Video biz intent on taking wind out of pirates' sails

DSN Retailing Today, August 18, 2003 by Doug Desjardins

LAS VEGAS -- DVD sales will continue to drive the video industry to new heights during the next few years, but there's a dark cloud on the horizon: the possibility that piracy could cut into video sales the way it has in the music business.

That was the message suppliers and retailers heard at the Video Software Dealers Association (VSDA) Home Entertainment 2003 show in Las Vegas July 29 to 31. The 22nd annual gathering of the home video industry was upbeat for the most part; attendance was up and analysts delivered positive forecasts for sales in 2003 and beyond.

But VSDA president Bo Andersen warned that even the booming DVD market isn't safe from the file sharing and downloading that have sunk CD sales. During a state of the industry speech, he called piracy "the greatest threat facing our industry right now."

During a panel discussion at the convention's opening session, 20th Century Fox Home Entertainment president Mike Dunn agreed with Andersen and said that "piracy is the No. 1 issue right now" at the studio. "Look at the music industry and see how they've been ravaged," said Dunn. "By the end of this quarter, the music business will have lost more than $2 billion to sharing and downloading."

The studios are working together to ensure that the next-generation of high-definition DVD discs--which will probably arrive by 2006 or 2007--come equipped with better encryption to prevent piracy. "We need better copy protection than we have with the current DVD format," said Bob Chapek, president of Buena Vista Home Entertainment. "If we don't, we're going to be in a world of hurt."

In addition to taking legal steps to discourage the illegal downloading of movies on the Internet, studios are working to create sites where people can download movies for a price. "Consumers should not expect that everything on the Internet is free, but they should be able to choose from a variety of business models in the future [to download movies]," said Andersen.

Aside from piracy concerns, the news at the show was good for retailers and suppliers heading into the home stretch of another record year. Sales and rentals of VHS and DVD topped $20 billion in 2002 and those numbers are expected to increase about 10% this year.

The DVD Entertainment Group reported consumers bought 10 million DVD players the first six months of 2003 and that 46 million U.S. homes now have at least one DVD player. VCR sales dropped 46% in the first six months of the year, according to the Consumer Electronics Association. DVD now accounts for about 70% of total video sales.

While the convention was short on the star power it had in previous years, a few celebrities were on hand. Peter Fonda appeared to accept the VSDA Maverick Award for independent filmmaking, and the 1960s comedy duo The Smothers Brothers received the George Carlin Freedom of Expression Award.