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Chicken Little, Don't Strain Your Neck

19 Aug, 2005 By: Thomas K. Arnold

No, the sky is not falling. And, no, we never said it was. Recently, some of us in the trade press have been assailed by the studios for allegedly writing “doom and gloom” stories about how bad our business is. We've been told the consumer press is picking up our downbeat diatribes and may be on the verge of pronouncing video dead — just as they did in 1997.

Let's set a few things straight. We never wrote about a slowdown in the business. We accurately reported a slowdown in the growth rate. Big difference. The DVD business is mature, with the majority of consumers having at least one DVD player. After years of double-digit gains, the growth rate has slowed to single digits — with projections of growth for 2005 ranging from 3 percent to 8 percent. That's what studio presidents told us, and research from Adams Media Research, Nielsen VideoScan and our own Home Media Research confirms.

It's easy to see why some studio execs are alarmed. For the most part, the mainstream consumer press has never understood home video. They're quick to misinterpret statistics and jump to erroneous conclusions. The best way to change their perception is for our business to regain its momentum, and there are encouraging signs. Early indications are that the fourth quarter could be a sales blowout, with a multitude of new theatricals and special editions coming to market. The spring and summer's relatively weak theatrical slate could prove a bonanza for DVD sales, as ho-hum box office titles typically overperform on video.

I'm seeing other positive developments, as well. Studios are making an effort to reach underserved markets, as evidenced by the emergence of “multicultural” marketing. They're also broadening DVD's reach into previously untapped retail channels. Our own market research shows supermarkets making a dramatic re-entry into the home video fold. Eventually, that's got to have a big impact on our business.

Each time the business faces problems — real, perceptual or a little of both — our industry tends to rally, and things get better. In 1997, when rentals were flattening and the theatrical schedule was weak, studios crafted various revenue-sharing and copy-depth plans that ultimately led to a recovery.

I believe another rally is already underway.

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