I want to share with you some new information I learned last
week over coffee with an executive of a U.S DVD distributor.
It was really eye-opening for me, and being that I always
want to deliver you guys the TRUTH of what’s happening out
there in the world of distribution, I thought this
would be important to share.
Basically he was explaining to me the reality of the VALUE-
priced DVD. And I’m not even talking Wal-Mart and Target
here….I’m talking Dollar Tree, 99 Cents Store, and Krogers.
Apparantly the profit margins that distributors make on value-
priced DVD’s ($1.99-$2.99 price points) far surpasses what they
make at the more ‘premium’ retail outlets like Best Buy,
Borders, and Barnes & Noble.
The answer lies in volume sales. Serious volume sales. For
example, a place like Dollar Tree may place an initial order
of 100K to 250K units, while a Best Buy might place an order
of say 5K units. So while the profit per unit is stronger at
the premium retailers, the overall profits are much
much higher with the value retailers.
And therein lies the future of DVD retail distribution! If
DVD distributors can earn higher profits by selling
to the value chains, then they’re going to be acquiring more
and more products that are appropriate for those outlets.
You may be wondering what genres do best here? He told me: Childrens,
Fitness, Educational, Animation – anything that can be an
impulse buy right next to the cash register that MOMS would
toss into the cart.
Oh, and here’s something else that shocked me – to keep costs
low for these massive orders of 250K units, they’re
manufacturing the discs in China for as little as 10 cents
per disc (the profit margins are usually 30-40 cents per
unit…you do the math). I left my meeting with this guy and
immediately started thinking of what Children’s program I could
produce to get into the Dollar Tree!
Anyway, of course not all DVD distributors are heading into
the Value arena, but you’ll notice on most DVD distribution
agreements these days they reserve the right to ‘value
pricing’ – and now you know what it means.
Written by Stacey Parks