July 19th, 2005


Home Media Retailing magazine Dollar DVD article

Run on Budget DVDs

The budget DVD market is booming. When BCI Eclipse first went to a trade show for surplus goods suppliers in Las Vegas four years ago, it was one of just three companies pitching dollar DVDs.

At last year’s show, there were 22, said Greg Glass, SVP of BCI.

As the number of budget-DVD suppliers has mushroomed, so has the market it serves. Though the original target for $1-priced discs was dollar stores, the bargain-basement-priced DVD is popping up everywhere — in drugstores, supermarkets … even mass merchants such as Target Stores and Wal-Mart.

Budget providers are bullish about the business, even though they're vying for the same shelf space — and, quite often, with the same royalty-free, public-domain content.

Gary Delfiner, co-founder of Global Multimedia Corp., said while there’s more competition in what he calls the “value business,” the market is far from saturated. In fact, he said he’s planning on doubling his sales force this year.

Genius Products CEO Trevor Drinkwater entered the value game strong at the beginning of 2004. He said many of the newer players may be getting into public-domain sales in the hopes of turning a quick profit and trying to keep costs low by sourcing in product from China. But, he said, when margins are counted in pennies, it’s critical to have a strong operations system to keep retailers happy.

“There’s a pretty high level of service required in this market, and there’s a lot of potential to lose your margin,” he said.

Retailers come in and out of budget, BCI’s Glass said, adding that “a lot of it is dependent on the studio releases.”

With such tight margins on product, retailers always are working out ways to maximize floor space and cost per square foot for budget titles.

Late last year, Target Stores created “The $1 Spot.” The front-of-store locations, which were rolled out in time for the holidays, were packed with $1 goods, including an ample supply of DVDs. By mid-December, 19 of VideoScan’s 50 top-selling DVDs were from Genius, which at the time was furnishing Target’s $1 discs. Among the top sellers were compilation DVDs of “Popeye” cartoons and “The Lucy Show” episodes.

The budget DVD craze most likely originated several years ago, when Wal-Mart began setting up giant dump bins of $5 catalog product, Glass said.

It wasn't a new idea, but prior to Wal-Mart’s strategy, these bins were transitory — they were used to get rid of a lot of product quickly and then removed.

Now, Wal-Mart also carries $1 product, mostly through Digiview Productions, formed in January 2004. The company’s Web site says it regularly adds new titles to its catalog, much of it from the public domain.

Budget suppliers tend to work closely with their retail accounts. It’s a no-return business, and with everyone offering essentially the same content, it’s important to forge strong relationships, Delfiner said.

The dollar DVD is an incremental sale, not a replacement for another DVD purchase, he noted.

“Nobody price-shops this product,” he said. “It’s complete impulse, like buying a candy bar. You see a Kit-Kat, and if you want one, you buy it. You don't go to a store down the street and see if they have a better price on it.”

The Future

One thing on every budget DVD supplier’s mind is the finite amount of royalty-free titles in existence — maybe 1,500 to 2,000 total. Copyright laws and licensing practices over the past few decades have slowed the pace of new content dropping into the public domain. As a result, suppliers said, they need to get creative.

BCI began adding exclusive licensed content with public domain content to differentiate itself, Glass said.

Delfiner would like to convince content providers that there may be budget life for titles after they've juiced out their rental and sellthrough runs.

Genius has a few ideas on how the budget game might feed the company’s growth as a front-line independent supplier. It’s getting into fitness for the first time this year, in part through the company’s acquisition of the Wellspring library. There might be potential to one day put out a 15-minute workout on a $1 disc and capture consumer attention for a brand, inspiring a future sale of a higher-priced product, Drinkwater said.

Budget titles may seem counterintuitive to the next-generation market, but suppliers said they are readying for that, too.

After all, they've already taken this content and remastered it for DVD. Once demand goes up and cost comes down, high-definition is the next step.

“This is not a business that is going out of business,” Delfiner said. “This is a business that is going to increasingly broaden as we penetrate more and more of the retail base.”
By way of popmusicpopculture.

Philadelphia Inquirer Dollar DVD article

Cheap DVDs

A Philadelphia firm has found a niche selling old shows for less than $2.

By Akweli Parker

While the entertainment world has focused lately on fighting the illegal trading and copying of copyrighted music and movies, a Philadelphia company has found a lucrative - and, it says, law-abiding - niche selling DVDs of well-known programs it doesn't own.

To be sure, the titles are a tad musty: The Andy Griffith Show, The Lone Ranger, and Casper the Friendly Ghost, to name a few. But by taking advantage of lapsed or improperly registered copyrights on the nostalgic programs, Global Multimedia Corp. says it is able to legally offer the shows for less than $2 per DVD.

Global is one of at least a half dozen companies trying to cash in on the "value DVD" segment.

For the most part, they pay no licensing fees or royalties because the product is in the public domain. They simply hire someone to print the DVDs en masse, package them for sale at retailers, and collect.

"This product sells to anybody," said Global chief operating officer Gary Delfiner, who once worked at West Coast Video, the movie rental chain founded by Global CEO Elliot Stone in 1983.

Global commenced operations last year after Delfiner suggested to Stone over a brainstorming dinner: "Let's sell to the dollar stores."

"This product, for a certain category of buyer, it brings them back," Delfiner said. "They go like, 'Oh my God, I remember that show.' "

Provided that the copyright has actually expired, what Global and its competitors do is perfectly legal, said Dennis J. Helms, an intellectual property attorney with Flaster Greenberg in Cherry Hill.

"Once it goes into the public domain, it belongs to the public," Helms said.

U.S. copyrights originally lasted 14 years and were renewable once. The durations have expanded over the years, so that today works are protected for the lifetime of their creators, plus 70 years after death for individual copyright holders.

Corporate copyright owners are protected for a total of 95 years. The Walt Disney Co. got Congress to tack on a 20-year extension in recent years, averting Mickey Mouse's previously scheduled entry into the public domain in 2004.

Global's titles, however, fell into the public domain either before copyright durations were extended or, in some cases, because of the original owners' failure to register their creations properly, Delfiner said.

"It's the government - if you don't fill the paperwork out right, it's not a good thing," Delfiner said. "Of course, our attorneys checked that out."

Delfiner will not disclose Global's sales figures, but he said that since going into business a year ago, the company has sold more than two million DVDs.

Global is not alone in trying to profit from the unprotected nostalgia.

Growth "has been substantial because the market's there," said Mike Omansky, chief executive of Dunellen, N.J.-based Digiview, another recent entrant in the dollar-DVD market.

Omansky notes that even as Hollywood has been disappointed by this year's DVD sales compared with previous years, the budget discs' sales are surging.

"In this segment, people are very willing at this price point to buy multiple DVDs at a time," Omansky said.

DVDs are an $18-billion-a-year industry in the United States, according to PricewaterhouseCoopers L.L.P. DVD prices fell 7 percent across all retail channels in 2004, according to NPD Group. The growth of dollar DVDs contributed to this drop, NPD said.

Digiview sells many of the same titles as Global. It also maintains a trove of B-films such as the 1962 bad acting-fest The Manster ("Is it Man or Monster?" the cover art asks rhetorically).

Omansky said, however, that Digiview's biggest seller is its family and children's category.

To get the widest distribution, the company avoids anything raunchy. "We screen everything - no foul language," he said. "We want to be squeaky clean."

The obvious marketplace for such offerings is dollar stores. But both Delfiner and Omansky said they were targeting other retailers as well.

Global, in fact, is trying to shift the focus to higher-margin retailers: supermarkets, independent grocers and drug chains, whom they encourage to charge $1.50 to $2 per DVD.

Typically, retailers make about a 50 percent profit at that price, according to Delfiner.

Digiview said it sold some of its DVDs at Wal-Mart and other mass merchants.

Quality of the DVDs varies by manufacturer.

"Anybody can put these out, but you need to purchase a master," Delfiner said. "I did my homework and found a guy in Arizona whose lifelong pursuit was keeping pristine masters of this product."

Using a master, or original, from which to make copies, instead of an already dubbed copy, ensures higher quality.

Digiview, meantime, said it was beginning to branch out beyond the public-domain titles.

"We are now licensing titles that will be exclusive to Digiview," Omansky said - among them, American Vampire, Amnesia, and Silver Wolf, all made in the 1990s or later.

"We're moving to more modern," Omansky said.
Again, by way of popmusicpopculture.