Harry Potter: Goblet Of Fire, Which Version? (1 Viewer)

[Chad R]

Yes, I have. I used to manage a little DVD store and have actually paid the bills for these releases. For a New Release like Harry Potter with a SRP of about $30, the unit cost from a distributor is $17.86, which is about a standard 40% markup if you sell the DVD for the full SRP. A retailer's discount actually depends on the bulk they buy, but having looked at the scale the best discount you could get was 45% off retail, but we could never buy enough units to achieve that much of a discount.

When a retailer like Best Buy sells Harry Potter at $14.99, they are losing a few bucks every sale. They were selling it for less than a little DVD store could get it from a distributor. So much so, that it has become common practice for little video stores to stop buying from distributors, and instead buy their stock from Wal-Mart or Best Buy to save about $2 per unit. With about 100 units a week, over 52 weeks, that was a substantial savings to our little store.

The new Warner price structure of having a 1 disc set and 2 disc set was a carrot thrown to retailers to thank them for making DVD such a success. Basically, the unit cost to a small store for the 1-disc set is $17.39. The unit cost on the 2-disc set is only $18.59. A difference of a $1.20. However, the perceived value is more, so a retailer can mark the single disc set down to cost or below to build loyalty, but have a larger mark-up on the double disc, and actually make a profit.

Making a profit may seem "greedy" to you, but believe me, it makes a difference. DVD pricing became so competitive, that a small store such as the one I managed couldn't keep up. We didn't have computers to make up the difference on the money we lost on renting and selling DVDs. That store shuttered its doors this past summer after 13 years.

I'm not looking for pity, because A) I no longer worked there, and B) because we live in a capitalist society whose purpose is to make money. It's not greed, it's capitalism. You can't fault a company for selling a DVD at a price that will keep milk in the fridge for the young'uns.

 

[MarkHastings]

Chad, you might be able to confirm my assumptions.

Would you agree that since a store (like Best Buy) can afford to sell a DVD at a price that loses money, that when there are 2 editions of a movie, they won't do it to both versions because shelf space is at a premium and while they can afford to sell the single disc (and lose money), the space that the 2 dics takes up, is too valuable to sell a DVD that will also lose money?

I can almost guarantee that shelf space is a MAJOR factor on pricing. That's why you see so many varions of soda, salad dressing, cookies, etc. - It's a fight for shelf space. Some stores can afford to lose profits on certain items, but the catch is, that loss-leader takes up valuable shelf space.

 

[Mike Frezon]

Chad: Nice post. Informative from a valuable perspective.

 

[Chad R]

Shelf space isn't an issue in Video as it is in a grocery store. Grocery stores due to health laws have to merchandise product on shelves, coolers and so on. DVDs can be merched on shelves, tables, or stacked on the floor if necessary. A good majority of DVDs are shipped in large cadrboard displays which become disposable shelves.

Best Buy, as a business, isn't about selling DVDs. They're about selling TVs, computers, and appliances. They sell products at a loss as a way of bringing you into the store repeatedly to build loyalty. Loyalty is the key in most retail businesses. You get used to going there. Or, if when you're there to buy Harry Potter you also see a good price on a TV, and remember that when it comes time to buy your new TV.

What Best Buy also does is mark their TVs down to just above cost. Why? Because when you buy that TV you're going to need cables to hook it up. Accessories have a huge markup. Batteries, speaker wire, etc. are all money makers for themm.

Also, they push those service deals very hard because those are huge revenue generators. The ratio of TVs that need service to the ones that actually don't and still buy the extended warranties comes out favorably in the end.

That's not to say that Best Buy enjoys losing money on DVDs. They offer those deep discounts the first week when demand is high, but mark it back up to eke out a small profit after that. Between deep discounts on Harry Potter, and small profits on other DVDs, they can break even which is good enough on that product line.

There's also promotional buys on endcaps by record companies and studios and other complicated deals to make up revenue, but the reality is that not a lot of revenue is generated by selling a single DVD, so being able to mark up the 2-disc of Harry Potter is a good deal for most retailers to maximise profits.

 

[Carlo_M]

Great posts Chad. One minor correction, though, is that I've never seen BB sell TVs to just above cost. In fact, I know what dealer cost is on most TV sets and trust me, BB sells at close to MSRP and never below MAP (which is still a healthy profit). They do make tons of money on the accessories as you say.

I'm talking of nicer TVs though, so if you're talking about 20"-32" tubes you may be right. I'm talking HD-ready sets, whether they be smaller LCDs or larger flat panel or RPTV/DLP/LCD technology.

 

[Andrew Bunk]

Great stuff from Chad and Mark. This is what I've been thinking as well.

I support a local DVD store by purchasing virtually all my new releases there. I still get impulse buy stuff at places like Borders (during sales and promotions), Best Buy, Target and the like. But I give this shop all my day and date business. They give a straight 25% discount off of list.

Their service is excellent, I'm on a first name basis with them and they fully support OAR. They don't even carry MAR discs, and if someone wants to order one, they try their best to educate.

Also, I usually get my new releases no later than the Friday before street, so it's worth a little extra to me.

In the end, I probably wind up paying about $5 more per disc for stuff that gets loss led at the big stores, but I also don't have to deal with getting in to the stores soon enough to take advantage of the sale.

Funny thing is, when it comes to stuff like TV box sets and movie box sets, you'd be surprised how close their 25% markdown is to what the big stores sell for. For example, I've seen many HBO sets for shows like Deadwood, Carnivale and the Wire start out at 79.99, which is only 20% off list. So I actually save money buying it with my local shop. It comes close to evening out.

Getting back to HP, I paid 23.24 for the 2-disc. Most places I've seen have the 2-disc for around 22.99.

 

[Larry Sutliff]

I saw the flick twice, once on Imax, and the opening scenes were very dark and grainy, as I recall. I was going to wait for the HD-DVD, but I picked this one up on impulse when I was in Best Buy. Looking forward to watching it sometime this weekend.

 

[Andrew Bunk]

I remember my theatrical viewing vividly as well. It was just 5 months ago. Saw a great looking print, so I hope to have some concrete feedback after my viewing.

 

[Ravi K]

Didn't Prisoner of Azkaban have some transfer issue that was rectified in another pressing?

 

[DavidPla]

They definitely were. Even darker than the DVD I believe.