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Retail Leaders Weigh in on Possibility of Dual Next-Gen Formats

21 Mar, 2005 By: Kurt Indvik

Members of the Home Media Retailing Editorial Advisory Board say the market confusion over HD-DVD and Blu-ray Disc is troublesome. Weighing in on the controversy are Gary Arnold, Best Buy; Bill Bryant, Ingram; Steve Hicks, Hastings; Bo Loyd, Movie Gallery; Ted Sarandos, Netflix; and Rick Timmermans, Tower Records and Video.

The Question:
How do you think retailers will react to a dual-format launch, should HD-DVD and Blu-ray Disc fail to reach a compromise?

Gary Arnold, Best Buy, SVP, entertainment
The real question is not how “retail” will react, but rather how will the consumer react. At the end of the day, some number of consumers will be buying technology that may not allow them to play movies they are passionate about. There is a real industry threat; from a historical perspective, we have not seen evidence that dual formats will not sustain over time. Regardless of explanations given on the retail sales floor to consumers, they will be slower to engage with the “next-generation” product. When one technology ultimately fails in the marketplace, guess who the consumer is angry at? Retail. The idea of a second generation of a higher-quality DVD to inspire the consumer to continue to buy DVD at unprecedented levels is a great idea … and the time is right. The current scenario is terrible for the consumer. Hey, Hollywood, it's time to respect and cherish the role of the consumer and align around one format with the best technology and copyright protection available so that the DVD revolution continues to excite and inspire the consumer.

Ted Sarandos, Netflix, chief content officer
I think that a dual-format launch will further delay consumer adoption and increase consumer confusion for a product that they may or not be interested in. Our focus group information leads me to believe that most consumers with a DVD player and an HD-ready TV think they already have [high-def] DVD, and only the earliest of the early adopters clearly articulate a desire for a “better” format.” I think if [high-def] DVD is going to be successful (and it is everybody's best interest for it to be), and the studios can not land on one format, the CE companies need to resolve it by offering a dual-format, backwards-compatible player at a price that average households will step up to.

Bill Bryant, Ingram Entertainment, VP, sales
If dual formats occur, this will certainly confuse consumers and be somewhat of a disappointment to retail. However, the industry has always been about change, and retailers will once again promote both platforms. There is still hope for a compromise, and the studios are continuing their dialogue to perhaps reach agreement. We eagerly await the final outcome.

Bo Loyd, Movie Gallery. EVP, chief administration officer
First, I believe the retailers will use their influence to encourage the two camps to reach a compromise. The introduction of new hardware is almost always a shot in the arm for the consumer electronics industry, but I think a dual-format launch will greatly reduce the adoption rate for either format. I believe retailers will do their best to provide the consumer with what they want, but I think the real question is … will the customer know what they want? It will be important for the retailers to provide consumers with enough information to allow them to make the best decisions for themselves. The retailers will need to provide in-store demos that clearly demonstrate the superior audio and video quality so that is abundantly clear that there is a significant enhancement of the viewing experience. I expect that they will initially target young males with expendable income by focusing on sporting events and action-oriented movies. I see this as being very similar to DVD vs. Divx. The DVD camp did a great job of presenting the consumer with features and benefits of DVD vs. Divx by partnering with retailers and providing point-of-sale material that made their case. I would expect to see similar tactics as HD-DVD is scheduled to launch prior to Blu-ray. The earlier adopters will likely support both initially, but will eventually gravitate to the one that provides them with the features and quality they want. I don't expect a format war to last long, as the consumers will ultimately vote with their dollars, and the eventual loser will ride off into the sunset.

Steve Hicks, Hastings Entertainment, VP, product
Retailers will have no choice but to support both these formats at launch. Ultimately, the decision will be in the hands of the consumers. Since HD-DVD will beat Blu-ray to the market, it stands to reason (although there's no guarantee) that HD-DVD has the best chance of succeeding due to early market penetration. The economics of the manufacturers will also come into play as to how long the one that is “losing” in the marketplace will be able to sustain its presence. All we can do as retailers is offer both to our customers and react responsibly to their preferences.

Rick Timmermans, Tower Records and Video, director, video merchandising
Although disappointing, it's not surprising to see the studios at odds with each other regarding the introduction of a new format. Due to the inability at this time to reach a compromise, I believe most retailers will have a somewhat lukewarm response to the introduction of the software. We will certainly support and properly merchandise the product; however, confusion over which format to buy can only be a detriment to the consumer embracing the idea of switching from the current DVD format they now enjoy. All it does is slow the process of creating excitement for the next new DVD viewing experience. So much depends on the compatibility of the players and the confidence the consumer has in choosing to invest in one or the other. My guess is most will refrain from jumping in to the degree they would if there were a universally-agreed-upon format.

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