The recent court case between Nu Metro and the Mr Video franchisor has unleashed anger from other independent video rental shop owners, who have accused the entertainment company of squeezing their profit margins.<\/p>\n
Nu Metro recently won the case in which it claimed Mr Video was buying DVDs of US film titles from distributors other than Nu Metro, resulting in Nu Metro and US film companies losing millions of rands in revenue. <\/p>\n
Nu Metro is owned by JSE-listed media company Avusa – one of a few licensed distributors of movies, TV series DVDs and video games to the local market. It has an agreement with US- and UK-based production houses such as Universal, BBC, Disney and small, independent companies. <\/p>\n
Robert Pagan, the owner of an independent DVD franchise, said this month that Nu Metro was infringing on the window period it had originally given the rental industry. For example, the company used to wait one to three months before releasing titles to the retail stores. Now, it brought some DVDs to retail stores just a week or two after rental outlets had bought them, he said.<\/p>\n
"Rental copies are sold to DVD stores at sometimes double the retail price," said Pagan. <\/p>\n
"These two moves combined have made it increasingly difficult for rental stores to make a decent profit margin."<\/p>\n
Retailers buy DVDs for R50 to R200. DVD shop owners pay up to R300 and charge customers R20 to R30 for rentals. A movie is first released in cinemas. It is usually shown for eight to 12 weeks before it goes to the rental market, followed by distribution to retailers and pay TV and public broadcasters. However, some titles are released at the same time to the rental and retail markets.<\/p>\n
Another independent rental shop owner, who spoke on condition of anonymity, echoed Pagan’s comments and added that Nu Metro should decide whether it wanted to look after the rental market or the retail market, because DVD shop owners were suffering from increased piracy. <\/p>\n
Fay Amaral, the managing director of Nu Metro, said the rental market had multiple opportunities to make income. <\/p>\n
Nu Metro’s decision to release certain titles to retailers and rental shops at the same time had been driven by consumer behaviour, she said. "There is an overlap between retail and rental in consumer behaviour. We want to give consumers choice on day one."<\/p>\n
Last year Nu Metro brought about 1 000 movies and TV series titles in South Africa and sold 7 million units. It distributes to 3 500 shops and employs 600 people at its DVD factory. It has more than 100 subcontractors. <\/p>\n
Nu Metro Entertainment, which includes film distribution and home entertainment, reported R60 million in profits from operations before exceptional items for the year to March, compared with R62 million last year. <\/p>\n
Revenue was just more than R1 billion, from R935 million in the previous period.<\/p>\n
Pagan said one problem was that the industry was dominated by two companies – Nu Metro and Ster Kinekor, which had more cinemas than Nu Metro but fewer DVD rental licensing agreements. <\/p>\n
Ster Kinekor has not responded to questions Business Report sent it almost two weeks ago. <\/p>\n
Another DVD rental shop owner, who also spoke on condition of anonymity, said: "Unfortunately there is no room for independent distributors because they [Nu Metro and Ster Kinekor] will always outbid the smaller player, since they already have long-term agreements with the [film] studios."<\/p>\n