COMPANY TOWN : Video Vexation : Tallying Sales in Booming Biz Can Be Tough
When “The Lion King” was released on home video last winter, it conquered stores with a mighty roar. The Walt Disney Company said consumers snapped up 20 million units in just six days.
But was the lion’s roar really that loud? Some researchers suggest the actual number was lower than the one Disney reported. Others say the studio’s figure, while perhaps high, was probably within a small margin of error. Disney, for its part, says the tape is still going strong and has sold nearly 30 million units to date.
The relatively young home video industry is still struggling with the vexing problem of tracking sales, especially for mega-hits such as “The Lion King,” “Forrest Gump” and “Jurassic Park.”
Analysts say that reliable information about the $5-billion-a-year video business is growing harder to come by because of sprawling distribution. Some hit titles are now flying off shelves at as many as 100,000 video stores, mass merchants and supermarkets nationwide. The market is growing so quickly--by over 14% a year, according to one estimate--that no single source can keep track of it. (The $9.4-billion rental market is growing more slowly at 6% annually.)
“The video business has exploded over a six- to eight-year time period,” said Bob Finlayson, spokesman for the Encino-based Video Software Dealers Assn., a 3,000-member trade association. “It’s a huge industry, but the statistical data is not as good as it should be.”
Manufacturers such as Disney presumably know exactly how many videos they ship to stores. Yet as the numbers climb ever higher, some independent analysts have questioned the reliability of data provided by these entertainment companies--even those that are publicly held--because they have good reasons for reporting sales bonanzas.
Among the questions: Do studios count sales as the number of videos sold to consumers or to retailers? And does a huge sales tally take into account the number returned by customers and left unsold by stores? (Disney says its 30 million figure reflects consumer sales and is adjusted for returns.)
Obtaining accurate information is of particular interest to investors. Home video now generates more revenue for the major studios than do theater runs, according to Carmel-based Paul Kagan Associates. The day Disney reported the record-breaking “Lion King” sales, representing $350 million in revenue, the entertainment giant’s stock price jumped more than 4%.
The lack of consensus has led a number of sources to try to count sales, with varying success.
New York-based VideoScan monitors transactions at selected stores. Video Store Magazine, a trade weekly based in Santa Ana, tracks the numbers of videos sold to retailers by distributors. New York-based Billboard gathers a ranking of top titles from retailers around the country. And the studios trumpet their own numbers, at least when they have a hit.
Earlier this year, the dealers association unveiled a new computer system that tracks rentals and might eventually be used to monitor sales as well.
But many say that videos, unlike novels or CDs, are being sold in so many different places, including fast-food outlets, bookstores and even gas stations, that getting an accurate count will prove nearly impossible.
“I believe that no one has totally accurate numbers, because there’s so many different sources of information,” says Gary Ross, president of Minneapolis-based Suncoast Motion Picture Co., a 400-outlet Musicland Stores subsidiary specializing in home-video sales.
It’s hardly surprising that studios and independent analysts disagree--sometimes bitterly--about sales figures. Disney has been especially vocal on the issue, partly because its animation films have some of the broadest consumer appeal. According to the trade journal Video Business, Disney’s Buena Vista division controls a whopping 40% of the domestic video market. Its nearest competitor, Paramount, has only 13% of the market.
When first introduced in 1993, VideoScan was touted as a permanent solution to the problem of gathering reliable video sales data. SoundScan, its sister company, is widely regarded as an accurate source of music industry sales, though many analysts point out that the market for CDs and audiocassettes is far more homogeneous than that for video.
Using a computer that interprets scanned bar codes off video boxes, VideoScan culls information from over 12,000 U.S. stores. Many newspapers, including The Times, publish VideoScan’s weekly list of top-selling videos.
But Disney has faulted VideoScan for excluding too many direct-mail outlets, mass merchants and small retailers from its survey. For instance, Wal-Mart Stores, which have been selling increasing numbers of videos in recent years, do not provide information to VideoScan.
“VideoScan has made a good attempt at gathering information, but it doesn’t provide a complete snapshot of what’s going on in the marketplace,” said Buena Vista Home Video President Ann Daly. “We have judged our numbers against theirs . . . and we see some dramatic discrepancies.”
One recent flap: VideoScan reported that the top video of 1994 was Universal’s “Jurassic Park.” But Disney, along with some prominent analysts, believed that its own “Snow White” had been the top-selling title.
Some studio executives have been unhappy with VideoScan almost from the start: Shortly after the service was launched, they successfully pressured Video Store Magazine to drop the weekly VideoScan sales chart. Said video analyst Richard Zahm of Kagan Associates: “Hollywood is very protective of [this] very important revenue stream.”
VideoScan Chief Operating Officer Mike Shalett defends his company’s methodology but concedes that charting mega-hits has proved a daunting challenge.
“I think [we do] an excellent job of tracking sales in traditional outlets,” Shalett said. But when it comes to a smash hit like “Gump” or “Lion King,” traditional retailers are joined by thousands of convenience stores and mom-and-pop operations whose sales operations are extremely difficult to audit, he said.
The problem was highlighted again this past winter, when Disney reported astronomical results for “The Lion King.” According to VideoScan, the video had sold only 7.5 million copies as of early June, although even Shalett admits that number is probably too low.
Some skeptical analysts noted that Disney’s 20-million figure meant that over 20% of U.S. households had rushed out to buy “The Lion King” in its first week.
“Where did we miss this stampede at stores?” one analyst wondered.
Even researchers who accept Disney’s figures point out that such consistently high numbers have tested the upper bounds of statistical possibility. Kagan Associates calculates that with an estimated 24 million units sold, the “Aladdin” home video must now sit in a vast majority of U.S households with a VCR and at least one child.
But as Disney is quick to note, the market is rapidly shifting, making old research and tracking methods obsolete. Some titles that do mediocre business at Blockbuster or Suncoast will sell like gangbusters at a grocery checkout.
According to Video Business, “The Lion King” sold more than six times as many units at mass merchants, such as Wal-Mart, than it did at retailers specializing in video. Almost one-fifth of the 12 million in unit sales for “Forrest Gump” have come from grocery stores.
All of which has led industry insiders to agree on one point: Tracking video sales won’t get easier any time soon.
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Trying to Keep Track
The video business has exploded, with annual sales expected to reach $9 billion by the turn of the century. With such growth, it’s increasingly hard for analysts to track the industry, but some statistics are available.
MARKET SHARE
By company, for 1995 through June 25: Buena Vista (Disney): 40% Paramount: 13% MCA/Universal: 11% Warner: 11% Fox Video: 8% Other: 17%
ANNUAL SALES
In billions of dollars: 2000: $9.0
Note: Figures for 1995-2000 are projections.
Sources: Paul Kagan Associates, Video Business
