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Question:
Which corporation wrote the biggest check
to the Hollywood studios in 2000?
Answer:
The answer is Wal-mart ($1.9 billion), followed by
Blockbuster ($1.7 billion). According to an analysis
by Alexander & Alexander, the total rental market for
videos was approximately $12 billion in 2000, which
produced about $3.4 billion of revenue, with Warner,
Disney and Universal receiving over 60 percent.
Blockbuster's purchases of product for both rental and
sale purposes, in both domestic and international markets
totaled $1.36 billion domestically and $0.34 billion internationally.
So their "check" to the studios would be about $1.7 billion.
Wal-Mart purchases its videos exclusively for the purposes
of sell-through (as opposed to rental) and has an estimated
28 percent share of the sell-through market. That would
represent consumer purchases at Wal-Mart of about $2.63
billion (assuming $9.45 billion in consumer spending for
both VHS and DVD).
About 15 percent of that sum is spent on non-studio product
(such as the Barney kid videos), which leaves $2.24 billion
spent on studio product.
Wal-Mart operates on a very slender margins, estimated
to be 15 percent on videos and DVDs. If so, it would retain
$324 million from these video and DVD sales, and pay the
remaining $1.9 billion to the studio's or their distribution
arms. Wal-Mart thus writes the biggest total check . |
