sample="quota" bates="506674675" isource="rjr" decade="1980" class="ui" date="19880405" Best Copy A MARKETING OPPORTUNITY FOR NOW Videocassette marketing is particularly appropriate for NOW because: - It is consistent with NOW's contemporary personality. - It allows for more complete communication of the complex factual support for NOW's lowest position. - There is a good fit between NOW's target prospects and VCR owners. COMMUNICATION OBJECTIVES Primarily to communicate NOW's lowest positioning and the factual support for it in an impactful, memorable and credible manner, consistent with NOW's print advertising. Secondarily to leverage NOW's brand equities: Brand name: Contemporary Packing: Modern Positioning: Lowest, Informational RECOMMENDED VIDEO CONCEPTS 1. A Stand-Alone Factual Commercial Provide a video that exclusively communicates NOW's positioning in a commercial format. Pro's Focuses message to achieve objective. Lowest production costs. Con's Risks consumer irritation with being sent a commercial only. Probably viewed only once. RECOMMENDED VIDEO CONCEPTS 2. Programming With A Commercial Provide a video offering entertainment or informational programming, as well as a NOW message to increase consumer interest in the video (i.e., brought to you by NOW). Possibilities include: - Music - How-to - Old Movies - Current Events Pro's Greater perceived value ($20) Greater probability of repeat viewing May share videocassette with others Con's Higher production costs NOW message is not the sole focus VCR INDUSTRY OVERVIEW BACKGROUND The following will provide some general background information on the VCR and videocassette industries: The VCR is the newest piece of video entertainment hardware and appears to be an enduring phenomenon. VCR's provide the crucial ability to control when TV viewing occurs, as well as supply additional programming options. VCR household penetration has grown dramatically over the past eight years and in 1987 surpassed cable penetration, 53% and 49%, respectively. (See Appendix, Chart I). VCR household penetration by 1990 should reach 65%, and by 1992 40% of TVHH will have two VCRs. (See Appendix, Chart I). As VCR penetration grows, and consumer facility with their operation increases, the demand for VCR programming will also increase. The prerecorded videocassette business was a $6 billion industry in 1986. - Approximately 1/3 of revenue was from purchasing and 2/3 from rentals - Buying tapes is increasing - By 1989 tape purchases will likely be greater than tape rentals - The high cost of tapes has been driving the tape rental market - Tape prices will continue to fall The 1/2 inch VHS tape format is dominant versus Beta. - Greater availability - 90% of sales VHS, only 10% Beta Movies are the dominant category for prerecorded videocassette with 62% of sales. (See Appendix, Chart I) VCR USAGE The following will provide consumer usage information of VCR's: The VCR user is young (73% under 45, mean age = 39), highly educated (46% attended college), have a family orientation (81% married, 66% with children), are affluent (78% HHI $35m+) and are heavy consumers of media (90% read one newspaper per day, 62% subscribe to 3+ magazines). (See Appendix, Chart II). According to Nielsen's diary study about 70% of all unattended TV recordings are played back. Nielsen reports that almost one-third of all VCR taping is of programming being viewed live. Set Is Off Set Is On Tuned to a Diff. Channel Set Is On Tuned to Channel Being Recorded Recording Usage 51% 18% 31% Nielsen reports that VCR recording parallels TV usage and are highest during the winter months. VCR USAGE (Cont'd) According to Nielsen the average VCR household uses their VCR for over seven hours per week. Total Hours of VCR Usage Hours of Recordings Hours of Playback 7.4 2.9 4.5 According to Nielsen the majority of VCR playback time is with prerecorded videocassettes. Total Hours of VCR Usage Hours of TV Recordings Playback of Prerecorded Videocassettes 4.5 2.0 2.5 INDUSTRY OBSERVATIONS The following industry observations were obtained from recent trade and consumer publications: "Consumers like the idea of owning something (videocassette) they really like. And having it on their shelf, like a book, it says something about who they are." Growth of home video libraries will increase as cassette prices decline. It is projected prerecorded video sales will increase $3.3 billion in 1988, up from $810 million in 1985. Videocassette title availability has risen 30% in 1987 about 19,000 are currently available. Video rentals increased from 1.1 billion to 1.4 billion transactions. There are currently 27,000 video specialty stores, primarily for tape rentals. Currently videocassettes are sold through a wide range of distribution outlets, they are: - Video Specialty Stores - Direct Marketing - Mail Order Catalogues - Bookstores - Premium/Promotion Item (On Package) - Mass Merchandisers - Supermarkets - Video Clubs (RCA, CBS) Video producers are constantly seeking new outlets and have had difficulty in finding distribution. CONCLUSIONS Based on what has been reviewed on the VCR and videocassette industries, VCR consumer usage and other industry observations the following conclusions are relevant to developing a marketing program for NOW's video: VCR ownership profile and concerned segment consumer are highly similar. A NOW video should be offered exclusively in the VHS tape format. The NOW videocassette should become available just prior to the winter months when VCR and TV usage are highest. Obtaining a tie-in partner for NOW should not be a significant problem. Movies, Music, Sports and How-To represent the best volumetric opportunities for NOW tie-in partnerships. Marketing via videocassettes will become increasingly popular, as tape prices decline, VCR penetration and facility increases. NOW has an opportunity to take advantage of this technique before it becomes less impactful. APPENDIX 62017.30md/A57