Making VCRs Obsolete................................
nationalpost.com
Making VCRs obsolete
Hailed as the 'medium of the millennium,' DVDs look set to become the most popular item in home entertainment, and even video store owners are happy
Terry Pristin
The New York Times
Ozier Muhammad, The New York Times
Michael Becker, the owner of the two Video Room stores in Manhattan, believes DVD formatted movies will reinvigorate the video retail business.
NEW YORK - Like many movie lovers, Victor Rosa has run through most of the titles available at the local video store. But not long ago, Mr. Rosa, the assistant manager of a fast-food chain restaurant in midtown Manhattan, found himself at a Blockbuster outlet near Times Square renting Enemy of the State, a 1998 thriller he had watched on his VCR before. Now, thanks to a Christmas gift from his wife, he was eager to see the movie again.
"I want to check it out on DVD," said Mr. Rosa, who has amassed a personal library of more than 200 videotapes at his home in Brooklyn.
About 3.9 million digital videodisc players, many now priced under $300, were sold last year, vastly exceeding industry projections (all figures in U.S. dollars). The surge in sales suggests that the new technology is not only catching on where other consumer electronics innovations, such as laser discs, did not, but that it is also on track to overtake videotape in a few years as the home entertainment format of choice.
Until, that is, it is supplanted by "video on demand" -- the opportunity to retrieve any movie via cable, satellite or, ultimately, the Internet -- which is still some years off.
Analysts and retailers say the growing popularity of DVDs -- which resemble compact discs that play music but are also capable of storing enough additional digital information to provide moving images -- is also expected to reinvigorate the video retail business by giving customers like Mr. Rosa a new reason to visit the video store. "It's making people interested in video again as a medium of entertainment," said Michael Becker, the owner of the two Video Room stores in Manhattan.
But video retailers reported mixed success yesterday. The Hollywood Entertainment Corp., the second-largest video store chain in the United States, said its same-store overall sales were stronger than expected for the fourth quarter, rising 4%, but Blockbuster's same-store sales rose 3% in the quarter, less than the 5% to 6% growth expected by some analysts.
For now, DVDs are simply an added feature at video stores. But they are quickly grabbing more and more shelf space. "It's an enhancement to our business," said Dean Wilson, the chief merchandising officer of Blockbuster, the largest video chain in the United States. Blockbuster, a unit of Viacom Inc., began stocking some stores with DVDs when the technology was introduced two years ago. It now carries them in more than 90% of its 4,500 owned and franchised outlets.
Tom Adams, president of Adams Media Research, an entertainment media research and consulting group in Carmel, Calif., said he expected video store revenues, including tapes and discs, to increase to $12.7-billion in 2002 from $8.7-billion in 1998.
"For what seemed to be a quickly maturing marketplace two years ago, that's a pretty good growth rate," Mr. Adams said.
Hollywood, which resisted competition from new technology in the past, was slow to anticipate the explosive sales of DVD players. But after some initial skepticism, the movie industry has welcomed DVDs, particularly as a lucrative new revenue stream from old titles. Studios are busily issuing "collectibles," including boxed sets of James Bond films, the Die Hard trilogy and the Alien films.
The reach of the technology now extends beyond the community of "early adopters," who can be counted on to try out any promising new gadget. These days, DVD technology is being embraced by ordinary consumers because of rapidly sinking prices for the players (as low as $170 for an off-brand model at Circuit City); a wider selection of movie titles, which now reaches 4,500 compared with just 1,800 a year ago; and a growing awareness that the sound and visual quality it offers are far superior to videotape.
Isador Monsanto, a security guard from New York, has been hooked on DVDs since he bought his player in 1998.
"When I used to watch a tape," he said at a store where he was renting Rush Hour and Flubber, "I didn't realize how grainy the image was until I saw the same movie on DVD."
The growing number of DVD drives in personal computers is also increasing the appetite for the new format. The number is expected to reach 33 million by this time next year, up from about 12 million late last year, according to the Video Software Dealers Association, a trade group. The computer drives are used not just to load software programs but also to play music and show movies on computer screens.
Some consumers have gravitated to DVD because of certain special features not available on VHS. Roberto Eliaschev, an advertising executive who splits his time between Caracas, Venezuela, and New York, said he preferred DVD because he could watch movies with Spanish subtitles. Jesse Driskill, a computer technician in Olympia, Wash., likes not having to rewind the tape. "No matter how careful you are," he said, "the tape gets old and starts getting scratchy."
For Lisa MacKenzie, a public relations executive in Portland, Ore., the selling point is the search feature that eliminates the need to rewind to find a particular scene. "I also like the addition of movie trailers, music videos and other fun stuff that makes the movie experience at home more like going to the movie theater," Ms. MacKenzie said.
As DVD players are becoming the latest must-have item, many people have also been upgrading their video hardware to use their new equipment to best advantage. In November, sales of colour televisions and projection televisions rose 8.4% and 10.9%, respectively, over the same month last year, according to the Consumer Electronics Association. And despite the explosion of interest in DVD players, sales of VCRs and television and VCR combinations continue to advance. The association said sales of VCRs were up 18% year over year, while sales of combination units jumped even more, by nearly 40%. The Best Buy Co., a major U.S. consumer electronics retailer, said yesterday its fiscal fourth-quarter profit would beat forecasts after strong demand for digital devices and other items pushed its December sales above expectations. Tandy Corp., owner of the Radio Shack chain, said its overall December sales were lower but it expected to meet profit forecasts.
Analysts say most people will hold on to at least one VCR until they are able to buy DVD players that are capable of recording -- a development that may be a few years away because of concerns about copyright protection. But the versatility of the DVD player, which also plays CDs, makes it possible to eliminate the need for a separate CD player.
Although sales of DVD players are taking off, disc rentals still represent only a tiny portion of the market -- $85-million out of a total of $8.1-billion in movie rentals. And while most video store customers expect to find multiple copies of any popular movie title on VHS, people looking for a particular title on DVD may walk away empty-handed.
Kathleen Pierce, a Manhattan publicist, decided on a whim to buy her husband a DVD player for Christmas. "I'm disappointed that there's only one of everything," Ms. Pierce said as the couple visited a video store for the first time since the gift was unwrapped.
That disappointment will be allayed if the movie studios agree to the same revenue-sharing arrangements with the retail industry that are in place for videotape. Under these arrangements, large operators can buy multiple copies of video titles for a fraction of their wholesale cost (as little as $8, as opposed to $65 or more), thus ensuring they can meet customer demand, in exchange for splitting rental revenues with the studios.
At least one studio, Warner Brothers, a unit of Time Warner, is negotiating with Blockbuster to work out a revenue-sharing agreement, said Warren Lieberfarb, president of Warner Home Video, the DVD market-share leader.
The wholesale price for most DVDs is $15 to $20 -- whether or not the item is to be rented or sold -- reflecting the fact that it is much cheaper to stamp out a disc than to produce a VHS tape. As a result, sales are still nearly equal to rentals as many people are choosing to accumulate their own collections, perhaps because DVD discs are more durable than tapes and take up less storage space. The industry estimated that 45 million discs were sold last year, bringing in $1-billion, about 15% of total video sales.
Mr. Adams said the average household with a DVD player bought 18 discs last year -- only one less than the figure for 1998, when many fewer homes were equipped with the players. He said the typical VCR owner buys only seven tapes a year.
Consumers seeking new DVDs are likely to shop for them at electronics stores such as Best Buy or Circuit City, discount stores such as Wal-Mart, or record stores such as Virgin or HMV. But many video rental stores are getting two bites of the apple by selling used DVDs at prices as low as $12 or $15 after the prime rental period has elapsed.
"It's excellent for the consumer and a good return after the rental period for the dealer," said Bo Andersen, president of the Video Software Dealers Association.
The inability to record movies is not going to slow the stampede to DVDs, Mr. Lieberfarb of Warner Home Video said. "Consumers have shown a willingness in droves to buy this product," he said. "DVD is the medium of the millennium. It's a win-win for everyone." |
