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The DVD Business: A History of Strong Growth

3 Apr, 2004 By: Judith McCourt

From the beginning, DVD was a growth machine. Seven years ago, March 24, 1997, Warner Home Video debuted the DVD for sale in seven test cities (New York City, Los Angeles, Chicago, Dallas, San Francisco, Seattle and Washington, D.C.). Despite the limited distribution and the skepticism of some, consumers, with the help of savvy retailers and the Internet, were quick to circumvent the test markets.

Retailers, who saw a future in DVD, began buying DVD movies at retail in test-market areas and selling to consumers outside of the target areas. On the Internet, Warner titles were available for purchase and shipping nationwide.

The first batch of DVDs to hit the marketplace included Warner's Twister, Eraser, Blade Runner and The Fugitive, all of which ended up on the top 10 DVD seller list of 1997.

Other studios joined the market and by the fourth quarter, when discs and players were available nationwide, concerns about consumer acceptance of the format were quickly evaporating. The focus turned to production issues and how soon facilities could ramp up to meet the demand.

Consumer DVD spending jumped from $400 million in 1998, its first complete year of domestic release, to more than $17 billion in 2003, according to Video Store Magazine Market Research.

Consumers loved the day-and-date sellthrough availability of DVDs. In 1997, Warner's Twister was the top seller for the year, selling an impressive 36,000 units on DVD, according to Video Store Magazine estimates. The Digital Entertainment Group (DEG) pegged total DVD hardware sales to consumers at 305,000, despite the average price tag of $489.97.

In 1999, Warner's The Matrix was the first title to sell more than 1 million units and became one of the staples of every early adopter's collection. In the same year, DVD software shipments escalated to 98 million, from 25 million in 1998. The average price of a player dropped to less than $300.

By 2001, the average price of a DVD player slipped to $200 and more than 9.8 million DVD players were sold. Software records collapsed in tandem, and DreamWorks Home Entertainment's Shrek and Buena Vista Home Entertainment's Pearl Harbor both sold more than 5 million copies in the calendar year of their release.

By 2002, just five years after DVD made its debut, the DEG estimated that more than 40 million U.S. households had at least one DVD player. Three titles (Columbia TriStar Home Entertainment's Spider-Man, Buena Vista Home Entertainment's Monsters, Inc. and Warner's Harry Potter and the Sorcerer's Stone) broke the 10 million-unit mark for sales in 2002.

With players available at less than $100 and U.S. household DVD penetration at more than 50 percent, 2003 was another corker. Five titles sold more than 10 million units in their initial year of release. Buena Vista's Finding Nemo sold 19.7 million units, setting another record.

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