Specialty DVDs add some spin to sales

When friends suggest that his Chatsworth-based home video company flies under the radar of the major studios, Image Entertainment CEO Martin W. Greenwald scoffs that he’s not flying low, but on a different screen entirely. Absent the star-studded feature films and library of titles at the disposal of a Walt Disney Co. or a Warner Bros., he and other independents have become the cable channels of the DVD world -- specialists in niche programming.

While the majors are focusing on the optimal release date for a “Batman Begins” and how many millions of units to ship, the little guys are using low-budget product to gain economic traction in a crowded marketplace. Special interest titles -- anime, sports, concert films, fitness and the like -- increased more than 16.3% year-to-date compared with only a 3.3% rise for DVDs as a whole, according to the DVD Release Report, a weekly industry newsletter. They may not level the playing field, but they diversify it considerably.

The majors have explored the niche area, but -- conditioned to high-profile fare -- Greenwald said they generally over-produce and over-pay. The 40 titles he sends out every month cost between $50,000 and $1 million each to acquire or produce.

“Our secret sauce is knowing how to price things right and sell to smaller, more defined, consumer bases,” said Greenwald, whose company -- a pioneer in the 12-inch laserdisc format superseded by DVDs -- took in $118 million in revenues last year. “A Moody Blues concert we’re sending out in the fall cost us $300,000 and should bring in between $2 million and $3 million. That’s a nice return for us, but a time-suck out of the studios’ day. Their time is better spent figuring out how to sell 100,000 more copies of a movie selling 3 million units.”

Studios still control 85% of the DVD market, said Ralph Tribbey, the DVD Release Report’s editor and publisher. Still, even a small slice of the $21-billion annual home video pie can mean big profits for a low-overhead enterprise.

“With more than 70 million DVD households, if you have even 0.001% interested in something, you have 70,000 potential customers,” he said. “There are 9,576 special interest titles -- 400 on magic tricks alone. A company called Just Planes puts a camera in the cockpit and puts out footage of different airline routes. That’s quite a contrast to the early days of DVDs, when sci-fi, action and horror movies drove a business geared to young males, the early adopters of the format.”

Nearly two-thirds of the home video business is sales compared to rentals, which dominated early on, and this helps the niche market. DVDs on cooking or travel, for instance, are far less appealing on an overnight basis than as in-home reference material. Targeting “collectors,” who propel much of the DVD market, A&E; Home Video is releasing a 12-disc DVD set “The Boston Red Sox 2004 World Series Collectors Edition” on July 26, aimed at that city’s fervid baseball fans.

Under a new exclusive deal with Major League Baseball, A&E; plans to release four or five titles a year. This one features 35 hours of game play and wireless on-field recordings of players for $129.95.

“Appealing to collectors, we’re less price sensitive than the studios,” said Kate Winn, vice president of sales and marketing for A&E; Home Video. “They want the best possible product, so we can charge a bit more. The number of DVD purchases per household is going down, but collectors continue to buy if the quality is there. We have to focus on great packaging -- the box is covered with related statistics -- and bonus material to add to the appeal.”

Access to A&E; and History Channel programming gives their company an advantage in the niche world, Winn observes. One of the “extras” on its “Paul McCartney in Red Square” DVD tracked events in the former Soviet Union when Wings was in its prime. The DVD, which contains a previously aired concert as well as another in St. Petersburg, shot to the No. 2 spot on Billboard’s chart of top-selling music DVDs when it was released June 14 -- and No. 1 in the U.K. A&E; increased awareness by repeating the McCartney program, timed to the home video release.

Lacking the $30-million marketing budgets for an average studio film, those in the niche market frequently ride the coattails of studio or network publicity machines. Ventura Distribution is betting that the success of Steven Spielberg’s “War of the Worlds” will rub off on “The Day That Panicked America” -- a look at the hysteria triggered by Orson Welles’ radio broadcast of the H.G. Wells tale -- that hits the shelves today. The company, based in Thousand Oaks, also sent out a DVD on the comedy of Carlos Mencia last week, the day before the premiere of his Comedy Central series.

Like comedy, the Latino market is a growth opportunity, said Michael McLeod, Ventura’s senior vice president and sales manager. His outfit is providing information to retail outlets about the percentage of Latinos in their area and earlier this year signed an exclusive deal with Univision to help promote Ventura’s Latino product.

“Since we began advertising on Univision in May, sales of those titles have doubled every week,” said McLeod, whose firm also specializes in Asian martial arts and Japanese horror films. “The Latino niche is building quickly. There are about 40 million Latinos in the U.S. and they’ve been shown to rent and buy DVDs more than the non-Hispanic consumer.”

Some companies buy a “cut” in Sunday circulars put out by stores such as Wal-Mart -- an outlet that allocates a limited amount of shelf space to specialized product. While these titles aren’t their bread and butter, they can add to the bottom line. Customers coming in to buy “Bewitched,” for example, frequently pick up another DVD or two geared to their individual tastes. And profits margins are greater -- as much as $4 or $5 -- compared to a quarter or so on nationally advertised competitive titles that are drastically marked down.

The proliferation of websites selling movies also promotes specialty programming. A direct-mail company such as Amazon.com can carry far more of the 45,000 DVD titles in the marketplace without the restrictions of shelf space in a brick and mortar store. And, following the path paved by iTunes in the music world, online retailers are rapidly embracing the digital downloading of video -- eliminating the need for small independents to manufacture, store, ship and take back returns of unsold goods.

“There are now tens of websites selling movies -- 18 months from now, there will be hundreds,” said Image’s Greenwald. “In the next five years, more than 50% of software programming -- audio and visual -- will be virtual. We’ll be pressing plastic less and less -- and transmitting downloads more.”

Still, not every niche is a guaranteed success, maintains Bill Bromiley, senior vice president of sales and distribution for First Look Home Entertainment, citing children’s animated features, for one. It’s hard to capture that audience, he said, given the dominance of DreamWorks and Disney in that realm. And challenging, without a major advertising expenditure, to draw the attention of youngsters, who respond best to repetition.

“It requires a lot more time to build awareness for a children’s direct-to-DVD title than for a theatrical feature,” he said. “ ‘The Snurks,’ which we’re releasing on Sept. 20, has a built-in marketing tool because it was created by the same team that did ‘A Bug’s Life’ and ‘Hercules.’ You need something parents can latch onto.

“Children’s features were one of the last hangers-on to the VHS format -- one of the few areas in which DVDs haven’t changed the market,” he added. “Tapes are passed along between families and friends. And that audience cares less about seeing a movie in DTS surround-sound.”

As a whole, however, the niche arena is flourishing, Tribbey asserted.

“DVDs may be reaching the saturation point,” he said. “But the special interest variety, by definition, needs fewer numbers to succeed. And, with the Internet, sporting shops, magic stores, they are less dependent on shelf space. There are more avenues to explore.”

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DVD sales

Here are the 10 top-selling DVDs for the week ending July 3. Rankings are compiled from a variety of major retailers, including Amazon.com, Best Buy, Blockbuster and Circuit City.

1. “The Pacifier”

2. “Diary of a Mad Black Woman”

3. “Hostage”

4. “Hitch”

5. “Coach Carter”

6. “Chappelle’s Show: Second Season”

7. “Cursed”

8. “Miss Congeniality 2: Armed and Fabulous”

9. “I Can Do Bad All by Myself”

10. “Madea’s Class Reunion”

Source: DVDExclusive.com