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IRMA Attendees Say Packaged Media Dominates VOD

22 Mar, 2004 By: Jessica Wolf

While digital delivery methods and the inevitable emergence of a next-generation high-definition format loom over the current video market, DVD still has more than a few good years left in it, presenters at last week's International Recording Media Association conference held.

“For the near to mid future — the balance of the decade — physical media will likely dominate,” said Buena Vista Home Entertainment president Bob Chapek said in his keynote address at the conference.

Make no mistake about it; he said digital delivery will play a significant role in the coming years.

“How soon will be decided by consumers as they vote with their dollars,” he said.

The future depends on the introduction of a next-generation [high-definition] format, Chapek said, one that provides “an overall value proposition to consumers, to prevent this format from appealing to only the most zealous home entertainment consumer.”

DVD shipments were up 50 percent for 2003 over 2002, said Jim Bottoms president of research firm Understanding & Solutions.

“VOD would challenge packaged media,” Bottoms said. “But it's growing slowly and is still eclipsed by revenue from packaged media.

“And I would propose that the reality is that packaged media is challenging VOD,” he added. “I have VOD. I also have 600 DVDs in my collection that I can watch any time I want; that is true VOD.”

Bottoms also predicts that genres like TV, music, special interest and children's product will encroach on feature films' lion's share of DVD sales in the next few years. Feature films made up 69 percent of the DVD sellthrough market in 2003, but should drop to 56 percent by 2007, according to Understanding & Solutions.

Recordability is the key for DVD hardware growth, Bottoms said, citing research that predicts prices on recordable hardware will drop to around $120 by the end of the year and to less than $100 by next year. Many replication facilities, especially plants in Asia, have already shifted some resources to the production of blank media, he said, in anticipation of this upcoming market evolution.

Best Buy EVP and general merchandise manager Ron Boire said unit sales from movies, music and games make up half the company's revenue and led Best Buy to its first $5 billion year in the company's history.

As for the emergence of hi-def packaged goods, “we will be listening,” Boire said.

“The customer is traditionally the arbiter of formats,” he said, pointing at the obvious results of format wars like Beta vs. VHS, or DVD vs. Divx. “Our point of view will be guided by what's best for the customer in the marketplace.”

Warren Lieberfarb, former head of Warner Home Video, was on hand representing Toshiba to promote the red-laser high-def format HD-DVD, which on a manufacturing level more closely resembles DVD than the competing hi-def proposition, Blu-ray.

“The doomsday theory that DVD is in trouble, I dispute,” Lieberfarb said, responding to statistics presented by the Blu-ray proponents that cite the DVD market is “commoditizing” and consumers' perceived value of DVD is dropping.

“DVD is reaching maturity, and the growth rate of software will inevitably decline,” Lieberfarb said. “But the reasons to move to hi-def are also driven by consumers' adoption of digital displays [TVs], digital on demand from cable and satellite, as well as broadband adoption.”

“There is a real business opportunity to give those consumers a higher-value packaged media product,” he said.

Copy protection issues, compression technology and manufacturing concerns still abound in the war between hi-def formats, and a settlement on just one format doesn't look likely anytime soon, presenters agreed, though the market would be better off to present a united front when hi-def hits the consumer in earnest.

Another flurry of interest at this year's conference revolved around the role hard-disk drives will play in the future of packaged media.

Andy Parsons, SVP of advanced product development for Pioneer Electronics Inc., explained and demonstrated his company's new DVD recorder that comes equipped with personal video recorder Tivo and can function as a storage library consumers can use to manage their library of digital programming before they burn the content to a blank disc.

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