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TK's MORNING BUZZ: Studio Execs Are Concerned That the DVD Sellthrough Market is in for a Period of Slowing Growth

25 May, 2001 By: Thomas K. Arnold

While everyone's still bullish about DVD sales, studio executives are privately concerned that the sellthrough market is in for a period of slowing growth as more and more under-$200 players come into the market and their less-affluent owners balk at plunking down $20 every time they want to see a movie.

One studio executive with whom I spoke said even the big retailers worry that the fourth quarter won't be as explosive as they previously thought and studios are already paring their expectations.

Don't mistake this for a slowdown in the public's appetite for DVD, however. Note I said "DVD sales." DVD rentals, on the other hand, are soaring, and studio executives see that trend gaining momentum as the year progresses and the DVD player penetration rate rises up the double-digit ladder.

Indeed, from what I'm hearing in Hollywood, the prognosis for retailers who rent DVDs has never been better, while the future for those who only sell discs is starting to appear a little hazy. It's not that sales are slacking off; it's just that sales aren't expected to continue rising at the same rate they have, which means the big national chains might have to recast their revenue projections and settle for a lower return on investment -- a prospect I'm sure they're not exactly welcoming with open arms.

None of this really surprises me. When DVD was first launched and retailers were crowing that they were moving an average of 22 discs for every player they sold, I figured that made sense because these techies who could afford to pay $750 for a basic player wouldn't think twice about feeding their expensive new habit. When the rate slowed to an average of 16 discs per player, that didn't surprise me, either. Player costs were coming down and the technology was penetrating middle America, which doesn't have the discretionary income of the high-tech set.

The latest estimates I've heard bandied about are that retailers are moving about eight discs for every player that sells. People who waited this long to buy a DVD machine for $150 or even $200 have neither the inclination nor the income to buy every movie they want to watch; otherwise, they wouldn't have waited four years to jump on the bandwagon.

They rent movies out of habit, and habits die hard.

Comments? Contact TK directly at:TKArnold@aol.com

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