Chart to Give Clear Picture of Video Sales

The guessing game is about to end in terms of what’s really selling in the home video business.

Retailers and studio executives in the estimated $11.8-billion industry predict a new weekly computerized video chart will give a far more accurate picture of what’s selling than does the much-criticized system employed by the video industry since its inception in the late ‘70s.

The new chart--which premieres Feb. 1 in Daily Variety and Video Store magazines--will be based on electronic data provided by VideoScan, a sister company of SoundScan, the New York research firm that revolutionized Billboard magazine’s pop music charts in 1991.

“The real problem in this industry is that studios and retailers have never had any truly reliable sales numbers before,” said Bill Perrault, vice president of marketing of Columbia TriStar Home Video, a division of Sony Corp. “The kind of information VideoScan provides will give us a much more accurate picture of what is really going on in the market and where we should spend our media dollars.”

Because the VideoScan chart ranks only the sale of videos, both publications will continue to run Video Store’s rental rankings, which are based on a smaller computerized sales sample gathered from more than 400 major video retailers and chain outlets. Video store operators, not studios, derive the bulk of the profit from rental of home videos.

Studios and retailers both agree that 1992 was a banner year in the $11.8-billion home video market, thanks primarily to a 21% growth in video sales. Indeed, estimated U.S. video sales vaulted from $3.8 billion in 1991 to $4.5 billion last year, while rental revenue remained flat at about $7 billion.

For more than a decade, however, store owners and studio chiefs have had to rely on hypothetical sales information published in Billboard, Hollywood Reporter and other entertainment trade magazines based on a system in which video store employees submitted weekly sales figure estimates--a method critics say is rife with potential for hype, manipulation and human error.

Under the new VideoScan system, figures are automatically entered into a computer every time a clerk runs the video through the bar code scanner at the sales register.

“We believe our point-of-sale information will have the same positive impact on the video industry that it has had on the music business,” said Mike Shalett, who co-owns the New York-based VideoScan with his partner Mike Fine.

Many in the music industry credit Shalett and Fine’s research with bringing accuracy to the nation’s pop music sales charts by showing the previously understated popularity of such music forms as country, rap and heavy metal. In addition, they say, SoundScan helped the six major record corporations trim inventory and cut marketing costs.

For years, movie studios--like record companies--estimated the sales of their products by counting the amount of cassettes manufactured and shipped to retailers. The problem is that many of those “shipped” videos did not sell and were returned months later to manufacturers for credit.

For instance, false expectations and overproduction caused retailers last year to unload thousands of excess copies of Paramount Pictures’ “Wayne’s World” below cost.

VideoScan’s alternative is to provide companies with precise information each week on what videos are actually sold--information gathered from a computer network linked into about 8,000 retail outlets tracking more than 50% of the videos purchased in the United States. Their survey samples data provided by some of the nation’s largest music and video retail chains--including Trans World Music Corp., the Musicland Group and Wherehouse Entertainment.

“This system deals empirically with the facts,” said Jeff Jones, senior vice president and chief financial officer of the 657-outlet Albany, N.Y.-based Trans World Music Corp. “It will tell retailers and studios exactly how many sales are made at the cash register across the nation.”

There is still some question in the industry as to whether Video-Scan’s store sample is broad enough to adequately represent the more than 28,000 independent video store operators across the nation. To address the problem, Shalett said the company plans to add hundreds of independent supermarket, discount price club and video specialty outlets before April.

Billboard executives declined to comment on why they opted not to take advantage of the new chart information and neither Shalett nor Fine would elaborate. But sources said there have been tensions between the two companies for more than a year and that Billboard balked at VideoScan’s price.

Shalett said his firm also hopes to sell the raw sales data to major studios and other home video companies. He has already offered the system free of charge on a trial basis to Disney, Paramount Pictures, Columbia Pictures, Universal City Studios, Fox Video and Warner Bros. Ultimately, the studios would pay a fee proportionate to their share of the overall home video market--as much as $400,000 in some cases.