Audio and video sales up, but margin is down

Drug Store News, May 1, 1995 by Allene Symons

Audio and video are branching out in new directions in drug chains, but overall in 1994 there was more action in sales than in margin.

This could change in 1995 with increases in materials costs. Some manufacturers like BASF have already upped their prices.

The most visible growth in audio/video for drug chains is pre-recorded video. In a year with "Jurassic Park" and "Snow White," blockbuster in-and-out titles pumped up sales and added excitement, even though buyers reported that they contributed little in margin. Some chains reported that they did better in 1994 with these two titles leading the pack than they did in 1993, when "Aladdin" was the bestseller.

As one buyer noted, prerecorded videos are a convenience for the customer, "but now we need to find a way to make money selling them." Hot home video is widely available, so prices are very competitive.

Blank video showed growth in units but stayed flat in dollars, said buyers. On the other hand, blank audio showed around a 3 percent dollar increase, largely because consumers are buying higher quality and longer running tapes, like 90-120 minute lengths, to record from CDs. Even though the CD installed base is growing, households already have cassette players for car, jogging, beach or poolside entertainment, and they want cassette copies of their favorite CDs to play on other protable devices.

Camcorder expansion

Buyers reported that blank video growth is largely in the camcorder segment, in 8mm and VHS-C formats. Camcorders have a 22 percent household penetration, so there is more opportunity in this segment. Currently 8mm tapes dominate, but VHS-C is growing. The compacts are easy to playback, but the 8mm smaller tape offers more length. Manufacturers say they think the two formats will co-exist for the foreseeable future.

Brand recognition counts in camcorder tapes, but T-120 tapes--by far the lion's share of the category--are footballed. Higher quality tapes are growing, however. The driver is higher resolution VCRs, so consumers want a better grade of tape when they upgrade their equipment. An increasing number of homes have more than one VCR. Upgrading helps retailers offset dollars lost in price promotions.

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Consumer purchasing habits

* About 66 percent of American consumers who record on videotape also record on audiotape.

* 77 percent of audiotape purchasers also bought a blank videotape within the last 12 months.

* About 35 percent of those surveyed had purchased computer floppy disks in the same period.

* Movies were the most popular subject for recording (61 percent of tape buyers), followed by sports (39 percent), special moments (33 percent), and favorite weekly television shows (28 percent).

* Over 70 percent in the survey bought a pre-recorded audiotape within the last year, and about 60 percent purchased a pre-recorded videotape.

Source: 1995 survey conducted by Chilton Research Services for Sony Electronics' Recording Media and Energy Products Group.