Wednesday December 23 7:20 AM ET
Holiday DVD & Divx sales strong
By Marc Graser
HOLLYWOOD (Variety) - Nearly a year after the highly visible launch of DVD and Divx, strong
holiday sales are signaling that both formats' digital video players, and the discs that go along with
them, may be turning into the Furby for adults this Christmas.
Sluggish sales since the digital technology's rollout -- DVD launched in 1997; Divx this past October
-- have suddenly turned around in recent months, for a number of reasons.
''You've got a ton of support out there, you only had a few studios releasing titles on DVD last year,
entry-level players are $200 less than last year, and video stores are now renting the hardware and
software,'' explained Toshiba spokesman Steve Nickerson. ''It's shaping up to be a very good
Christmas for electronics retailers.''
Consumers have also been prodded to push DVD to the top of their holiday wish lists through a
promotional onslaught launched by the home electronics and film industries. A joint promotion
sponsored by retail chain Best Buy, Hollywood Video and Warner Home Video, among others,
packages five free DVD movies and 13 free rentals with every purchase of a designated $299
player.
DVD rival Divx also includes five free titles with purchases of its players, and Microsoft is giving
away one free DVD title for every purchase of Windows 98. Even discounters Target and
Wal-Mart are pushing DVD products.
The campaigns seem to be working. Best Buy, for example, has seen sales of its DVD players
skyrocket since it launched its promotion in November. The retailer sold as many DVD players in
that month as it did in all of 1997, according to company spokeswoman Joy Harris. Several stores
were even forced to hand out rain checks for out-of-stock players.
According to the DVD Video Group, an association of DVD manufacturers and merchants, 1 million
DVD players were shipped to retailers in 1998, up from 400,000 in 1997.
About 1 million players are already said to have made their way into consumers' homes.
Manufacturers are reportedly scrambling to build and ship about 300,000 in time for the Christmas
rush.
As for DVD software, VideoScan estimates that retailers sold about 1.5 million copies of film or
television titles in November and 676,000 during the first two weeks in December. About 15 million
have been sold so far in 1998, compared with 2.8 million in 1997. Neither figure includes online
sales.
Toshiba, one of the first manufacturers to release DVD players, said sales have increased with each
week as the holidays approach. Although it declined to disclose numbers, Toshiba said sales in
November and December will equal sales for all of 1997.
Sales for Divx are also strong, high-tech market analysts said, despite having to withstand an
onslaught of negative word-of-mouth and standards issues. The pay-per-view format launched
throughout Circuit City stores in October.
The fledgling format -- with only 250 titles for rent as opposed to DVD's 2,300 -- is said to control
20% of the digital disc market.
Despite Divx's stronger than expected sales, a Divx spokesman declined to disclose how many of
the players or film titles have sold.
Although the pricier Divx players (about $500) play both DVDs and CDs, DVD players, such as the
DVD-ROM drives in computers, do not support the Divx format.
Currently Circuit City and Good Guys are the only major electronics retailers to carry Divx
merchandise. Circuit City has a considerable interest in pushing the product. The Richmond,
Va.-based company's Circuit City Group owns two-thirds of Divx, and sources say Circuit City
salesmen receive as much as $100 in commission for every Divx player they sell.
It is Internet retailers, however, who have really cashed in on DVDs' surge in popularity. Internet
researcher Jupiter Communications estimates online sales will reach $2.3 billion during November
and December alone, compared with $1.1 billion a year ago. DVDs accounted for $15 million in
online sales in 1997; about $50 million is expected to go toward DVD sales in 1998.
''DVD sales are proportionally larger online than in the brick-and-mortar world,'' says Ken Cassar,
an e-commerce analyst with Jupiter. ''Where DVDs account for 10% of video sales in stores, they
account for a quarter of video sales online.''
Online retailers DVD Express, DVD Empire and Amazon.com are all reporting record DVD sales
this Christmas.
Reel.com, owned by Hollywood Video parent company Hollywood Entertainment, for example, is
reporting that DVD sales have jumped 13-fold since last year, with purchases surging 200% in
November alone.
Online DVD software retailers, however, are anticipating that most of their sales will come in January
and February.
''The presents people are buying now are the players,'' said Jeff Rix, whose DVD Empire launched
last year. ''After Christmas, all these people are going to have players and are going to start buying
films.''
Although DVD has made an impact, the VHS market is still safe, sources said. Consumers are still
holding out for recordable players, scheduled to hit the market in 1999, and for more family-friendly
fare -- the mainstay of the VHS sell-through market.
''The industry is slowly evolving and is becoming more family oriented,'' Harris said. ''The first
round was for the techies and home-theater enthusiasts. Now, retailers are reaching out to the
masses.'' |
