Demand grows for retail exclusives

Studios offer incentives in exchange for higher title orders

By Susanne Ault -- Video Business, 9/8/2006

SEPT. 8 | The studio practice of furnishing key retailers with exclusive title premiums is growing, as Circuit City joins the ranks of merchants who demand—and get—such extras.

For some years, Wal-Mart, Best Buy and Target have each demanded a unique premium tied to high-profile DVDs, be it a bonus disc or licensed merchandise that they use as a lure to bring customers in stores.

At the same time that retail competition for exclusive premiums is expanding, studios are starting to offer premiums not just for theatrical blockbusters, but also for middle-tier theatrical titles, TV sets and some indie films as a way to increase their inventory on shelves at key accounts.

Recently, Paramount Home Entertainment’s second season of Laguna Beach, out Aug. 8, came with beauty products at Circuit City and exclusive, unique bonus discs at Target, Trans World and Best Buy.

20th Century Fox Home Entertainment assembled three unique bonus discs for Target, Best Buy and Trans World for Prison Break: Season One, which also went on sale Aug. 8.

On the indie front, Magnolia Home Entertainment’s $2.5 million-grossing The Lost City, out the same day, was bundled with an exclusive bonus disc at Target. Lionsgate had exclusive bonus discs to accompany $19 million-grossing Akeelah and the Bee, out Aug. 29, at Wal-Mart and Target.

Warner Home Video is prepping three unique premiums for horror DVD premiere The Rest Stop, streeting Oct. 17.

Most studios declined comment on exclusive SKUs, not wanting to risk upsetting individual retail accounts.

“It’s being done on too many titles, including ones that make under $30 million at the box office,” said a senior studio executive. “There are now four key retailers you have to provide unique value added items—Target, Wal-Mart, Circuit City and Best Buy—and it’s a challenge having to come up with ideas and concepts they’ll adopt. You don’t want one to look over their shoulder and ask, ‘Look, what that guy got!’”

The executive is concerned that retail’s race for exclusives will eventually turn off consumers to DVDs if shoppers feel pressured to buy multiple versions of the same DVD in order to score all the extra value.

Studios are unlikely to stop, however, as they can expect a retailer to take in 5% to 10% more copies of an exclusive version of a title than a straight, vanilla one.

Costs for a bonus disc, which can be 50¢ per unit, are taken out of retailers’ market development funds. Studios grant retailers these funds based on the percentage of copies they agree to take in on a DVD.

“Are you just helping retailers trade share back and forth?” asked one studio source. “It’s a judgment call. You are trying to add some value for consumers, and it’s being funded from dollars retailers are earning anyway.”

Retailers are likely to keep it up as well, hoping to beat rivals in winning DVD sales.