Many home entertainment operators say sales of all kinds of entertainment products dropped dramatically in 1997 as the recession took hold. But only a year later, sales began to pick up with video rental and distribution businesses, in particular, gaining increased popularity. The quick turnaround is partly attributed to a widespread use of video, video compact disc (VCD) and digital versatile disc (DVD) players for use as a home entertainment. Many video rental companies from overseas, including Tsutaya, Blockbuster and EZ Video, are trying to capitalize on the current wave.
They have been opening video rental stores throughout Bangkok and other cities as more people turn to video rental services. Padet Hongfa, managing director of CVD International Co, said that before the economic crisis, the company’s total revenue from the video business stemmed from sales (70%) and rentals (30%). But that ratio has reversed. CVD International is a local producer and distributor of home videos for the Major Group and an operator of Showtime stores. Mr Padet said video rentals would continue to dominate the market.
His company plans to increase the number of Showtime outlets to 70 from 50 by the end of 1999. To boost competitiveness, the firm has offered a franchise fee of 200,000 baht compared with 300,000 baht quoted by Tsutaya, another major provider of video rental services. The first group of target franchisees would be CVD video rental agents who want to reshape their shops to compete with chain stores from overseas. Mr Padet said video rental markets in Thailand had evolved in the same pattern as those in the United States.
Among those moving into the rental business was entertainment chain Mangpong Co, a local producer and distributor of home videos. Director Yuttadech Vejpongsa said the company had experienced a sales slump since the baht was floated in mid-1997. It then changed its marketing strategy in early 1998 by setting aside space for video rental services. Before the crisis, rental videos were popular with a handful of people. Most preferred buying videos and favourite movie titles at between 300 and 400 baht each. But now they prefer to pay 30 baht to rent a movie.
Mangpong plans to open its video rental chain stores-like convenience stores-in local communities next year. It now has 40 entertainment outlets at major shopping malls in Bangkok. Mr Yuttadech said he did not believe that competition in the video rental business would intensify next year though more operators are likely to focus on rental services. The VCD is another home entertainment product that has gained increased popularity this year. Mr Yuttadech said VCDs entered the Thai market three years ago. But the product’s popularity began to gain momentum this year for three reasons.
Firstly, VCD players are cheaper. Some imported products from China and Taiwan are priced at only 3,000 baht to 4,000 baht each. As well, VCDs can be played with personal computers. Secondly, legitimate VCDs are also cheaper with prices set between 200 baht and 300 baht while pirated products are sold for only 100 baht to 120 baht. Thirdly, VCDs are now common as there are several producers of legitimate and pirated products in the market. Mr Yuttadech said the recent drop in video tape sales is due partly to the continued growth of VCDs in the market.
The increased popularity results from the fact that average VCD prices are around 100 baht lower than those of video tapes. Mr Padet said he did not believe the life cycle of VCDs would be as long as that of video tapes. One reason is the picture quality of VCDs remains low. He added VCDs are popular only in Asia. They are not so popular in the United States and Europe. People there prefer DVDs because they offer the highest picture quality. DVD product prices are also relatively high with players at around 20,000 baht each and DVDs at 1,000 baht or more.
But analysts say DVDs will be more common in the next few years, largely because they will be cheaper. In the music market, the economic downturn has had little impact on cassette tapes. Sales of local music cassettes and CDs are forecast to total 3. 2 billion baht this year and grow by about 30% to 4. 16 billion baht next year. Annual sales of the products have been between 4. 5 billion baht and five billion in the past few years. Total sales of foreign music are projected to rise by 5% to 830 million baht next year from 800 million baht this year.
Kittisak Chuang-aroon, managing director of local music giant Grammy Entertainment, said he believed the music industry would improve next year. Thai music cassettes and CDs were low-priced and only slightly affected by the economic downturn. However, sales had fallen by 20% this year, compared with last year’s turnover. Nadda Buranasiri, president of the International Phonogram and Videogram of Thai Producers’ Association, said that to adapt to the economic meltdown, most surviving firms had downsized business and put a brake on new investment.
They had tried to expand distribution channels for foreign song cassettes and CDs, which total only 500 outlets around the country. Copyright violation remains a key hindrance to the music industry. “Getting rid of all pirated cassettes and CDs in the market is impossible, but squeezing them in a particular place looks easier,” he said. Sales prices are expected to stay flat next year as many companies dare not increase prices for fear of losing revenue to pirates. In the video games market, Sony Corp takes the lead with a 80% market share, followed by Nintendo Co and Sega Enterprises Ltd.
Suphol Sittithampichai, senior vice-president of Galaxy Group Co, the sole distributor of Sega arcade and video games in Thailand, conceded the economic crisis had left an undesirable legacy-an increased popularity in pirated and smuggled products among consumers. “Over 10,000 pirated game machines can be sold each year while sales of legitimately imported products total fewer than 3,000. The number of pirated software games available in the market is so huge that it is impossible to determine the total manufactured and sold,” he said. This is a research found from www. siamfuture. com .
Number of video tapes and DVDs sold by distributors, 1990-2001 The number of wholesale video/DVD units sold by distributors increased by nearly 60 per cent in 2001. The strongest growth was in DVDs, but there was also a significant increase in the number of videos sold to rental outlets. DVDs now account for 39 per cent of total units sold by distributors, up from 17 per cent in 2000, with most of the product going to sell-through retailers. Tapes sold to retailers now account for 45 per cent of total units, down from 63 per cent in 2001. This represents a shift in sell-through from tapes to DVD.