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TK's MORNING BUZZ: Will DVD Replace VHS or Co-exist Alongside It?

22 Mar, 2001 By: Thomas K. Arnold

Mitch Lowe of NetFlix shares his vision of the digital consumer with attendees of the Hollywood Summit and the 31st annual IRMA conference at last night's opening dinner. (Hive Photo News)

INDIAN WELLS, Calif. — If the guys at NetFlix are right, DVD is going to catch on a lot quicker than most people think —- and yet the question of whether the format will replace VHS or co-exist alongside it is still up in the air.

NetFlix, of course, is the amazingly successful online DVD rental shop that now counts more than 300,000 subscribers -- including Secretary of State Colin Powell —- who pay $19.95 a month for unlimited rentals. Order as many movies as you can, and keep them for as long as you want —- with the only stipulation being that you can have no more than three movies out at any one time.

We at Video Store Magazine invited NetFlix executives Mitch Lowe and Ted Sarandos out to this Southern California desert resort town to kick off Hollywood Summit, a special program we put together for home video studio executies during the 31st annual International Recording Media Association (IRMA) conference here at the Hyatt Grand Champions.

Speaking at last night’s opening dinner, Lowe and Sarandos shared some interesting findings they’ve gleaned in the three years that NetFlix has virtually dominated the online DVD rental market, about everything from usage (DVD renters are three times as active as their VHS counterparts) to demographics (mostly male, average annual income over $75,000, a growing number with kids).

The most interesting part of their presentation, however, was their projections for the DVD penetration rate. Lowe and Sarandos divided the DVD audience into six categories. The first group to buy into the digital disc was, of course, the early adopter category. Now, we’re in the next stage, that of the high-tech households. Next come the "keeping up with the techies," consumers who are spurred to buy players because their more tech-savvy friends have them. After that comes mainstream, followed by tech laggers and, finally, the end-of-the-train set.

By the time the end-of-the-train set comes around, 94% of households will have DVD players, Lowe and Sarandos said. The estimated time of arrival: 2006.

But whether we even get to that point is questionable, the pair said. First, we have to get past the big hump, reaching the mainstream audience, a point Lowe and Sarandos say we should be at in 2003. "That’s a pivotal year," Lowe said. "That’s when we should find out whether DVD will replace VHS, or whether it will live alongside it."

My bet’s on the former. Readers, how about you?

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

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