CD-ROM Rental in the Video Channel

A borrowed idea for digital media whose time has come

by Joey Tamer

This holiday buying season has brought us the next major step in creating a mass market for multimedia: CD-ROM titles are now available for rental in leading video stores. In part the shift toward more consumer-oriented distribution for digital media is based on the increase in the installed base of CD-ROM drives and the mass market buzz surrounding interactive media. Basically, it is a borrowed idea whose time has come. The idea of renting CD-ROM titles originated from the gaming industry's cartridge rental model: More than 60 percent of Sega's game cartridges that are purchased have been rented first. And Sega cartridges are at a similar price point to CD-ROM titles. The interest in testing this model of rental-to-sell-through stimulated Compton's NewMedia, Baker & Taylor and Blockbuster Video to initiate their own extensive pilot programs in video stores.

Blockbuster establishes trial in Bay area.
Blockbuster recently announced an in-depth pilot program in the San Francisco area, demonstrating more than 200 titles from more than 35 publishers on five major platforms in more than 50 stores. Kiosks are being setup to show off the titles, which are being demonstrated by experienced, trained sales personnel. "[We want] to stimulate the multimedia market out there," says Mike van der Kieft, director of business development and manager of new media markets at Blockbuster Entertainment. "We want to create a new business for ourselves, but to do that all participants must be successful. We are trying to create a win/win for all concerned." Not incidentally, Blockbuster was extremely influential in creating the home video rental market by becoming one of the first chains to rent both VCRs and videos to customers. (For more on the Blockbuster announcement, please see News story, p. 28.)

Baker & Taylor, Compton's go nationwide.
Baker & Taylor launched a program to rent CD-ROM titles in 100 video stores across the country. This program recommends various product mixes from a list of 300 titles by 20 publishers, including about 100 titles from Compton's NewMedia.

The movement to make CD-ROM titles available for rental in video stores is the first step in
targeting the non-technical consumer market.
Compton's, in conjunction with The Major Video Chain, began its own rental program earlier this year, offering a selection of 30 titles to independent video dealers across the country. The number of participating dealers has grown now to 150 "Mom and Pop" stores. In describing the Compton's program, Diane Morgan, executive director of North American sales for the company, says, "Our mission with rental is to inform the average consumer... that there is this new technology out there that they have to see. [We are] reaching millions of people who would not go to a computer store."

Previewing multimedia for a new market
Until now, the multimedia market was limited to early adopters who already understood the technology and its potential. These early adopters could purchase software through mail-order catalogs or in software stores or computer superstores. The movement to make CD-ROM titles available for rental in video stores is the first step in targeting the non-technical consumer market. Brad Grob, group director of market development at Baker & Taylor Software, referred to CD-ROM rental as a "key turning point for multimedia which takes the product beyond the traditional software channels into other channels." The broader mass market of non-technical users, particularly those seeking entertainment, have had no mechanism for previewing CD-ROM titles. Every other entertainment segment has its previewing mechanism: radios play new music, book review sections tell us about new books, and movies have trailers and coming attractions. CD-ROM rental could become this previewing mechanism. Visitors to video stores can rent CD-ROM titles in the same way and for the same price that they rent videos. They can buy both in the same store. The mix is extensive and includes all categories of CD-ROM including games, edutainment and reference. Bonnie Predd, senior vice president of marketing and new business development at Baker & Taylor Software, remarked that "video stores -- with their less intimidating and more convenient shops -- are uniquely positioned to move CD-ROM into the family market."

Careful strategy required.
Not all publishers should offer their products for rental, however. Some titles, however interesting, challenging or useful, may exhaust the user's interest in the course of a weekend. This might be true for a strategy or adventure game, certain story books, or utility products. If a title is likely to be rented and never purchased, it should become available for rental only at the end of its product life cycle, when the publisher's next title is available for sale (but not for rental). When releasing an aging title to the rental market, a publisher should add an advertisement or announcement of the new product in the opening screens of the rental product. In this way, the sampling of the publisher's product also offers the renter an opportunity to buy the newest release. There will most likely be an increase in sampling or trailers of publishers' other products in the titles available through rental programs. It is possible that the rental of CD-ROM titles will offer the first legitimate forum for advertising on CD-ROM discs to the mass market. At first these advertisements will function as the equivalent of "coming attractions" in the cinemas, but later may expand to more aggressive forms of commercial advertising.

The next wave.
The rental of CD-ROM titles creates new marketing opportunities on many levels for the expansion of this market, and there is great excitement among the video and software distribution community. The next wave is under way. As Paul Bader, vice president of sales at Compton's NewMedia, says, "Nothing is more important than the rental of CD-ROM titles for making the new media a mass market product. Rental is critical to its retail success."




Joey Tamer refines the vision, strategy and success of companies -- 
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