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TK's MORNING BUZZ: The DVD Industry May Have Hit Its December Numbers, But It Used Cheaper Players to Do So

1 Feb, 2001 By: Thomas K. Arnold

Despite Alan Greenspan's unexpected endorsement of a tax cut and yesterday's interest rate drop, signs continue to point to an economic slowdown.

Just look at our own industry: In recent weeks, we've had AOL-Time Warner report huge losses and cut more than 2,000 jobs, we've had Amazon.com cut 1,300 jobs and close a distribution center, we've had Disney shutter Go.com, and, honing in further to the home video spectrum, we've seen A-Pix Entertainment parent Unapix file for Chapter 11 bankruptcy protection, we've seen New Line Home Video cut nearly one-third of its jobs, and now we're hearing reports of significant layoffs -- amounting to nearly half its sales force -- at one of the remaining national video distributors.

Even DVD, the golden egg of the home entertainment business, has some bad news to report. In his DVD Release Report, Ralph Tribbey, who also covers DVD for Video Store Magazine and Hive4Media.com, reports that DVD hardware shipments didn't meet expectations in December and the industry fell about half a million units short of its midyear projection that 9 million DVD players would be shipped to retailers in calendar 2000.

Tribbey was promptly chastized by the DVD Entertainment Group's ever-watchful Amy Jo Donner, who maintains that if you factor in cheap players from Korea and China, that industry yardstick the Consumer Electronics Association doesn't count, the 9 million-unit tally was, in fact, met.

My question: Would the cheap players even have been brought up had the number been met initially? If this sounds like a sensitive issue, it is: breaking apart the CEA numbers, one finds that the number of DVD players shipped to retailers in December took an unexpected dive to 792,919 from nearly 1.38 million the month before. In fact, player sales in December were the lowest since July, and Tribbey believes that's significant.

"Here's two things that could have happened: Retailers may have cut back on ordering players to tighten up their inventories, which is a mirror of what happened in the retail community overall in December, or a lot of these retailers may have shifted to lower-priced imports that the CEA doesn't count as opposed to top-of-the-line stuff like Toshiba and Sony," Tribbey says.

In other words, the DVD industry may well have hit its number, but it used cheaper players to do so. The big retailers tightened their belts and spent less money. Is this indicative of an economic slowdown, or is it merely sound business sense?

Methinks it's a little of both.

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

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