Hollywood gives DVD thumbs-up

Electronic News, Jan 13, 1997 by Andrew MacLellan

Las Vegas--Revving its engine for the better part of a year, the digital versatile disc (DVD) industry appears finally to have received the green light on the strength of reports coming here from the Winter Consumer Electronics Show (CES) that several Hollywood motion picture studios have authorized the release of major movie titles.

The availability of content is expected by many hardware vendors to trigger a wave of pent-up demand, which by the most optimistic accounts could result in the sale of 3.8 million stand-alone DVD players in 1997. While more conservative estimates come in at 500,000 to 1 million units, there is little question that the resolution of a protracted copyright protection dispute has positioned DVD for a long-awaited market arrival.

"I think this is encouraging, because clearly there are some studios beginning to act upon the work of the data encryption," said Alan Bell, co-chairman of the DVD Consortium's Copy Protection Technical Working Group, which drafted the encryption proposal. "The question is no longer 'Are there any motion pictures?' "

To date, Warner Home Video, MGM Home Entertainment, Columbia Tri-Star Home Video and New Line Home Video have announced they will introduce a mix of classic and new release titles, although Paramount Pictures, Disney and 20th Century Fox were noticeably absent from the first wave of support.

"Warner's announcement shows that this is not longer a waiting-to-happen scenario," said Patrick Barry, director of market development, DVD/advanced media for Warner Media, in an interview with Electronic News. "It's actually been executed."

Warner Home Video, which has a long-time partnership with Toshiba, said it will introduce 25 titles into the market in March concurrent with their VHS cassettes. Sony, which introduced the DVP-S7000 video player here, will release more than 20 DVD-formatted movies from its Columbia Tri-Star Home Video division and is ramping up DVD disc production to meet the expected demand. Initial capacity is pegged at 200,000 discs per month in Japan, with an additional capacity of 300,000 discs after Sony's Terre Haute, Ind., facility comes on-line later this summer.

The development stands in contrast to last year's CES marketing frenzy, which failed to live up to the hype, and is important, observers say, if the industry is to avoid missing another Christmas selling season.

"If you're a Good Guys or another retailer, you don't want to go to another Consumer Electronics Show and get no news," said Ted Pine, president of InfoTech, a Woodstock, Vt., market research company. "There is a window of opportunity where DVD is fresh and exciting, and they didn't want to lose it."

According to Mr. Bell, the agreement between the studios, recording industry, consumer electronics and computer companies was essentially solidified in October (EN, Nov. 4, 1996), with much of the last two months spent instituting a licensing program and drafting anti-circumvention legislation.

What remains is ratification of a regional coding proposal--to be presented today in San Jose, Calif.--which will allow the movie studios to time their releases in different global markets.

Despite the optimism generated by the impending release of Hollywood blockbusters like Twister, the question remains, according to Mr. Pine, whether the industry will funnel a sustained whirlwind of DVD titles into the market.

"The thing I think you have to watch is not what everyone is watching," he said. "You have this magic number of movie titles that have to be available at the time of launch, but the interesting thing to watch is how fast do they build a catalogue, how fast do they keep up with releases and will they release DVD before VHS, after VHS or at the same time?"

At $600 to $1,000 each, DVD players will carry a hefty premium over traditional VCRs, but their superior audio/video quality and storage capacity will generate sales approaching 10 million units by the turn of the century, according to Sony. At that volume, prices could drop to about $250 and in turn generate an installed base of 80 million units by 2005, according to InfoTech.

"The VCR is really at the end of its life, so this thing is coming along at the right time," said Mr. Pine. "The only thing is you're trying to replace a recordable medium with a prerecorded one, and that's never been done before."

Recordable and re-writable DVD products are expected to follow in 1998 and 1999, respectively, according to the majority of companies polled.

Elaine Chen contributed to this article.