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DVD Will Fuel “Multichannel” Retail Growth

4 Jul, 2002 By: Jessica Wolf

DVD will continue on its path of growth, though buy rates will drop as the market becomes saturated -- and as more retailers jump on the DVD bandwagon and other discretionary consumer electronics, both hardware and software, enter the market. So said panelists at the “DVD: When It's 10” panel discussion, held June 28 during the “DVD at 5” conference produced by Video Store Magazine and the DVD Entertainment Group.

Panelists also agreed that integral to DVD's continued growth are the emergence of affordable recording platforms for DVD and a stronger children's software market.Panelists included Tom Adams, president of Adams Media Research; Barry Sosnick, analyst with Fahnestock & Co.; Ben Keen, executive director of Screen Digest; and Paul Ramaker, VP of merchandising, movies for Wherehouse Music. The panel was moderated by Kurt Indvik, editor-in-chief of Video Store Magazine.

The topic was the rapid growth of DVD in its first five years and challenges facing the format's future.

Sosnick noted that DVD's target demographic faces strong competition from the revitalized video game market. He also said industry members should keep an eye out for more retailers to strengthen their DVD presence, using Wal-Mart's DVD ramp-up over the past few years, and Best Buy and Circuit City's ever-strengthening DVD commitments, as examples.

“Product transitions tend to favor the strongest retailers,” he said.

As more types of consumer products like home entertainment hardware, computers and handheld devices enter the market, and as retailers become more multichannel than ever, DVD will have more competition for consumers' discretionary dollars, he said.

“There's no such thing as a video store anymore -- we're moving more toward multichannel stores,” Sosnick said.

Adams, with video research from before and after DVD's launch, pointed out the major revenue stream DVD has created for studios, which have always made the bulk of their dollars from sellthrough, rather than rentals. Though DVD continues to chip away at VHS's hold on the rental market, Adams predicts the DVD sellthrough market will dominate overall studio and retail video revenue by 2006.

Ramaker, the retail representative on the panel, said retailers have “borrowed a page from the music industry's transition from cassettes to CD” when determining how to balance product in the stores. Ramaker also said retailers must continue to market DVD aggressively.

Internationally, there are “considerable growth opportunities” for DVD, said Screen Digest's Keen, citing research that compares the $8 billion video market outside North America to North America's $22 billion market. Screen Digest research predicts DVD consumer spending will overtake VHS by 2003, and by 2006, DVD will make up three-quarters of worldwide video software spending. Screen Digest research also shows that, outside North America, video software spending will climb from $8 billion today to $30 billion in 2006, largely on the untapped potential of DVD.

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