An Abundance Of Top-shelf Product Buoyed U.k. Vid Industry In '98

LONDON‹While last year's hot topic in the video business was the impact of the U.K.'s new Labour government‹Would it live up to its promises of improved dialogue and a more liberal approach to the video industry?‹the business concentrated on making money, and lots of it, thanks to a stream of top-quality product.
In 1997, the industry saw revenue in the region of 1.1 billion pounds ($1.83 billion). In 1998, it looks as though that figure rose to 1.48 billion pounds ($2.39 billion).
For a trade described as being in its maturity after just 10 years‹and said to be managing its decline in the face of pay TV‹this was nothing short of remarkable.
Gary Ferguson, VP of Fox Video Europe and chairman of the British Video Assn. (BVA), put it more succinctly at a November BVA meeting.
"The U.K. is enjoying one of its best years ever," said Ferguson. "We are used to seeing double-digit growth in the sell-through business, but this year looks even better than usual, at 30% so far in 1998."
It is, he says, "a breathtaking performance" that reflects a profound change in the entertainment habits of the British public, making "the video industry the single most significant part of the entertainment industry."
He backs this claim, saying that the 1.48 billion pounds spent on video by consumers is greater than the amount spent on cinema, music, books, or TV, "an astonishing achievement for an industry little over 10 years old."
And it is not just the sell-through side that has performed well.
"Rental transactions grew by nearly 20%, which is a convincing reversal of the trend of recent years," says Ferguson. Much of this he attributes to a major shift among rental dealers toward store refurbishments and local-level marketing.
John Beasley, video marketing manager at HIT Entertainment, agrees that it was a tremendous year as far as the children's specialist has been concerned. He believes that the boom has been driven in particular by the supermarkets.
"They were much stronger than they were the previous year, and I think they have got better at dealing with video as a product," says Beasley. "However, they are having to gear up for it, as the video market is changing so quickly because consumers are buying much more sell-through product."
Garry Elwood, sales director at wholesaler Golds, puts it simply.
"We had a very good year," he says. "In addition, I think we have seen a fantastic increase in the profitability of the independent rental dealer. This is because the dealers have decided that they can't expect [suppliers] alone to advertise the business; they have to work at it themselves. A lot of people have revamped their stores to bring in new and lapsed customers."
Elwood says he is "very optimistic about the future of the business," adding that "we got the customer in stores. This year, we don't need a "Titanic' or a "Full Monty'; just a good stream of product will suffice."
He notes that the independent suppliers were also making significantly improved contributions, singling out High Fliers and its deal with Alliance. Still, there was room for improvement, he concedes.
Rental dealers, Elwood believes, have largely handed the sell-through business to the supermarkets.
"They have taken their sell-through sections out, saying it doesn't work for them, which effectively pushes the customer into the grocery retailer for their sell-through purchases," Elwood says.
Alan Partington, sales director of Pathe Video, agrees. "The feeling seems to be that rental dealers can't compete with the likes of [supermarkets such as] Tesco and Asda," he notes. "But, if they have got the customer into the rental habit, why can't they get them to buy?"
It was not all good news, however. While the majors enjoyed double-digit growth, United News and Media, owner of longtime indie supplier First Independents, pulled the plug on the business, following a long uphill battle to make the numbers work. Insiders say that the balance was tipped with the poor performance at cinema, not video, of the Demi Moore vehicle "G.I. Jane."
Despite First Independent's demise, many believe that there is good news to come. While TV broadcasters struggle to launch digital networks, the video business believes that its digital product, DVD, will prove as big a hit in Europe as it has been in the U.S.
Iain Muspratt, chief executive of the Home Entertainment Corp., says that "DVD is vital to the video industry; it is our digital alternative."
Elwood is also emphatic. "1999 is going to be the year of DVD," he declares. "It will go ballistic."
DVD does raise greater regulatory issues, however. Andreas Whittam Smith, the new head of the British Board of Film Classification (BBFC), says with the potential for a variety of endings to movies, DVD releases will "take more examination."
To that end, the BBFC has increased its number of examiners from 14 to 20. Despite this, some industry executives are concerned about a logjam of products awaiting classification. "It took long enough when it was just VHS," says one. "I hate to think what will happen with DVD."
As far as the political arena is concerned, Laurie Hall, secretary general of the Video Standards Council, says that 1998 was "relatively quiet" following the furor caused in 1997 by Parliament member (MP) David Alton over violence in videos. That year, he tried to introduce some of the most restrictive video legislation anywhere in Europe.
Hall is full of praise for the Labour government, which, having promised a much more proactive relationship with the video industry last year, has settled into a routine of dialogue. This open attitude has headed off the kind of tabloid headlines that had characterized the industry's dealings with the conservative politicians.
"They listen; they ring up," says Hall. "We can ring up and head off potential problems behind the scenes."
This doesn't mean that the relationship can't be strengthened further, says Austin Mitchell, Labour MP and vice chairman of the All Parliamentary Media Group. He acknowledges the central role of video, even dubbing it, in a phrase that echoes Prime Minister Tony Blair, "the people's medium par excellence."
Referring to the legislative results obtained as a result of briefing MPs about the effects of video piracy, Mitchell says, "The video industry must keep in touch; we [MPs] don't, frankly, know enough about video and the massive contribution it makes. [We] need education."