Zoo Digital Technology with a market set to grow strongly

Mixed thoughts with this article from home entertainment weekly.






So here it is, Merry Christmas…


If the word on the street is anything to go by, it's all doom and gloom in the run-up to Christmas. Reports of high-street shops going bust are rife as millions go online and there are even talks of Chancellor Gordon Brown ordering the treasury to investigate why store takings have tumbled. After talking to various DVD suppliers, retailers and analysts however, it seems that there is still much to play for. Anna-Louise Dearden takes a look



There are still a few weeks to go until the last sale rings through the till on Christmas Eve. And not until that moment do we know what kind of sales period it has been. Talk of tough times and challenging retail climates are all par for the course at this time of year, with retail surveys showing consumers holding back on gifting spend until mid December. It looks like 2005 may bring a joyous 12 days to Christmas after all!

"Only 31 per cent of this year's Christmas gifting spend has made its way into tills," says Helen Dickinson, head of retail at KPMG which has published the latest statistics from the YouGov survey commissioned by analysts KPMG in collaboration with SPSL. "Although this is not to be taken lightly, it still means that over two thirds is possibly still out there for the taking."

According to the report, a staggering 43 per cent of shoppers will complete their shopping in the week before Christmas or even on Christmas Eve. These figures could just be showing consumer spending slowing down with only a mere hope of a last-minute shopping deluge, but the analysts feel there's still a lot to play for: "We do think that at this early stage of the Christmas campaign shoppers have held back a bit from visiting the shops compared to last year," says Dr Tim Denison at SPSL. "However, the shortfall is nowhere near as dramatic as some had feared and there is no reason why retailers should panic into deep discounting at this stage of the campaign."

So, a challenging time ahead but with hope on the snow-frosted horizon, all be it at a discount: "Yes, the run up to christmas business has been challenging," says Steve Gallant, product director at HMV. "We have seen all the pressures from piracy and loss-leading prices becoming even more pronounced. I think the underperformance on volume on many of the big releases is probably one of the triggers for the increased pricing activity. If you took the OCC Top 10 for each week in October, the volume is 27 per cent down on the same weeks last year or 650,000 units less. Given these big drops in the market, some retailers have decided to protect their market share rather than their margin. What growth there has been in the market has come from driving campaign and catalogue at lower prices so I believe we are now seeing the DVD market in value decline."

MVC's Dawn Hancock agrees that there are issues to be tackled in terms of sales, with a worry that retailer panicking may cause drastic price reductions: "In terms of our business we are where we would have expected to be through the transition of a buyout. We're down on last year but then we've closed 14 stores.
"My view overall on Christmas is that, as always, it's been a slow start, some titles are starting to pick up and perform and I'm hopeful that christmas will still happen. The next couple of weekends will be interesting. If there isn't an increase in sales with it being the last pay-day before christmas for most, then I think we'll see retailers panic and the January sales could actually start in December."

Corroborating evidence of a 'wait till the price drops' culture, Hancock says: "Customers are savvy as to how things are on the high street. If they haven't already bought their presents from last year's sales then they will wait and see what gets discounted before purchasing, even if it means leaving a lot to the last minute."

If last minute is December, many retailers are hoping that now the December freeze has landed, consumers will be heading for warmth in-store. "Yes, now the winter weather has arrived I am hopeful that we are going to see bigger week-on-week lifts than we normally do in the run up to christmas," says Gallant. "The winners and losers are already emerging from the field. TV product is very strong this year whether it is individual series or box sets and I think TV will be a bigger share of the market this year than in previous years"

"Stand-up seems to be having a quieter time this year, but several of the key titles are only just being released so it is a little early to make a call on performance."


A big player in the comedy market, Universal's managing director Johnny Fewings thinks sales are relatively OK so far: "It's true, business has been patchy. Not all of it has been bad and not all has been good. Basically there hasn't really been a pattern. Some titles have done brilliantly, like American Pie and Peter Kay. In fact, comedy has been doing generally very well. I think December will pick up even more. I see a glimmer in sales and although there will be plenty of business online, I think the high street will be kicking as well."

With a large interactive portfolio, Fewings feels that this genre is working well: "Our interactive range is doing good business. We've put a lot of weight behind the campaign and the fantastic results are pleasing to us all."

With many in the industry bemoaning the number of releases, Fewings comments that it is not much different to normal: "As is the case at this time of year, loads of titles are being released, but really, this isn't different to any other year. Of course, we all bemoan the fact that our competitors are releasing so many titles but we're all doing the same thing.

"Basically we're releasing titles that we think will make money, so every title is there for a reason. Market forces dictate what sells and the market prices itself. The good ones will sell and make us money, which is what we're all out there for."

Not necessarily so, according to Hancock: "I think there are far too many titles in all genres. We are used to seeing so much comedy but this year the number of skus in interactive is unbelievable and it's just diluting the market, so already we can see too many that are not selling."

Gallant agrees that numbers are on the high side for everyone to be a winner: "Obviously last year there were a few interactive games which proved to be successful on DVD. Therefore, not surprisingly, we have seen a whole plethora of releases this year, which can't all possibly work."

Hancock continues: "There are at least two top films a week being released, all with high box offices so in turn big sales expectations, it is understandable why none of them are performing to forecast. More should have been delayed and released in Q1, so too should a number of the key TV titles as they are just getting lost. Charts are turning too quickly because of the sheer volume of releases. The gifting titles although released in November, don't actually start to sell until December and they are being dropped and then re-entering."

The consensus is then that we really need to wait until Christmas is upon us for the final figures. As Alex Coultate, senior product buyer at Silverscreen agrees, retailers need to be pushing shoppers until December 24 to maximise sales: "It has taken some time but Q4 has definitely started. Our stores are very busy and we are trading well across catalogue, campaign and new release. We feel that we have a customer proposition that covers everything from the key new releases to the deepest catalogue gift, ensuring that we continue to satisfy our ever-growing customer base. With a full week run at Christmas this year it is crucial that we drive customer service and availability right up to Christmas Eve."

In summary, there are still a few weeks left to go. The analysts predict a pick-up with two thirds of gifting spend still to run through tills. And although sales are not to the levels of the halcyon days of DVD, retailers and distributors are quietly confident that the market can pull through. Of course, all that glisters is not gold and it would be remiss of us not to mention piracy, which is plaguing the industry, even more so in the season of good will. "We've seen that volume is down on the same weeks last year," says Gallant. "I think it would be fair to say that the single biggest factor behind that is probably the rife piracy situation."

Fewings summarises, fiercely emphasising the problem: "We say it time and time again, but not everyone listens. It amazes me that some companies think piracy is not worth the time. They leave it to the rest of us to fight the battle and they get carried along because of our efforts. There is nothing more important than piracy right now, the sooner everyone in the industry realises that the better."

END

This article was before Christmas, but the chart stuff that has been posted seems to give the same idea: Universal's interactive DVDs are selling but that many others may not be.

1. It seems that interactivity is bucking the downward trend in the market.

2. Probably more to gain financially from publishing own titles that sell well than relying on tiny amounts of royalties from third parties that are not selling????

My own personal opinion is that Zoo has shown that it can publish its own titles that rank amongst the best of the genre and that it needs to take more risks in this area. I think that it would be a shame for Circle to steal a march on Zoo.


Cheers, Vim