TK's MORNING BUZZ: The Essence of Marketing Packaged Home Entertainment in the Convergence Era--Selling 5-inch Discs to Young People

13 Sep, 2000 By: Thomas K. Arnold

Convergence affects people, too. I spoke last night with Mitch Koch, the president of Buena Vista Home Entertainment who is resigning next month to assume the vice presidency of Microsoft Corp.'s home and retail division.

Among his chief duties will be to oversee the launch of Microsoft's new X-Box, the much-ballyooed videogame console scheduled to launch in the fall of 2001.

While at Disney, Koch was a big supporter of DVD and other things high-tech. It was under his auspices that Buena Vista began issuing its animated classics on DVD, and stepped up its efforts to use the Internet to market to retailers through one of the most advanced studio Web sites I've seen.

While Koch maintains the move is a good one for him--he noted, with a laugh, that while his kids were little, he worked for Disney and lived less than an hour away from Disneyland, and now that they are a little older he's moving into the video game and computer sector--the hire also makes sense for Microsoft.

No one markets to kids better than Disney, and with Koch having pushed the pedal to the metal in the studio's drive to DVD, Microsoft is getting one shrewed cookie with plenty of experience in selling 5-inch high-capacity discs to young people.

And that, my friends, is the essence of marketing packaged home entertainment in the Convergence Era--selling 5-inch high-capacity discs to young people.

The video side is already well on its way toward a DVD-dominated universe. Already, studios are reporting that as much as 20% of their sales volume on hot sellthrough titles comes from DVD, and that ratio is going to soar, particularly if what DreamWorks did with Chicken Run--listing both the VHS and the DVD at the same suggested retail price--becomes the new industry standard.

On the rental side, a new report from Centris shows that the number of DVD households renting discs has gone up a whopping 333% in the last two years.

On the music side, the rapid development of DVD-Audio is causing lots of experts to predict the 5-inch high-capacity disc will eventually dominate there as well.

Retailers are anxious for something new and better that will rekindle consumer excitement, now that the CD is a rapidly maturing teenager and more and more of their customers are downloading music over the Internet.

The videogame sector is also moving to the 5-inch high-capacity disc, led by the PlayStation2 and the Microsoft X-Box, both of which will be able to play movie discs as well as dedicated game software.

And while Koch appears to be jumping from one industry into another, if you get right down to it, it's all rapidly evolving into the same sport:

The disc throw.

Comments? Contact TK directly at: TKArnold@aol.com