Rental Prices May Increase During the Next Few Months : Cassettes: Some distributors are raising wholesale charges. If more follow suit, the increases will be passed on to the consumers, the head of a video chain says.
Is a rental price hike looming for home video customers?
Several prominent retail chain executive thinks so, predicting that many stores will jack up rental fees by the end of the year. Others rule it out for now but concede that, if certain factors change, it’s possible in the near future.
The reason for this gloomy speculation is a recent increase in the wholesale price of cassettes--in the 3%-4% range--implemented by major video companies such as Paramount, MCA/Universal, Warner and RCA/Columbia.
If more manufacturers follow suit, a price hike to consumers is inevitable, said Allan Caplan, who heads the Midwest’s Applause Video chain. “If profits are dropping, where else can the retailer get more money?”
And in the view of Mitch Perliss, Music Plus’ director of purchasing, more wholesale price increases can be expected, probably in the next few months.
Video manufacturing executives claim that they have no choice but to increase wholesale prices, citing rising marketing and production costs at a time when the demand for rental titles has leveled off. In the past they might have compensated for rising costs by shipping more units, but the rental market didn’t grow last quarter and is considered too soft for that strategy.
“People are renting less right now,” Perliss said. “Rental revenues aren’t increasing but other expenses are.”
Many retailers are resisting the idea of boosting their rental fees, however.
Ron Castell, senior vice president of the mammoth Blockbuster chain, said that he didn’t see any price hikes in his company’s future. “Raising prices just alienates customers,” he explained. “They don’t want to know your financial problems. All they know is you’ve just raised the rental price, so they’ll rent less often or go somewhere cheaper.”
Tower’s product manager, John Thrasher, said that his chain won’t be raising prices--for now at least. “The market is incredibly competitive,” he said. “You can’t risk losing customers by raising prices.”
Arguing for the rental-price rise, Caplan said: “People forget that the rental price has been steady for the last few year. Other prices--like the price of movie tickets--have gone up but rental prices have stayed the same. The average price is about $2.50 but some of the better stores charge $2.99.”
Caplan is an advocate of tiered pricing--charging more for the first few months for the new hits, say $3.50, but charging $2.50 for older titles.
Tower’s Thrasher hates that idea. “It confuses the consumer,” he insisted. “Besides, whatever is cheapest to rent isn’t what the people want. So they’re getting a bargain on movies they don’t want to rent.”
Retailers have other options besides raising rental prices, such as buying fewer copies of each title or buying the hits in regular numbers but cutting down the purchase of B titles.
“If you’re a small store and you buy less copies of a big hit, you risk not having enough for your customers,” explained Castell. “So you decide not to buy certain B titles that wouldn’t rent too often anyway. I can see the companies that put out the B titles getting hurt in this price-increase crunch.”