Future Will Be Tougher, Panel Agrees19 Jun, 2003 By: Holly J. Wagner
Despite phenomenal growth during the last six years, DVD sales may face hurdles in the future as the format matures, a panel of home entertainment powerhouses agreed.
“The revolution is over. The easy going is behind us, and there is an evolution of product going forward,” said Best Buy SVP Gary Arnold to an audience attending the DVD in 50 conference. “Recordability, not high definition, is going to be the next consumer benefit.”
How much that might cut into prerecorded sales remains to be seen, but threats to video software growth loom on the horizon, said Warren Lieberfarb, the former Warner Home Video chief who's often called the “father of DVD.” Lieberfarb, who formed consulting firm WNL Associates after departing Warner late last year, said the video industry need not suffer the same decline as the music industry if executives take steps now to give consumers what they want legally. Otherwise, in five years “video executives will be explaining the decline in revenue from downloading and burning.”
Other issues that could cloud the industry's future are the need to diversify product offerings and a potential format war as video moves to high definition.
“The introduction of recordable is a call to arms to migrate to high-def with a single standard,” Lieberfarb said. Referring to DVD-Audio, he said the music industry “had a better way to give the consumer a better product on disc. They didn't understand it, and peer-to-peer filled in.”
Quipping that Lieberfarb is “the antichrist of rental,” Hastings Entertainment president and CEO John Marmaduke agreed that “no industry has been so poorly managed in the last 20 years as the music industry.”
Proof, perhaps, was Arnold's statement that Best Buy sold 85 million prerecorded music CDs last year — and more than 3 billion recordable discs.
“It is inevitable. It's a matter of time before those things hit us on this front,” he said.
Tightening budgets and an increasing need to hone product choices will drive consumers to seek ever greater value in their entertainment devices and products, which will force suppliers and retailers to step up to give consumers options in content and devices, Marmaduke said.
“The problem with the movie industry is the same as the problem with the music industry. The last thing they consider in any conversation is the consumer,” he said. “Today's consumer is not really configuration- or even product-loyal. They're all agnostic.”
That could lead to multiple platforms and delivery systems, said Movie Gallery EVP of product management Bo Lloyd.
“The industry has not changed materially as relates to home [entertainment] delivery,” he said, but it could start to follow the pattern of multiple platforms like Xbox and PlayStation 2 games.
Sanford C. Bernstein analyst Tom Wolzien sees a threat in the mass merchants' increasing clout.
“Big [media] conglomerates are in the business of supporting the big-box retailers,” he said. “Big-box retailers have a pricing advantage over suppliers. When Wal-Mart decides it's going to cut prices, it cuts price by encouraging the supplier to take the hit. What we're seeing over the last two years is a shift in the retail model.”