Audio Video News

The world's largest video rental chain wants to renegotiate its video supply agreements with Hollywood film studios. In late June, Blockbuster Inc. chairman John Antioco announced to Wall Street analysts that his company is reassessing its distribution deals with the studios—including possibly letting some deals lapse when renewal time comes.

The move sent a chill through the studios and provoked threats of retaliation. With more than 7000 stores, Blockbuster is a major source of revenue for many studios, whose films often die at the box office but earn profits in the rental market. Some film critics believe that the common practice of ignoring a film's production quality or box office numbers because profits can be churned by rentals has contributed to an overall decline in movie quality. There's no other explanation for the quantity of mediocre films cranked out by the studios, they say.

Blockbuster, a unit of Viacom, Inc. (parent company of Paramount Pictures and Paramount Home Video), may be tired of saving Hollywood's bacon. The company wants to leverage more favorable deals from the studios, including ending the requirement to stock every title owned by its vendors. Some popular films turn over constantly, but older or unfamiliar titles that rarely rent occupy valuable shelf space that could be used more profitably.

For many film fans, a culling of Blockbuster's catalog could marginalize hundreds of films, making them difficult or impossible to obtain. For the studios, it would mean that many titles could slip into permanent obscurity. "It's important for us to have a breadth of product . . . and not to be cherry-picked," one studio executive told the Wall Street Journal. Blockbuster, he said, wants only to "buy the top movies."

Blockbuster merchandising executive Dean Wilson put a different spin on this idea; his company simply wants to "focus on the products that are going to generate business." Wilson stated that in new contract negotiations with the studios, Blockbuster would discuss the burden of carrying a large number of titles "with low box-office performance." The rental chain would like to devote more space to DVDs, which are becoming an increasingly important source of revenue—and which are more profitable on a per-unit basis than videotapes.

One possible retaliatory move by the studios would be to sell more movies to mass market outlets, thereby undercutting consumers' motivation to rent from Blockbuster. In the short run, movie fans in locations where Blockbuster is the dominant force in video rentals could suffer a decrease in choice. In the long run, however, movie fans everywhere may benefit as Hollywood pays more attention to quality.