TK's MORNING BUZZ: Two-Tiered Pricing for DVD, Like the VHS Videocassette, is a Concept Whose Days Are Numbered

11 Apr, 2001 By: Thomas K. Arnold

Just got the latest DVD numbers in from the DVD Entertainment Group, and they show continued momentum for the little discs.

In the first quarter of this year, 2.4 million DVD players were shipped to retailers, bringing the total number of players shipped since DVD's launch to nearly 16.5 million. If this pace continues, the DVD Entertainment Group estimates 17 million players will be sold this year.

On the software side, there's more good news. According to figures compiled by Ernest & Young for the DVD Entertainment Group, nearly 70 million DVD titles shipping in the first three months of this year, more than twice as many as were shipped in the first quarter of 2000. All told, suppliers have shipped more than 380 million pieces of software since the format's debut in March 1997.

These rosy sales numbers affirm my stance that to tinker with the existing DVD pricing structure at this point would be sheer idiocy. DVD is on a tremendous growth curve, but the format is still vulnerable and a move to adopt a two-tiered pricing structure and a rental window could seriously jeopardize future growth. It would also anger the very same big software sellers, like Best Buy, that helped give DVD its start, not to mention the mass merchants who are driving more and more growth on the sellthrough end.

And independent video specialists who have grown accustomed to picking up DVDs on the cheap for their rental inventories would also be in for a rude awakening.

Rather than two-tiered pricing for DVD, I much prefer the strategy that I hear at least one major studio is pursuing: Keep DVD at sellthrough, and at the same time work to develop a video-on-demand infrastructure -- through cable, through the Internet, or through both -- for the pay-per-view "rental" of movies after a reasonable home video run.

Two-tiered pricing worked well in the growth years of home video, but like the VHS videocassette, it's a concept whose days are numbered. Quite simply, something better came along. Let's not mess it up.

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