Nineteen eighty-seven will be remembered as the year Hollywood got serious about home video. Last year, video rentals surpassed ticket sales for the first time; this year, the video customer became a subject of concern in Hollywood, because the growth rate of new renters was slowing down as quickly as the frustration level among current renters was rising.

Accordingly, the studio folks booted their spreadsheets, focused their focus groups, summoned their MBAs and got to work redesigning the golden egg that video technology had inadvertently left in their nest. The results were usually scrambled, and probably tarnished the industry's luster a bit, but may in the end make it easier and cheaper for consumers to buy or rent a wider variety of video entertainment in 1988 -- if they are willing to make some compromises in the process.

Pricing fell squarely into the scrambled category. The year began with a price increase on major rental titles. The studios were relieved when orders weren't cut back, until somebody finally realized that that was nothing to cheer about: To keep renters happy, video stores needed to buy more copies of the week's blockbuster, not just the same number. By the end of the year, CBS/Fox, the company that led the price rise with "Aliens," developed a program that essentially cuts in half the price the dealers will pay for "Predator," due next month. As a result, the "Predator" monster should storm into more homes faster than "Aliens" did last winter.

On the budget end of the market, the $20 movie looks like it's here to stay. An industry standard this Christmas, the $20 price tag on "collectible" films is already popping up in promotions planned for early next year. That's good news for everyone but the video dealers, many of whom report that they're making less money even though they're selling more tapes.

The Ads of '88

"Top Gun" was credited with getting hundreds of thousands of movie fans into the practice of taking home last year's favorite movie for keeps, and its prefeature Diet Pepsi commercial proved to be an easy compromise, since it was almost as entertaining as the film itself. While ads on movie tapes were unheard of a year ago, and remain the exception rather than the rule today, the studios are busy lining up more exceptions for 1988. The Diet Pepsi ad was designed to echo "Top Gun's" aviation theme, but the first big video of 1988, "Dirty Dancing," will carry a 30-second spot for Nestle's Alpine Winter chocolate that is already familiar to TV viewers.

It's possible no one will ever see Lee Iacocca's "tribute" at the front end of "Platoon" -- or the rest of the movie, for that matter. Whatever its legal problems, the "Platoon" episode brought the video business one step closer to the paperback reprint industry, with which it shares some obvious parallels. HBO Video wasn't the only company willing to bid high stakes and spend big ad dollars to lure "Platoon" renters into the store. The next major feature to come legally up for grabs is the forthcoming George Lucas/Ron Howard fantasy "Willow," on which the bidding for distribution has reportedly topped $15 million. If that money is indeed spent, you can be sure it will not go quietly onto tape.

Bad News for Beta

The biggest casualty of the year was the Beta format. While it's still around for big new releases, studio cutbacks on lesser and low-price titles in the format, along with the proliferation of VHS-only stores, portend slimmer Beta pickings in 1988; the fact that no studio has followed Paramount's lead in cutting Beta prices doesn't brighten the picture. The three major hardware innovations of the year -- CD video, super VHS and ED Beta -- had virtually no impact on the 1987 market, but may be factors in 1988.

Video of the Year?

Another story for 1988 gets the Video Monitor's vote for video of the year 1987. "Dirty Dancing" was the first feature from Vestron Pictures, which was created to provide movies for industry veteran Vestron Video. A surprise hit in the theaters, "Dirty Dancing" will be surrounded on tape by ads for both Nestle's and the film's No. 1 sound-track album. The film itself plays like it was designed for video: With abundant musical numbers culminating in a shamelessly upbeat ending that radio listeners are constantly reminded of, "Dirty Dancing" is choreographed for repeat viewings. That video-inspired appeal won't be lost on the other studios when they're considering film projects -- nor with the unprecedented pair of on-tape commercials. This slick nostalgic tale of lost innocence that begs a second viewing, bracketed on tape by commercial messages, may well be the video of the future. Hollywood will doubtless repeat itself in 1988 -- except this time there will be sponsors to help pay the bills.