DVD seems to be gaining momemtum.
Analysts Give DVDs a Positive Spin
By DAVE McNARY
c.1998 Los Angeles Daily News
LOS ANGELES -- Digital versatile disc players are well on their way to
joining TVs, VCRs, PCs and CD players as a must-have consumer electronics
product.
DVDs have already moved from the periphery as a favorite toy for the
so-called ''new adapters'' who buy leading-edge gizmos. Mainstream status
seems inevitable.
One trade group predicted last week that DVDs are within four years of
becoming a mass-market item. By the year 2002, there will be DVD video
players in 8.6 million American homes and factories will produce 183 million
discs, according to the study by the International Recording Media Association.
''Look at 2002 as only the beginning,'' proclaimed Charles Van Horn,
IRMA executive vice president.
DVDs and players went on sale 18 months ago and are expected to be
in 800,000 homes by the end of the year, IRMA projects. Other trackers
believe that figure could reach 1.3 million.
DVDs, which are the same size as audio compact discs with seven
times the capacity, play full-length movies with digital clarity, offer six-channel
sound and instant rewinding, and store massive amounts of information such as
trailers, deleted material and interviews. A basic DVD player retails for $400
while discs sell for $20 each. The number of outlets selling DVDs will hit more
than 12,000 at the end of this year, compared to 5,000 at the end of 1997.
The trade group also said typical consumers are buying DVDs at a rate
of 15 to 20 per year, compared to 10 to 15 VHS videotapes.
''IRMA's statistics chart a rapid rise for DVD during the next four years
as the format establishes a strong consumer niche for itself,'' Van Horn said.
''DVD ... is a rather small marketplace in comparison to VHS, but as
the first true convergence entertainment product, the potential, according to our
statistics, is tremendous.''
Adding further fuel will be the inclusion of DVD-ROM players in most
new personal computers. IRMA projects combined worldwide production of
DVDs will reach 430 million in 2002 while DVD-ROMs will reach 850 million.
Thomas Adams, president of Adams Media Research, says IRMA's
statistics may be on the conservative side based on what he foresees as strong
sales during the upcoming holiday season. He notes that DVDs are growing at
similar rates to compact discs when that format was rolled out in 1983.
''The bottom line is that round discs are in and cartridges playing in
machines with moving parts are out,'' Adams asserted. ''I don't see any reason
to change the view that it's going to happen.''
The IRMA projection came in the same week as a trio of key
developments that underscore the growing importance of DVDs:
--20th Century Fox dropped its opposition to the format and announced
plans for eight titles to be released later this year. Fox's move was crucial
because it had been the lone major studio holdout on DVDs and because its
endorsement clears the way for Paramount and Fox to release a DVD version
of box-office megahit ''Titanic.''
''If Fox and Paramount come out with a 'Titanic' DVD, it will really
propel the market,'' said Jay Frank, sales manager at home electronics retailer
Evolution Audio in Agoura Hills. ''This format is not a fad. It's here to stay.''
--Image Entertainment Inc., which remains the nation's largest laserdisc
producer but is scrambling to ramp up its DVD operations, turned around
profits for its quarter ended June 30 with earnings of $205,000 compared with
a loss of $191,000 in the year-ago period. Sales rose to $17.1 million from
$16.9 million with 38 percent of the 1998 revenues from DVDs.
Even though the company's stock is not tracked by any Wall Street
analysts, investors have significantly boosted the share price as an
endorsement of Image's commitment to DVDs. The stock's value rose from
$3.0625 at the end of March to $10 last month. It closed at $8.125 on Friday.
''Investors are obviously betting that DVD will grow,'' said Jeff Framer,
Image's chief financial officer.
''We realize DVD is the future, but we still have to do laserdisc,'' added
Framer, who believes much of the interest in DVDs has come from
technophiles and early adapters who already own laserdisc players, which
usually cost $1,000 each plus $50 a pop for the laserdisc. ''DVD has done so
well because it already has a captive audience and it's so much cheaper.''
Jae Kim, an analyst with Paul Kagan Associates in Carmel, Calif.,
credits Image's management for having the foresight to diversify. ''They saw
the handwriting on the wall and knew that their future would evaporate like a
water drop in the Sahara if they relied solely on laserdisc,'' he said.
Image will move its distribution operation next month from Los Angeles
to a state-of-the-art facility in Las Vegas but will keep corporate headquarters
and production operations in L.A.
--Warner Bros. is planning a special 25th anniversary release of ''The
Exorcist'' on DVD even though the horror hit was one of its original DVD
releases last year. There are now well over 1,000 movies released on DVD.
The new version of ''The Exorcist,'' with a price tag of $24.95, includes
a 75-minute BBC documentary, an introduction by director William Friedkin, a
separate documentary on storyboards and production, outtakes of sound
effects, commentary by screenwriter William Peter Blatty and three original
trailers.
One potential problem has emerged for DVDs: a rival pay-per-view
format, Divx, that carries the backing of retailing giant Circuit City. The Divx
system is being tried out in the San Francisco and Richmond, Va., markets and
will go nationwide next month.
With Divx players, consumers rent titles for viewing that become
unviewable in two days, eliminating the need to return the disc. But opposition
has emerged over the issue of the consumer electronics industry establishing a
beachhead with the long-term goal of making the consumer pay per use on all
forms of entertainment.
Additionally, many retailers aren't pleased since they believe they'll be
cut out of most revenues. Tower, Suncoast, Sam Goody, Hollywood Video,
Fry's Electronics and Warner Bros. - the strongest Divx proponent - have
bought billboard space in San Francisco to proclaim, ''Only Open DVD
Delivers.''
Adams, however, believes the format war is somewhat incidental over
the long term. ''Divx will appeal to some people who want the feature, but I
think that arguing against it may be shooting the overall business in the foot,''
he said.
For Kim, the major issue isn't competing formats, it's piracy. If codes are
unscrambled, copies made by criminals could be of much higher quality than
typical illegal copies.
''We've always been optimistic about DVD,'' he said. ''The only real
thorn has been copy-protection issues because if someone is able to bust the
encryption, they can derail it. That's exactly why there needs to be severe
penalties.''
As for more distant future, Adams believes that the DVD format will
eventually have to offer recordable features. ''Recordability could be the next
wall that DVD faces, but we probably won't get to that for five to 10 years,''
he said.
Tim |
