This year's list is headed by Star Wars Episode III: Revenge of the Sith," which earned $400 million at the box office and is due out Nov. 1.

Other hit titles that will begin arriving in stores soon include "Barman Begins" on Oct. 18, "War of the Worlds" on Nov. 22, "Mr. and Mrs. Smith" on Nov. 29 and "The Fantastic Four" and "Cinderella Man" on Dec. 6.

Other retailers are tapping into the middle ground between the dollar DVD business and new releases. Longs Drug Stores has stand-alone merchandisers in many of its stores that carry a wide selection of recent hit films for $9.99, a price that still puts them in the impulse-buy range.

And in Manhattan, Duane Reade is making a big push into DVD rental. Earlier this year, the chain began to roll out video rental kiosks in dozens of stores in New York City that allow customers to rent movies with a debit or credit card for as little as 99 cents. The kiosks, from a company called Movie Bank, carry hundreds of titles with a mix of new releases and older films and allow customers to rent and return movies around the clock.

Duane Reade has since become a solid destination for video rentals in New York City, but its success isn't likely to be duplicated by other chains being as most of its stores in Manhattan are conveniently located near subway stops. For other major chains, DVD rental isn't a viable option, given the fact that specialty chains like Blockbuster Entertainment have watched rentals sag under growing competition from low-priced mass merchants and online competitors.

And even online rentals have become competitive. In June, Wal-Mart dropped its online DVD rental program and directed existing customers to rival Netflix (in return, Netflix directs Web site visitors to Wal-Mart if they're interested in buying a DVD). Wal-Mart's departure left the online rental arena to Netflix and Blockbuster, which launched an online rental business earlier this year to offset declining rentals in its stores.

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