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TK's MORNING BUZZ: What's Your School of Thought -- the Expanding Pie Theory or the Cannibalization Principle?

5 Mar, 2001 By: Thomas K. Arnold

In my conversations with some of the industry's most celebrated visionaries and luminaries, I'm noticing two distinct schools of thought in regard to the future of home entertainment and the arrival of true video-on-demand through electronic channels.

One I'll call The Expanding Pie; the other, The Cannibalization Principle.

The former school of thought goes like this: The viewing of entertainment in the home is becoming more and more fractionalized, and that means consumer spending on bringing entertainment into the home is bound to go up, up, and away. As recently as the middle 1990s, it was still a popular family pastime for Dad to bring a movie home after work and everyone to watch it together.

Today, however, the family unit is disintegrating, with Dad watching pay-per-view sports on the big screen in the family room while Mom watches a romantic comedy on the VCR in the bedroom and the kids alternate between playing games and watching DVDs on their new PlayStation 2.

The leading cheerleader in the Expanding Pie school is Blockbuster's John Antioco. He's basing everything he does on this "fractionalization" theory, and intends to have a bite of it all: video rentals, video sales, satellite, video-on-demand, and whatever else comes down the pipeline next.

Meanwhile, those who believe in The Cannibalization Principle feel the single biggest leap in the history of home entertainment was the introduction of the VCR, which opened the door for consumers to bring movies into the home, on demand. This explosion will never be duplicated, and with VCR penetration at the saturation point, any new option for bringing entertainment into the home will eat into the existing model, namely, packaged media.

The only way to avert this cannibalization, disciples of this school of thought say, is for the population of the world to suddenly double, or for some new vehicle for movie-watching to emerge that's as revolutionary as the VCR.

I'm a staunch subscriber to the Expanding Pie school of thought. New vehicles are, in fact, emerging all the time. With the PlayStation 2, we now have a game console that doubles as a movie machine. That's certainly going to have an impact on video watching, particularly among the younger set; already, I'm seeing Britney Spears music videos and other DVDs aimed at young people carrying stickers noting their PlayStation 2 compatibility.

Another new vehicle is the car. No, wait -- hear me out. From what I hear, portable DVD players with monitors that fit into the back of headrests are starting to become very popular in some urban markets, and I'm sure that's only the beginning. Anyone who's ever driven with a bunch of kids in the car knows how annoying they can be, particularly on long car trips. This is the perfect solution -- and with the number of minivans and SUVs on the road continuing to increase, there's a match made in heaven.

And still another new vehicle is, well, the old, familiar one, the home. I firmly believe viewing habits are becoming more and more fractionalized; I see it in my own home, and I see it in the home of my friends. Two years ago, I said I'd never watch a movie on my computer; now that I have a computer with a DVD drive, I'm screening two or three films a week while the kids watch "Scooby Doo" or the "Rugrats" downstairs in the family room and my wife watches "Sex in the City" videos in the bedroom.

Yes, I guess you can call me a pie man. Readers, where do you stand?

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

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