Video One - Revenue Share

[CornerVideo]

Hey Everyone,

I'm in Canada and looking to open my store in the next couple of months. I spoke with a rep from Video One the other day and this is what he quoted me:

- no investment up front from me
- they provide POS, racks, promo material and DVDs (NR and catalog etc)
- revenue split of 70% for them and 30% for me
- they need two weeks notice for a new store opening to set up from start to finish.
- if my volume doesn't meet the minimum they've set then there will be a montly "minimum charge".


In some ways this sounds too good to be true. On the otherhand it sounds like a good way to get the store opened and a good start on my customer base. On the other other hand (I'm a freak with three hands) it really sounds like I won't actually be owning the store and will instead be running a Video One store. How can I possible survive on 30%.

I tried to get more detail from the rep regarding pricing, terms etc but he only said to call him back when I have my location and opening date set. Well, I'd kind of like full details before I put all me eggs in one 24hr drop off slot, if you know what I mean.

Would I be just better off buying new releases from a distributor with a good buyback plan?

ack, Help!

Judd

[JamesIVSC]

That doesnt sound like a good deal to me. Most stores spend between 25-40% of their net in titles each month. Giving up 70% of your business would not be good.

Also figure that even if you got a business loan and purchased all of the items they provide, you still would be paying out way less than 70% between the loan payments and the NR purchases.

[CornerVideo]

James that's a very excellent point that I had not considered.

So here's a question...If I'm buying NR to start up, how many titles am I buying?

[JamesIVSC]

It all depends on the size of your store and how much business you anticipate.
You could start off with any amount between 100 to 2000.

The one thing I would recommend is that do not cut yourself short at the beginning. You want people to get the impression that you have great depth and selection. If they come in and see that you are limited on your offerings it will be hard to get them to come back.

[CornerVideo]

We're an extremely small store, less than 1000 sq feet and I think 300 titles would be a fairly good start. We don't have any competition within a 45min drive. Thanks again.

[seanandsarah]

It might be a good idea if you really want a no muss, no fuss and no brainer way to get into rentals.  Especially with it being risk free.  They will own the product and you keep a cut for giving the movies space.  There's a lot more details you need: like what POS system, how long your bound into contract with them before you can just start purchasing your own, etc.

I would suggest that since it sounds like rentals will not be your primary business (and we all know that we have more to deal with in our business than we have time for), electing for this type of operation might be the best solution.  There is a convenience store near me that does rentals and they revenue share with a company (not V1) who provide them with all the titles and little hassel.  But they had to provide all their own shelving and have no POS system.  This stuff adds up quick.

Regards,
Sean

[CornerVideo]

Thanks Sean,
I think I may have accidentally found one of those other companies that provide everything but the POS and shelving. If the revenue share is workable I may go that route. We're also going to go with a lot of candy and such. These small town kids go ape nuts over penny candy.

Anyway, I'm close to getting a really good buildling and I'm not at all opposed to doing my own promo stuff and shelving. Oh well. Any other info/experience/guidance is still greatly appreciated.

Later,
Judd

ps: Sean, where do you stand on the Corner Gas debate?

[amanda]

i thought it was a 70/30 split for you, not them. ouch. The nice thing about that is that there is no upfront investment. I go with James on this one.

[CornerVideo]

Yeah I'm going to steer clear of that one. Have you ever used Amazing Video Network? Anyone have any stories on them?

[VideoPix]

Rack-jobbing/revenue-sharing should not be considered for a new store.  Only for a non-video store where you already have a positive cash flow and steady walk-in traffic, and you want to add video rentals as an alternate profit center without any added hassle or expense.

Buy 1000 used recent-top-renting DVD's from Amazon resellers for around $5 each, and you are in business.

[Mick]

I certainly agree that you should stay away from rack-jobbing.  Revenue sharing is a little different, though.  There are legitimate revenue sharing options available to you (at least for some studios) via Rentrak.

That is not to say the pursuing those options will make sense for you.  Everyone is different and has different needs.  But, there is no reason you shouldn't take a look at it.

Also, $5 is an unrealistic price for buying goods from Amazon.  If you take a look, you will find that most titles released in the last few months are going to cost you about $10 - $15 each (including shipping) on Amazon.

Mick

[seanandsarah]

I would avoid back cataloguing at all.  Just start with the new releases for the last 30 days and work from there.  People coming to your store are shopping for convenience and will pick up that copy of Hitch the same time their going to pick up a 2L Coke and a loaf of bread.

Regards,
Sean

PS.: Judd, what Corner Gas debate?  Honestly, I've never seen it.  But considering I'm originally from Saskatchewan, I don't really need to see it... I lived it.

[VideoPix]

I said Amazon RESELLERS.  Not Amazon.  The biggest titles of 3 or more months ago are the ones that have the biggest glut, and therefore the lowest prices.

Find a few Amazon RESELLERS with good inventory and prices, and contact them directly for purchasing a large quantity.  $5 would be very realistic, since you are bypassing the Amazon commission.

[CornerVideo]

Hey Sean, I can't believe you haven't seen Corner Gas. But yeah I know what you mean, growing up in Manitoba I pretty much lived it too. For some reason, Amanda has seen it and hates it. That's like a Canadian saying they hate hockey. I don't get it.

So here's where I'm at with my soon to be real store...I found a local distributor (who is essentially a rack jobber I suppose) who I can lease some catalogue titles and month old NR from for a reasonable price. Then I'm just going to buy the 2 or 3 top new releases each week and eventually cut down on how many I lease.  The store is going to be less than 1000 sq feet and there is zero competition in the village so if we really focus on top knotch service and being "experts" and having at least some new releases I think we can deter people from driving 45min to Rogers or BB.

Another question...at first anyway, I'm not going to get a POS system until the revenue stream can justify it. However, does anyone know of a good program for keeping track of things?  I have a friend who is an expert with Excel and was thinking of asking him to design me a series of worksheets tied together so that I could keep track that way.  I really don't have the cash to purchase anything to start. Any other ideas?

Thanks all, this place is invaluable.
Judd

[BeckyJo]

You can go to theultimatevideo.com and download free software.  This is the same software we have been using for a long time.  Updates cost you money (something like $250 a year) but you could probably get by with the free version until you start making some money.  That would give you some time to check out all the good programs out there before you invest in software.  I do have to say though, that the computer software sure makes running a store much easier.  I can still remember the good old days when we used index cards to keep track of videos.  It works but once your customer base grows and your inventory grows, it becomes pretty difficult.