Video rentals seen as key to success of DVD medium
By Bob Tourtellotte
LAS VEGAS, July 9 (Reuters) - As the digital videodisc
(DVD) approaches its first anniversary on the U.S. market,
proponents of the new medium for playing movies at home say the
key to building consumer interest is putting DVD on the shelves
of video rental outlets.
"The key to growth of DVD is likely to be directly related
to the product being available at the video rental store," said
Jeffrey Eves, president of the Video Software Dealers
Association (VSDA).
For the most part retailers are willing to invest in DVD,
but their enthusiasm is tempered by the number of DVD players
people are buying, the cost of DVD and by two other
technologies -- DIVX and digital pay-per-view -- clouding the
horizon.
Launched nationwide last summer, DVD is a new digital
technology that puts movies on a five-and-a-half-inch disc much
like an audio CD or computer CD-ROM.
Because DVD provides a clearer picture and crisper sound
than videotape, some industry experts believe it may replace
home video in coming years. And in its first year in the
market, early adopters seem to be taking to DVD.
Eves presented consumer survey figures showing that DVD
awareness has doubled to 37 percent of the U.S. population this
year from 18 percent in 1997.
About 600,000 players were sold in the United States
through June, below first-year forecasts of 800,000. But
proponents note that figure exceeds the first-year sales of
audio CD players, 320,000, and for VCRs, 515,000.
At a luncheon in Las Vegas on Wednesday, Warner Bros. Home
Video President Warren Lieberfarb said sales of DVD movies
generated revenues of $110 million in the first year. Warner, a
unit of Time Warner Inc. , has been a major DVD backer.
DVD movies sell at retail for about $25. But the mass
rental market is seen as the key to more consumer awareness.
The two industry heavyweights, Viacom Inc.'s
Blockbuster Video and Hollywood Entertainment Corp. ,
have slowly embraced DVD and plan to boost its presence in
their stores as the Christmas holiday season approaches.
John Antioco, Blockbuster's chief executive, told Reuters
his company currently was testing DVD in 100 stores, with plans
to put the movies in 1,000 stores in the near future.
But Blockbuster and Hollywood control only about 34 percent
of the video rental market, according to VSDA figures, leaving
DVD's backers the other 66 percent to conquer.
"I will be bringing DVD into my store," said Scott Prost, a
Minneapolis-based independent retailer. "I don't think you can
go wrong at a cost of about $18 (to retailers) a unit."
To be sure, there are few DVD players in homes compared
with VCRs, which are in 80 percent of all U.S. households.
Retailers also worry their cost to buy DVDs from Hollywood
studios will rise to the average $70 per unit they now pay for
videotapes if DVD takes off. They believe the studios may seek
to boost their profits by raising prices.
At least two studio sources scoffed at that notion, saying
once the price paid for DVD was set at $18, studios would face
an uproar among retailers if they tried to raise it.
He also noted the likelihood that DVD rental pricing would
likely turn to one of several new revenue-sharing business
models that is sweeping the videotape side.
Concerns also focus on DIVX and digital pay-per-view. DIVX,
like DVD, offers consumers the ability to play back movies in a
digital format on a five-inch disc. But unlike DVD, consumers
buy a disc for about $4.99, then download a sort of
technological key that allows them to play it.
DIVX, backed by retailer Circuit City Inc. , offers
a compelling rental alternative to DVD and could confuse
consumers, retailers said.
Digital pay-per-view movies remain a few years away, but
cable, telephone and other companies are trumpeting the
delivery of all sorts of digital content -- like movies -- as a
product in the future.
The small independents worry their customers won't get up
from their couches and go to the local video store if companies
like proposed merger partners Tele-Communications Inc. and AT&T
Corp. can bring the movies into living rooms with just a flick
of the remote control. |
