Some big titles come with small price tags

Oh, the indignity of it all. Jimmy Stewart, despite his ties to Clarence the angel, has landed in the bargain bin for the holiday season. He’s not alone. When it comes to DVD sales, Stewart and other stars of the Golden Age of Hollywood are leading the way in the race to the bottom.

This year, DVD sales, which studios count on to turn costly movies into mega-moneymakers, are experiencing a precipitous decline in growth. To counteract the plunge, home video executives are slashing prices.

Though new DVD releases have been relatively stable, hovering in the $15 to $25 range, other titles have dropped sharply. “Austin Powers in Goldmember” and the “Lethal Weapon” sequels can be picked up for just under $5 at Best Buy, and Wal-Mart is pricing “Trading Places” and “Fatal Attraction” among others at $5.50. Meanwhile, DVDs of primarily public domain movies, including some starring Stewart, Danny Kaye, Shirley Temple and the Three Stooges, are being marketed as affordable stocking stuffers in Target’s $1 racks.

The bargain-basement prices are a boon to many consumers. On a recent Tuesday at the Target store in Culver City, retired artist Charlene Tobias came in to buy the newly released “Madagascar” for her grandchild. Noticing the section of $1 titles, she spontaneously picked up three for herself.

Tobias said her kids gave her her first DVD player a few months ago, and she now has about 50 films in her collection.

“I’m a late arrival to DVDs but making up for lost time,” she said. “Price is a consideration because I’m retired, but I don’t just go for bargains. The title counts.”

Not everyone agrees with the pricing strategy. Consumers become reluctant to fork out $25 for A-list titles when they’re accustomed to paying a fraction of that, critics say. Dumping movies into bargain bins robs them of their identity and turns them into “commodities,” said Barry Gordon, senior vice president of worldwide programming for Image Entertainment, a leading producer and distributor of independent fare.

The industry might be shooting itself in the foot, agreed Steve Beeks, president of Lions Gate Entertainment. “Price reduction is a sound part of any marketing strategy,” he said, “but it’s a matter of balance. You don’t want to drop prices to maintain sales level -- we’re in it for the long run.”

Part of the slowdown can be blamed on rising gas prices that cut into entertainment spending -- and hurricanes Katrina, Rita and Wilma didn’t help. But part can be attributed to weak theatrical releases and fewer hits and family-friendly blockbuster sequels that drive DVD sales.

According to the trade association DEG, DVD revenue that increased by 39% in 2003 and 32% in 2004 will expand by only about 8% this year. And with 52,000 titles on the market (11,500 released in 2005 alone), shoppers are more selective. Studios no longer can toss out a DVD and count on it striking gold.

“The challenges Hollywood faced attracting people to the box office have transferred to the DVD world,” said Gary Arnold, senior vice president of entertainment at the Best Buy retail chain. “We’ve been less successful with consumers than we have been in years past.”

Of more lasting concern are changes in a maturing business confronted with runaway success. At $25 billion annually, home video revenue is more than twice that of box office, so double-digit growth is more elusive -- particularly now that saturation has set in.

DVD players have become fixtures in 75 million of the nation’s 110 million households as prices for the machines dropped to less than $50. Although consumers who have only recently switched to the DVD format bought more than expected, they are typically less affluent and less enthusiastic buyers. And many of those who bought in early have begun tightening their belts as they watch their discs pile up.

“This is a natural progression,” said DEG Executive Director Amy Jo Smith. The only surprise, she said, was how quickly the market saturation came.

Black Friday -- retail speak for the day after Thanksgiving, the busiest shopping day of the year -- is a chance to reverse some of that downturn, reaching a consumer who departs from the norm, said Mike Dunn, president of Fox Home Entertainment. Someone who gets up at 5:30 a.m. looking for a bargain gift isn’t your typical home video consumer, he said. Because that shopper cares more about price than about a particular title, you’re competing less with another DVD than with a Cuisinart or a sweater, he said.

Aggressive marketing increases the likelihood that the DVD will come out the winner. And, from a retail perspective, DVDs are perfect for Black Friday promotions, Best Buy’s Arnold pointed out. Unlike computers, televisions and other big-ticket items, they’re usually impulse buys. And, as loss leaders, they lure in customers who might then spring for a pricier purchase.

In an effort to step out from the rest of the pack, some studios -- including Disney, Universal, Lions Gate and Fox -- are releasing titles the Monday after Christmas, instead of the typical Tuesday release. Gaining an edge is a challenge in the fourth quarter, when more than a third of all software transactions occur. This season, heavy-hitters such as “Star Wars: Episode III Revenge of the Sith,” “War of the Worlds,” “Fantastic Four” and “March of the Penguins,” just for starters, will compete for the consumer dollar.

Adding to the pressure, 50% of all of a DVD’s sales takes place during its first week on the market -- up from 40% two years ago. “Opening on DVD has become as cutthroat as opening in theaters,” said Kevin Kasha, senior vice president of acquisitions and programming for New Line Home Entertainment. “Everything is fast and furious -- perform or die. If your product doesn’t sell big in the first 30 days, you’re often off the shelves.”

Past Black Friday promotions focused almost exclusively on catalog -- or “library” titles. Not this year. Movies less than 12 months old are being discounted, including some of the biggest titles of the last five years. A spokesman for Warner Bros. noted that all “Harry Potter” DVDs will be available for $7 for a time at selected stores.

Red-hot TV-on-DVDs, however, are a bright spot for the industry, now responsible for 25% of all home entertainment spending. And sales, according to Nielsen VideoScan, are expected to increase by 28% this year. But there’s a flip side, Best Buy’s Arnold said. Watching a season’s worth of “Lost” or “Desperate Housewives” is time-consuming, taking people out of the purchasing cycle.

Something to keep in mind, said Ralph Tribbey, editor of the newsletter DVD Release Report, is that even at 8% growth, the pie is $2 billion richer than last year. The industry is still the largest in the entertainment world, he said -- and you can’t take percentages to the bank.

But, no doubt, the rules have changed. “This has been a watershed year,” he said. “We no longer have double digits to cover up our mistakes.”