Like I said before, the Mouse wants to Zoom...............
Studios fear films will be illegally copied
NEW YORK - Hollywood studios thought last March, when digital video discs were introduced, that they would know by now if movies on the super-sharp CD-like format might become hot sellers this holiday season.
But after six months, DVD's prospects are as fuzzy as the image from a black-and-white kinescope.
Some supporters are getting nervous. They fear that lingering disputes about marketing and technology could undermine one of Hollywood's most promising opportunities to revive its flagging home video business.
The biggest problem: Three major studios - Walt Disney, Fox and Paramount - still won't put their films on the discs. The hold-out studios worry that pirates will break encryption codes and make perfect copies of DVD movies. There are reports that it's already happening in China.
Disney's participation is essential. Its family fare usually dominates the home video charts, particularly in sales directly to consumers.
"If Disney doesn't go in, then the whole viability of DVD is in question," says Sanford C. Bernstein's Tom Wolzien.
DVD also might fail to rival the popularity of video cassettes if Disney supports a controversial plan under discussion. This system, called Zoom TV, would require consumers who buy special DVDs to pay for each viewing.
Disney declined to comment on its DVD plans. "We're not involved in the business," says Tania Moloney, vice president of publicity and marketing for Disney's Buena Vista Home Video.
Big profit or big bust?
DVD backers would rather take a more simple route by selling discs directly to consumers, who could replay favorite movies at will.
Those who buy DVD players are expected to pick up about 20 discs in the first year. That could produce a windfall for Hollywood: DVDs cost half as much to manufacture as video cassettes, but retail for as much as $26 each.
Based on this model, a report from Bernstein Research says that studios could make as much as $2 billion in profit from domestic DVD sales in the year 2001. This forecast assumes that 15% of all households will have DVD players, with consumers buying nearly 250 million discs.
More conservatively, investment bankers Veronis Suhler believe that only 4.4% of homes will have DVD players by 2001, with each family buying 12 discs that year.
It's hard to determine from early sales which forecast looks more realistic.
"From all the reports we've been able to get, they're selling well," says Paul Kagan Associates' Larry Gerbrandt. "But we've had to rely on what the Consumer Electronics Manufacturing Association and Warner Home Video report."
CEMA, a trade group, says that about 149,000 DVD players have been shipped to retailers since March. It's estimated that consumers have only bought about 45% of them. Prices typically range from $500 to $750.
And consumers have bought about 324,000 DVD movies through Aug. 24, according to research firm VideoScan. Warner disputes that count. It says consumers have bought at least 48% of the more than 1 million DVDs it has shipped to retailers.
"We've been extremely pleased with DVD's performance in light of the fact that not every studio signed on," says John Powers, director of DVD marketing for Warner Home Video.
Exit the laser disc?
DVD hasn't yet shown that it can appeal to mainstream consumers, though. "Some early research suggests that 80% of DVD owners also own laser disc players," says DVD Guide Publisher Ron Rich.
Indeed, the early DVD activity has already "pretty much killed the laser disc business," says Gerbrandt. Last week was the first in which sales of DVDs exceeded laser discs, VideoScan reports.
To sell DVD on Main Street, studios and hardware makers know they must convince consumers that the technology will thrive a lot longer than laser discs have.
That effort has been complicated in recent weeks, though. Manufacturers such as Pioneer and Sony are at odds about a standard for the next generation of DVDs that users can record on, like tape.
In addition, there's work on an even sharper DVD standard - known as "blue laser" - capable of showing movies with the same clarity as high-definition TV.
New campaign
Yet DVD backers aren't waiting for things to settle down. Warner is leading a new campaign to stoke consumer interest in the format. If successful, it could convince hold-out studios to join the DVD pack.
Software and hardware manufacturers will spend about $50 million for DVD-related ads this holiday season. And DVD-supporting studios will increase the number of movie titles on DVD from about 185 to nearly 410 by year's end.
Warner just took a big step by distributing its DVD movies nationally. Previously, Warner only sent DVDs to New York, Los Angeles, Chicago, San Francisco, Dallas, Seattle and Washington.
Despite its limited distribution, Warner-distributed movies - which include MGM's productions - account for nearly 70% of all DVD sales, VideoScan says. Warner's top sellers include blockbusters such as Twister and Eraser.
Among other studios that already distribute nationally, Sony has 11% of the market with such hits as Jumanji. And Live Home Entertainment has 10% with action films such as Total Recall.
Universal recently said that it will begin releasing DVDs in November, with four movies out then and a total of 10 out by February.
"If DVD works, it's huge," Wolzien says. "But it's still just too soon to know."
By David Lieberman, USA TODAY |
