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What Does a Mature DVD Market Mean For the Industry?

23 Dec, 2004 By: Kurt Indvik

As we reach the end of 2004 and reflect on the year, we hear words like “mature market” and “transition” emerge from the industry as it looks to 2005 and beyond.

Isn’t it amazing that after just eight years in existence, we hear DVD might have reached its zenith? At least this is the anecdotal evidence, as studio executives see a softening of sales for the latest hit movies going into the fourth quarter — although the numbers for 2004 will show a growth rate in sales of more than 11 percent from 2003, according to Video Store Magazine Market Research.

Our society’s ability to absorb technological changes has become quicker, and suppliers are better at driving that adoption with low prices and applications that offer consumers more bang for their buck.

So now we’re trying to imagine what this mature market phase of DVD will bring. Like the baby-boom generation that will work and live longer than previous generations (and was responsible for driving DVD’s growth), I think DVD has an interesting and longer-lasting “mature” market phase than previous home entertainment technologies that took longer to reach mass market penetration but then, after taking decades to get there, had more “older” households ready for a format change.

From now on — and until consumers can be convinced to embrace the next generation of digital-disc entertainment — it’s all about managing a “mature” business. And although high-definition disc technology seems ready for market introduction 12 months from now, it’s possible that we’ll have several more years of steady, single-digit growth in the current DVD format that reached critical mass so quickly. There will come a day — as HDTV becomes ever-more affordable and high-def content ever-more available — that next-generation disc technology will likely share the home entertainment stage with digitally delivered content. That’s arguably several years off.

Meanwhile, Hollywood will moderate its sales expectations and adjust expenses accordingly. Retailers and suppliers will find revenue growth in product niches. Sellthrough has emerged as the dominant power in home media retailing, but it’s also possible that the rentailer business could re-emerge as buy rates soften, shelf space at larger sellthrough chains stays level and rental finds its equilibrium (maybe even an uptick?) and continues on with growth in previously viewed titles and other sellthrough opportunities.

Being a mature market offers opportunities on a more judicious level as we await a new generation of technology and for consumers to come forward and take the business to new heights.

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