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East Coast Video Show: DVD's Popularity Is Driving Hardware and Software Sales to New Levels in a Widening Market

12 Oct, 2001 By: Anne Sherber

ATLANTIC CITY, N.J. -- Household penetration of DVD players has passed 20million units, demand for discs is expected to exceed 1 billion units next year and the format's rapid adoption is driving sales of otherhardware components, panelists at the East Coast Video Show's “Currentand Future DVD Trends” presentation told their audience.

Retailers, hardware manufacturers and studio executives were on hand toshare sales and merchandising strategies and discuss hardware and software trends.

Video Store Magazine editorial director Bruce Apar moderated the trends panel and provided some proprietary DVD rental data compiled by Video Store Magazine's market research department.Panelists included Joshua Pine of duplicator Technicolor; Craig Eggers,Toshiba's director of DVD and digital product planning; Stephen Einhorn, president of New Line Home Video; Mitch Lowe, v.p. of strategicalliances for online DVD renter Netflix; and USA Home Video president Joe Amodei.

Multichannel receivers, audio components, home theater systems and speaker systems are among the hardware benefiting from DVD's popularity, Eggers said, noting hardware sales figures don't include the 93% of PlayStation 2 owners who use their game machines as DVD playback devices, or owners of computer-based DVD-ROM drives who watch movies ontheir PCs.

Almost 97% of players sold were priced below $300, Egger said. While that may be bad news for hardware manufacturers, it translates to bigger sales for retail outlets that sell discs. Falling prices for recordable DVD players will also drive hardware and software sales. One hardware manufacturer is expected to have a $599 recordable player available next summer, Eggers said, while those available now are priced between $999 and $1,199.

Program suppliers are ready. Demand for nontheatrical product has grown, Amodei said, citing USA's Ultimate Jordan disc. The disc, which includesall of the label's existing Michael Jordan videos as well as “Nike commercials that never aired and footage from the locker room,” surpassed target numbers “before Michael even announced his comeback,” Amodei said.The label's sports division is also planning a VHS and DVD day-and-date release for its very popular Super Bowl program that is scheduled tostreet just three weeks after the game.

Einhorn talked up New Line's proprietary Infinifilm brand, which features a series of pop-up menus that let viewers access the value-added materials on a disc in context. “We were looking for a way to leverage the capabilities of DVD to the max,” said Einhorn.

Although program suppliers said current DVD customers prefer widescreen to full-frame versions, both admitted that as the DVD audience broadens, consumer demand for full-frame versions might grow. “Our current customers prefer widescreen. Our future customers may not,” Amodeisaid.

Retailers at the session expressed concerns over potential changes in DVD pricing. Einhorn tried to allay some fears without actually committing to maintaining the single-tier pricing that's so important tosmall retailers. “At the end of the day,” he said, “revenue optimizationis what it's all about. As long as the economics make sense for retailers, we'll all do OK.”

Mitch Lowe, v.p. of strategic alliances for Netflix, presented research indicating:

• DVD buyers are getting younger

• more are female

• families with less disposable income than early adopters are joiningthe DVD universe; and

• DVD viewers are more likely to snack on fruit than the VHS audience.

Lowe also reported people watching DVDs are more inclined to sit up while watching than those watching VHS, who are inclined to, well, incline.

Consumers surveyed about what takes a DVD from a rental to a purchase cited improved audio and video quality and bonus materials — specifically, deleted scenes and alternate endings.

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East Coast Video Show

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