Price Slide Hits DVDs, but They Help Increase Store Traffic Nov 19, 2003

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Deep discounting on hit DVDs has raised concerns among many that the format is being devalued at a dangerous pace. Price deflation is also leading to inferior product lines, according to York Entertainment president Tanya York.

At such mass-merchant chains as Best Buy, Wal-Mart, and Target, consumers are usually able to find a new release for less than $15 within weeks of the street date.

"The risk is that consumers start to think that the opening price point for a DVD is $15," says Bob Chapek, president of Buena Vista Home Entertainment. "The economics of Hollywood mandate that this can't be. We need every penny coming out of the video machine."

As with music, the mass merchants are using DVDs as loss leaders to drive store traffic and sales of such higher-profit items as home appliances. Similarly, the pricing strategy has raised concerns among rival retailers. "We think it is a short-sighted strategy," says Dave Alder, senior vice president of product and marketing for the Los Angeles-based Virgin Megastore chain. He adds that some retailers have reacted to loss leadering by breaking street date in an effort to get an edge in marketing hot DVDs. Reuters/Billboard

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