DVD gets mega boost from Warner and co. at VSDA

Discount Store News, July 21, 1997 by Robert Scally

LAS VEGAS -- Digital video disc technology was topic A at this year's Video Software Dealers Association convention, which took place here July 8-12.

In a move that could have wide-ranging implications for the home entertainment, computer and consumer electronics business, Warner Home Video and a consortium of consumer electronics manufacturers announced that digital video disc (DVD) hardware and software will be available nationwide as of Aug. 26. Universal Studios Home Video also announced it will begin producing movies on the digital disc format.

DVD, which offers picture quality that rivals that of movie theaters, was initially rolled out in seven test cities around the nation in March.

Warner Home Video president Warren Lieberfarb said that Warner and the family of labels it distributes--MGM Home Entertainment, New Line Home Video and HBO Home Video--will stick with sell-through pricing for DVD. All future Warner DVD titles will be released day-and-date at a $24.98 price point, regardless of whether the VHS version is priced for sale to rental stores or for sell-through, Lieberfarb said.

Executives with several specialty mass retailers said they are behind the DVD technology and that the format could soon replace prerecorded VHS tapes as the main format for video software.

Russ Soloman, founder and chairman of the Tower Records/Video chain, said he thinks the conversion to DVD could happen even faster than music industry's conversion from 12-inch vinyl LPs to audio CDs.

"Video is much more hit-driven and the biggest titles sell far more copies than a typical hit in the music business," Soloman said.

Once the installed base of DVD players reaches critical mass, sales of hit titles will fuel the shift to digital, Soloman said.

DVD players also play the current generation of audio CDs, and DVD-ROM computer drives offer the promise of vast amounts of storage. In fact, storage is far in excess of today's CD-ROMs, a factor that gives the format added distribution channels, raising the likelihood that it will be successful, industry experts said.

"Compared to all of the other types of [consumer electronic product] formats that have come before, thus far this is by far and away the best out-of-the-box introduction," Joe Pagano, Best Buy's merchandise manager, said of DVD.

The least expensive DVD players now sell for less than $500, significantly less expensive than the first generation of VCRs or audio CD players, Pagano pointed out.

Pagano said he thinks DVD could become the dominate format in home video within two to three years.

But DVD still faces a number of obstacles to mass market acceptance. The current generation of DVD players is not capable of recording, and consumers have not yet been made aware of the format's advantages.

Meanwhile, this year's VSDA reflected some of the new realities of the home video industry.

Booths of many of the major studios were smaller and less ostentatious than in the past, and some studios, such as Warner, opted not to have a booth on the show floor. During the past year, the retail side of the business has seen the effects of massive consolidation as a few dominate chains have emerged to compete with the 3,800-location Blockbuster Video chain.

Rentals of home video have been down during the first half of the year and many suppliers have looked to sell-through sales to provide revenue growth.