DVD Numbers Exploding, Making Studios Lots of Money – Will They Be Smart Enough to Learn from This?

DVD Numbers Exploding, Making Studios Lots of Money – Will They Be Smart Enough to Learn from This?.

DVD in 50 – Studio Execs Discuss The Future of DVD

“Last week DVD studios, producers and press all converged for the annual Video Store Magazine DVD Conference. Last year everyone gathered to celebrate the 5th anniversary of DVD. This year it was another big landmark, 'DVD in 50,' as DVDs found their way into over 1/2 of all US Homes….

The picture for DVD couldn't be better. In the United Stats there are now over 50 million set top DVD players. This number is expected to grow to 60 million by years end. When you add other devices which can play DVDs (including PC's, PS2 and X-box) that number jumps up to between 90 and 100 million DVD capable devices. In 2002 there were 1.14 Billion DVDs shipped world wide and the average home bought 15 DVDs. For the first time DVD has overtaken VHS in the rental space. During the week ending June 15, 2003, for the first time ever, more DVDs were rented than VHS videocassettes. According to VSDA VidTrac, 28.2 million DVDs were rented while 27.3 million VHS cassettes were rented. DVD Rental stores also are singing the DVD praises which is now a $9 Billion industry. Old style DVD Rental companies like Blockbuster and Hollywood Video have more to celebrate (though renters won't be crazy to hear this) as 25% of DVD renters are reported to pay late fees at least HALF of the time they rent DVDs and in 2002 Video Rental companies collected an estimated $1 Billion in late fees – yes, that's Billion with a 'B'. The explosion in DVD doesn't end there. DVD is seeing growth into the portable market, into cars, dorm rooms, playrooms and multiple rooms in the home. Twenty-nine percent of US homes now have two or more DVD players. Barreling full steam ahead DVD is expected to continue to have 'double digit growth' from now until 2007….

For DVD consumers there's some good news and some bad news about the future of DVD. The good news is that you won't have to worry about chucking out your DVD collection any time soon for HD-DVD. The bad news is that there is going to be a format war. I have absolutely no doubt that there's a format war coming and it'll make the wars between Betamax & VHS, DVD-A & SACD, heck even Coke v. Pepsi, look like school yard skirmishes.

As it stands now there are five formal proposals for an HD-DVD format…. The battle for the next generation of DVD is shaping up to be a mega battle between Sony and Microsoft in a 'winner take all' battle for the central home entertainment device of the future….

But a format war might be a moot point if the studios can't figure out how to make the next generation of DVD compelling for people to buy. As it stands now the key selling points for HD-DVD are: 1) it's got much better copy protection than DVD (something that was repeated over and over and over again through out the day); 2) it has higher resolution picture; and, 3) 'Interactivity'. When pressed about what exactly 'Interactivity' means, the best response I could get was a 'Wow Experience', but throughout the day no one could really quite define or describe exactly what that was. Unfortunately, I believe no one can define 'Interactivity' because they simply don't have any idea what it really is. Studios on the whole seem to be a little surprised at just how successful DVD is, and just how popular all special features are with consumers, I think they are hard pressed to come up with anything to 'one up DVD'.

When you really boil it down, the rush to HD-DVD is less about what consumers want or need and more about the needs of the studios. The two biggest issues facing studios are copy protection and an end to the explosive growth of home video. Studios somehow think that they can capture lightning in a bottle and re-create the DVD explosion with HD-DVD. Several presenters at the DVD in 50 convention likened the launch of HD-DVD to a 'PS-2' type event with visions of consumers quickly tossing aside their DVD Players and collections and re-purchasing their favorite titles again in HD. I think some of these studios are going to get a serious wake-up call. Home Video isn't games and the jump from DVD to HD is no where near the tremendous leap between PS1 and PS2 or Nintendo 64 and Gamecube. Studios look at the consumer behavior surrounding game systems and think it can be emulated in the Home Video Market. It can't. I believe that DVD buyers are going to take more of a 'wait and see' approach to HD-DVD instead of fire selling their DVD collections on Ebay to jump on the HD-DVD bandwagon. I also think that studios are over estimating how quickly people are going to actually be upgrading their standard TVs to view HD content. Currently the FCC has a 2006 deadline for total broadcast conversion to HD. Most of the big name retailers I spoke with at the show admit that the 2006 deadline won't be met and they don't expect HD to be as mass a product as DVD until as late as 2010! All this combined with a format war, I fear HD-DVD has a fairly rocky road ahead of it….

Now may very well be the 'hey day' for home video. There is, however, a ray of hope for the future. The Studios do acknowledge that the customer is now in the driver seat when it comes to entertainment, so despite all their obsessions with copy protection and getting people to buy the same film over and over again, they do have a sense that they can't do it alone. Without the excitement and enrollment of movie fans the DVD phenomenon won't be repeated.” [DVD Talk]

There are some staggering statistics embedded here. I can't decide which of the points made in this article are most important – there are so many! Lessons for the music industry, lessons in the fallacy of paranoia, lessons in the definition of the term “customer”….  [The Shifted Librarian]

Leave a comment