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Ratcheting Up the DVD Buy

15 Dec, 2002 By: Kurt Indvik

It's a mixed up, crazy dual format world in the home video business going into 2003 and it will remain a struggle for both studios and retailers to juggle their DVD and VHS businesses even as they participate in the creation of the DVD era.

Figure that of the 96 million U.S. homes with VHS players, say 38 million also have a DVD player going into 2003 (I am averaging a couple of estimates here from several sources). Also figure that, according to at least one estimate from Warner Home Video, 10 million households have two DVD players. Now think of the rental or retail combinations any one buyer can represent when they walk into a store. I won't even try to factor into the mix DVD-enabled video game consoles.

Despite the stupendous and exciting growth in DVD, consumers are still very much fractured in their use of home video platforms, even as they continue to embrace the concept of collectibility of movies (predominantly on DVD) while still visiting the rental counter (where VHS still has the edge.)

It's clear from the current poll on this Buzz page that retailers are committing themselves to building DVD in rental (and, of course previously viewed sellthrough), since more than 56 percent of the poll respondents say they intend to expand their DVD inventory by more than 21 percent going forward. But they are also fully aware that VHS still drives the majority of rental transactions (56 percent for the month of November, according to Video Store Magazine market research). The VHS rental business continues to decline, however, and as one studio head told me last week, retailers know they won't go wrong heavying up on their DVD buys.

On the retail/sellthrough side, a number studio execs express surprise and confidence that there is still a very strong VHS market, even as they continue to see 65 percent DVD sales on most major new releases, on average. The fact is they have to do a lot of title-by-title consumer surveys polling intent to buy by platform to try and get a handle on how to plan for DVD/VHS splits on new releases. The multiplatform household of today means any number of combinations is possible for any one title in terms of positioning the DVD and VHS product, especially VHS pricing and marketing. And that's going to continue for the next 12 months or more.

Despite the legitimate hype over DVD, this will still be a dual-personality business in 2003.

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