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New DVD Households Are Hungry &mdash; <br>Feed Them Early, With a Feast of Titles

16 Jan, 2004 By: Thomas K. Arnold

Think broad.

The fourth quarter of 2003 saw consumers spend around $4.5 billion on buying DVDs, and much of the money went to the big blockbusters that each week battled it out for supremacy on the shelves of the big chains.

If the studios learned a lesson, it is this: You had better take an in-your-face attitude toward marketing, because if you don't make a big splash the first weekend, you're likely not going to have a second chance. The concept of “legs” disappeared long, long ago — the days when a title, like the original Lion King cassette in 1995, could rack up strong sales for several consecutive weeks are over, and the new reality is that if studios don't sell at least one-third of their shipment by the first weekend, they're out of luck.

As a result, virtually every studio executive with whom I've spoken said consumer marketing dollars are headed for a huge uptick in 2004, and living or dying by the hits bears increasing relevancy. Just like in theatrical, there's generally only one big winner each week, and if you're sharing a Tuesday release date with two or three other heavyweights, as you're likely to do in the typically crowded fourth quarter, you need to do all you can to stand out and grab the consumer's attention so you finish in the money and not in a pickle.

The problem in this isn't just the risk inherent in a first-week battle of the heavyweights, but what to do when there are no heavyweights. Not all studios have golden runs, and if you depend entirely, or even mostly, on your parent company's theatrical slate, you wind up with very little control over your division's fate — and your professional destiny.

So in addition to upping the marketing ante next year, what I'm hearing from smart studio executives is the pressing need to broaden their product offerings. The feeling is that with buy rates still up in the 15- or 16-DVDs-a-year range for even the newest generation of DVD owners — the ones who weren't motivated to buy players until this past holiday season, when the price dipped to as low as $19.99 — the bottom isn't about to fall out of the sale market.

New DVD households are almost as hungry as their early adopter predecessors — and you'd better feed the kitty while you can. Observers don't forecast any significant drop in buy rates until penetration hits the 70 percent mark, and that's still about two years off.

In the meantime, the prevailing sentiment is to offer DVD consumers the widest possible assortment of product. And without giving away any secrets — a lot of these studio executives with whom I've spoken are fearful of word getting out about their specific plans for '04 — let me just talk in generalities about some of the trends and developments we're going to see in the coming year.

1) Short-form children's programming will continue its rapid transition from VHS to DVD. If you dissect their numbers, the Digital Entertainment Group (DEG) sees as many households buying a second DVD player this year as coming online for the first time. That means the old adage about the VCR moving to the bedroom, or the kids' room, is no longer correct — it's moving into the trash. And if you factor in the PlayStation 2 phenomenon and the anticipated growth in other ancillary playback devices, including DVD players in SUVs and minivans, there's a huge gaping market that won't be satisfied with the handful of features aimed at kids that are released on DVD each year.

2) TV DVD will continue to sail away. There are gobs of great stuff still sitting in the vaults, and consumer research has found that once you get into the habit of watching TV shows on DVD, you're likely to stick with it. Expect some shows you never thought would see the light of day — heck, maybe we're even in for a complete first-season set of that treasured Jerry Van Dyke classic, “My Mother, the Car.”

3) Old movies will come out in droves. A few years back, some studios put a temporary halt on pushing their catalog out on DVD because the price points were so low. They wanted to wait until the price went back up. Guys, that ain't going to happen. Prices have come down even more — and yet demand has gone up so astronomically that studios would be foolish to sit on the sidelines any longer.

4) Look for December 2004 to bulge with hot new releases. I remember lots of skepticism about Disney's decision to not issue Pirates of the Caribbean on DVD until December. “They'll miss out on sales” was the common refrain. Well, Disney sold 11 million DVDs in a single week and easily won the battle for fourth-quarter market share, while studios that pushed their hot titles out early suffered from soft sales. Guess who's laughing now.

5) We're going to see a uniform next-generation standard simply because we have to. High-definition is coming fast, and our industry can't afford to let satellite, cable, or even broadcast TV get it first. My money's on Blu-ray, a true next-generation format. I see a lot of pride-swallowing in the coming months, and an agreement by year's end.

I've got several other prognostications to make, but this column is running a bit long and I'd better stop. Perhaps I'll touch back on this topic in a few weeks. In the meantime, check out what's happening at retail this month. From most accounts, DVD sales never stopped soaring with the end of the holidays. And you can bet that the release slate for January 2005 is already taking shape — and it will have a lot more heavy hitters than this year's list.

One thing about our industry — we're fast learners.

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