The new king of home entertainment - DVD - Cover Story

Post, Dec, 2003 by Matthew Armstrong

since June 2003, consumers have been consistently choosing DVD over VHS, according to the Encino, CA-based Video Software Dealers Association. They have not only been renting more DVDs, but buying more as well. To meet the rising demand over the past few years, studios have been scrambling to get more titles, old and new, on the video store shelves. Thus, the DVD industry has been thriving in the past few years, essentially immune to a troubled economy that has plagued much of the post industry.

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But will this trend continue? These DVD authors looked into their crystal ball and answered these and other questions as they look to 2004.

JEFF STABENAU

Principal, Blink Digital (www.blinkdigital.com), NYC

STRENGTHS: "The most significant area of business that's been increasing for me, and likely to continue in 2004, is television material going to DVD. There's been a lot of that in the past couple years, but it's really starting to kick in now.

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"Another strength I see developing is in enhancements and special features for DVD. By that I mean innovative DVD games that can sustain interest and may be educational-based or corporate training-based or related to a movie. There have been a couple of breakthroughs recently so the games can be much more complex and additional content will continue to develop."

WEAKNESSES: "If there's a weakness, it's that the music business is still in the process of settling on how they want to use DVD. DVD is doing well in music overall but they still haven't settled on a format, is it DVD-A? Is it SACD [a high-resolution audio format that can play stereo and surround and could be played in a SACD player or a regular CD player]? Is it DVD-Video? DVD is potentially great for the music industry, either as an enhancement with video or as a replacement for CD. I do think there will be a replacement format for the CD, and DVD can provide that with 5.1 mixing and going from 16-bit to 24-bit. But nothing has been settled and consumers are going to stay away until there's clear message from the marketplace."

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OPPORTUNITIES: "The biggest opportunity out there is to replace CDs. I look at CDs as being in the middle of the pack. On the low end you have the downloadable music and the higher end you have a replacement format like DVD. So eventually I see the CDs moving away and consumers will have a choice between the low and high end. The problem with CD technology is that it's too close to what's available on downloads. The quality's not a heck of a lot better and you don't have all the enhancements you have on DVD. That's the biggest opportunity for DVD and that literally could happen in 2004."

THREATS: "Video on Demand chips away at DVDs on some level. It's not a big threat but it does cut into some people's trips to the video store. Especially with the functions that Time-Warner Cable has now where you can pause it, rewind it and watch it anytime you want. So that certainly will steal away some DVD dollars but that's only for the blockbuster movies."

OUTLOOK 2004: "In 2004 I see the downward trend ending. We're part of the Ascent Media parent company and we're in the same building as other post companies and it seems from them and the other people I've talked to that business has been picking up and generally the economy has turned around for them in the past few months."

CHRISTIAN GERARD

President, Chroma Titles (www.chromatitles.com), LA

STRENGTHS: "Going forward into 2004 I see the strengths being DVD HD. That format is going to be decided on soon, and that's going to be a big thing next year. We're hoping that we'll start doing titles as soon as the standard is set. They're still deciding between Blue Laser, Red Laser, MPEG-2 or MPEG-4, but from what I've heard the standard should be decided by January. It will start slow. There's only going to be a certain amount of titles the first year and then it's going to grow and grow.

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"We're waiting to find out whether we're going to need new hardware as far as new boards to encode--new MPEG-4 boards or just modified MPEG-2 boards. Also, there's supposed to be a revision of the normal standard DVD to incorporate more interactive DVD functions with the DVD player connected to the Internet. With special decks you can browse Internet sites related to the DVD. Some of the authoring tools already have these interactive authoring tools built in them, and I expect that's going to be used a lot more in 2004 and will grow."

WEAKNESSES: "The only weakness has to do with the players. A consumer can go out and buy a title and put it in the machine and it can still have glitches. The players now are much better than they were a year ago and they'll be a lot better a year from now. The biggest complaint I get is that DVDs are not as fool proof as VHS. With DVD you can get weird anomalies."

OPPORTUNITIES: "DVD HD is the big thing. We're just waiting for the gun and we'll be off and running. We're trying to position ourselves to be one of the first companies that will be able to go out and do that. We're going to have to get an HD player and some monitors so everything will have to be upgraded to HD, some of which we've done already. There will also have to be some sort of HD proofing software that comes out. Upgrading to a new Digi Beta deck too that can handle HD. It's an expensive upgrade all around but it will be well worth it for the years of revenue that will be coming in."