DVD Market from Space Daily;
Analysis: DVD Success Transforms Business
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Los Angeles (UPI) Dec 27, 2004
Entertainment consumers have embraced DVD technology so thoroughly that the DVD component of the entertainment industry has transformed the business in dramatic ways.
The home-video market has been a profit center for going on two decades and has grown to the point where it generates an estimated $25 billion in revenue. Industry estimates for 2004, through Nov. 20, indicate that home-video revenues are up 4.6 percent over 2003 - with DVD easily outdistancing VHS as the preferred format among consumers. DVD revenues were up 22 percent, while VHS revenues declined 53 percent - and DVD accounted for 90 percent of all sales.
Industry estimates also indicate that the rental market is flat, so DVD sales account for the increased revenues.
Peter Staddon, executive vice president of marketing for Twentieth Century Fox Home Entertainment, told United Press International the relevance of DVD to studios has never been greater.
And the relevance - not just to the consumer, but to the creators of the content - has never been greater, he said.
A significant factor in growing consumer acceptance of DVD has been affordability of DVD players. Just a few years ago consumers could expect to pay $200 or $300 for lower-end players - now, said Staddon, some retailers have offered players for as low as $15.
Another major factor in the growing consumer acceptance of the technology is its ability to offer more features than VHS was ever able to manage.
In a VHS environment, we were able to take the theatrical experience and shrink it down to a small screen, said Staddon. With DVD, you can expand on that experience and build on it further through commentary and added background.
Steven Feldstein, senior vice president of marketing at Fox Home Entertainment, told UPI the growth in the DVD market has caused studios to put as much importance on DVD launches as they typically do on theatrical releases. Some home-entertainment professionals have - perhaps half-jokingly - come to regard theatrical releases as pre-sell events for DVDs.
Just as opening-weekend performance has come to be a predictor of eventual box-office success for most high-profile movies, studios note that DVD releases also rely greatly on first-week sales.
You do 35 percent to 50 percent of your (DVD) business within the first week, said Feldstein.
However, in many cases, DVDs are able to stick around the marketplace long enough to find an audience - and can often bounce back when first-week sales are not so great. Movies that fall short at the box office often go on to score big with consumers on DVD.
A perfect example is (writer-director Mike Judge's 1999 comedy) 'Office Space,' said Feldstein. We've sold several million copies of that movie. It made $10 million at the box-office.
Staddon said catalog sales - sales of older titles - continually break existing records for the company every year. He said sales of TV shows on DVD have opened up yet another opportunity for studios.
That's now a $1 billion-plus market for studios that really didn't exist five years ago, he said.
The prosperity has not gone unnoticed within Hollywood's labor unions, which have been making a point for several years that decades-old formulas for splitting up revenues from home entertainment should be replaced with a new way to divide the pie.
In contract talks concluded earlier this year with writers and directors, the Alliance of Motion Picture and Television Producers managed to hold the line on keeping the old formula intact. Talks between the AMPTP and the Screen Actors Guild are currently under way - and SAG President Melissa Gilbert has made it plain her union will bargain hard for a greater share of revenues from DVD sales and rentals.
It's time for us to be more fairly included in the studios' explosive growth and success, she said.
In any case, there appears to be a huge amount of room for growth in the DVD market.
Even now, it's only in 65 percent of U.S. households, said Staddon.
Looking ahead, online distribution of content seems poised to challenge DVD at some point - something Staddon called the logical conclusion of the digital household. However, he said that even when the home-entertainment business migrates to electronic content delivery, DVDs will still have a place in the home-entertainment mix - because they will be able to deliver higher-quality picture and sound and a higher degree of interactivity.
That is going to be difficult to stream across a server, he said. That is going to be one of the ways the DVD market will continue to grow and be healthy, in parallel to the online delivery platform, which will be more like the rental model. |
