The Collapse of Video Prices and Vestron's Collapse

In June 1989, Vestron laid off 140 employees, effectively shutting down its film production and distribution business.

A major cause of Vestron's financial problems was that retain prices for videocassettes -- Vestron's main product -- were collapsing.

The collapse was reported in an article titled Movie prices get cheaper, written by Stephen Advokat and published by The Record newspaper on June 9, 1989.

The article provides the example of Dirty Dancing videocassettes. When Vestron began selling the videocassettes in 1988, the retail price for one videocassette was about $90. Vestron sold about 1.8 million of the videocassettes. If the price had remained at $90, then the gross sales would have been about $162 million.

However, by the time the article was published in June 1989, Vestron had reduced the retail price to about $30 a videocassette. Furthermore, the article reported that Vestron was planning to reduce its retail prices to $15 a videocassette in the near future.

Keep in mind that Vestron's basic business was selling videocassettes. Vestron's main reason for financing the movie Dirty Dancing was to sell the movie's videocassettes. During the years 1988-1989, the retail price for videocassettes collapsed from about $90 to $15 apiece. That collapse was the basic cause of Vestron's financial problems.

In that situation, Vestron was not able to come up with the huge payment necessary to convince Patrick Swayze to act in a Dirty Dancing sequel -- and he never wanted to do sequels of of his movies anyway.