A special interest in DVD - DVD

Post, Dec, 2002 by Bruce Apar

In addition to its runaway popularity as a platform for watching movies, DVD is coming into its own in another realm: it is emerging as an ideal delivery platform for a growing spectrum of content.

The DVD Entertainment Group, a consortium of major studios and other marketers and makers of DVD software and hardware, estimates that more than 150 million DVD software units were sold in the third quarter of 2002, more than doubling the same period a year earlier. It is projected that players will be in half of US homes by the end of 2003. For DVD player sales through the first nine months of 2002, the Consumer Electronics Association estimates slightly more than 10.2 million DVD players, compared with 12.7 million units for all of calendar 2001. In the 48-month span between calendar years 2000 and 2003, says video research firm Cambridge Associates, DVD production in the US will have quadrupled, from 270 million units in 2000 to more than one billion units projected in 2003.

MARK WALDREP

Chairman/CEO

AIX Media Group/AIX Records

www.aixmediagroup.com

West Hollywood

STRENGTHS: We're cautiously optimistic that 2003 will be real good. AIX has gone from being a large DVD specialist to a boutique shop with a division in AIX Records. DVD has especially high penetration with the college-age audience, We're so far ahead of CD, which took two years to reach 10,000 units.

WEAKNESSES: It's almost a generational thing, but DVD-Audio's attributes aren't understood enough. That's why I'm evangelizing to 20-somethings two mornings a week at Cal State University. They have yet to appreciate the depth of quality from plastic vs. a downloaded MP3 file. At this rate, the market will not saturate into the masses, but will stay in audiophile group where people spend $10,000 on speakers or more.

Another weakness is the proliferation of inexpensive desktop systems that lull people into thinking all you need is the right gear and don't need skills to make a living in DVD or audio production.

OPPORTUNITIES: We're patiently waiting on the sidelines for DVD-Audio to be a business, We've released 20 DVD-Audios -- we do three to four a month-- and are looking to double or triple that.

THREATS: Some people fear video on demand, but I don't believe it for a second. In my graph, the slope, an upward trend in bandwidth, falls below the upward slope in demand for bandwidth. TiVo looks like crap compared to DVD. Things are breaking up. You see the block effect each time it fades down to black VOD has been around the corner for five years, and it's still five years away.

The economy really hurt the post business, whether a studio or audio facility, and it's a long way from being fixed. The custom Flame rooms, where you have to do $2,000 a day to pay for, aren't there anymore. The Bay Area post houses are mostly out of business.

AIX Media Group is a digital media company specializing in all forms of DVD, including its proprietary Smart DVD Web connectivity and unlocking software.

BRIAN BRODEUR

Owner/Lead Producer

NYDVD

NewYork

www.newyorkdvd.com

STRENGTHS: More people continue to embrace the technology and its special features, We've been doing DVD since 1998, and have always understood it is capable of much more than providing a movie on a disc. We take advantage of its navigation and ability to communicate a variety of things in different languages in a nonlinear way.

WEAKNESSES: The disappearance of companies like Spruce is a concern, and Scenarist being gobbled into Sonic, which is very supportive. Its system works like a well-oiled engine. But with the Spruce Maestro systems we bought, now there's no support. A lot of people are worried about a shakeout. If there isn't enough competition, things don't grow and get better For a producer, that's a weakness.

OPPORTUNITIES: We're aggressively pursuing new avenues of subject matter to embrace instructional and educational benefits of DVD. We service the music instruction market and have 50 percent to 75 percent of all the titles in that area. With almost any topic you need to teach, we're developing models on producing that product -- everything from technical training to medical models to cuisine.

THREATS: More businesses that are potential clients are embracing newer technologies such as [Apple's] DVD Studio Pro. It's not something I worry about much, since we focus not only on putting out the best work but also on high customer service and relationships with our clients. But desktop production is a threat to a lot of bigger places. The users don't know all the pitfalls, make mistakes and the product ends up not being as good.

The bandwidth issue is a threat but not anytime soon. The only threats palpable to me are business threats, not from content or production side.

New York DVD is a development and disc reproduction company.

DAVID ANTHONY

President

Metropolis DVD

New York

www.metropolisdvd.com

STRENGTHS: Ultimate collectibility. This year has proven consumers love DVD. People who never collected VHS tell me they have 40 DVDs already. The movie studios are enjoying the same phenomenon that happened to record labels 20 years ago with CD. A fundamental shift in behavior has occurred. Basically, for the first time people have become movie enthusiasts even if they aren't movie buffs. DVDs have high-perceived value even if you don't have time to watch six hours of extras, As soon as someone buys a DVD, he becomes enthusiastic about the format, and that gives producers confidence to create more content