DVD Audio could be 2nd musical coming - DVD Update

DSN Retailing Today, May 19, 2003 by Laura Heller

It has been hailed as the ultimate music experience for consumers. Music labels and retailers are hoping it will reinvigorate ailing CD sales, but DVD Audio just can't seem to get off the ground. It doesn't help that there is, of course, a format war. Super Audio CD (SACD) was developed by Sony and Philips and introduced at nearly the same time, while DVD Audio counts Toshiba, Warner and Panasonic among its backers.

Both offer superior sound to existing CD recordings, expanded storage capabilities and the promise of a new revenue stream in a very mature market. But only one will play in existing hardware and that gives DVD Audio an edge, or so hope its backers.

"The main tipping point is the installed base of DVD players," said Ted Cohen, vp of digital development and distribution for EMI Recorded Music. "It has total compatibility and there is no adoption barrier. I really think this is a mass market product."

But there is quite a lot of confusion among consumers. Hurdle No. 1, said Joe Pagano, senior vp of music and trend merchandising at Best Buy, is getting them to understand that the new format is more or less an extension of their new favorite Video format--DVD, and the same player can serve both video and audio needs. DVD Audio playback is now being incorporated into DVD players, typically adding between $20 to $30 to the price of the hardware, and regular CDs will still play on the units.

DVD Audio benefits retailers on several fronts: providing a new format to spur consumer interest even as it fades for the compact disc; offering an alternative to digital music files, the downloading of which bypass the retailer entirely; and an opportunity to fix the "price value equation," according to Pagano.

DVD technology allows for artists and producers to pile on the extras. Outtakes, music videos, commentary tracks in addition to the album-length recordings provide consumers with the same kind of value as a DVD movie or video game--a value that would hopefully justify a $20-plus price tag.

However, the format presents not only a challenge in consumer education but one of merchandising as well. Best Buy gives approximately 12 linear feet to the category in a dedicated section and in April devoted a special section in its circular to DVD Audio. Potentially software can be blended in with audio and video, grouped by artist, called out on endcaps and perhaps the most compelling, stocked near DVD players, which are still enjoying unprecedented consumer popularity.

But what will benefit the new music format most will be a strong marketing push the likes of which pushed DVD video into consumers homes in large numbers. However, DVD Audio hasn't gotten the same support as its video brother. "This group is not nearly as strong as DVD video; Warner and Toshiba really drove that," explained Pagano. "This is a budding opportunity."