DVD buzz: Embrace change

By Stephanie Prange Fri Jun 2, 8:28 AM ET

LOS ANGELES (Hollywood Reporter) - The reports of DVD's death are exaggerated, but the business is entering a period of transition as two high-definition formats hit the market and digital downloading makes strides.

Change was the keyword at the fifth annual Home Entertainment Summit: DVD's Nine Lives, produced by Home Media Retailing, a sister publication of the Hollywood Reporter.

"We must not fear change," said Craig Kornblau, president of Universal Studios Home Entertainment. "We must seek it and embrace it."

The DVD business is entering a period that will test the mettle of marketers, noted Mike Dunn, worldwide president of 20th Century Fox Home Entertainment.

With DVD, competing high-defintion formats Blu-ray Disc and HD DVD, and different digital delivery options, the future will be a "real integrated world that the marketing guy is going to control," Dunn said.

The job of the home entertainment executive is more complex, noted speakers on one panel.

"We've become bipolar," said Bob Chapek, president of Disney's Buena Vista Home Entertainment, noting home entertainment executives must be fluent in technology as well as the traditional packaged media business.

Executives said they now devote between 20% and 50% of their time to new delivery options.

"The job seems to change every week you come in," Chapek said.

"We are now in the mode of trying to anticipate consumer behavior," said David Bishop, North American president of Sony Pictures Home Entertainment. "There's a lot of R&D going on."

Much of the anticipation of consumer habits involves the digital download world, where studios have been offering more and more movies in the same window as DVD.

"Unlike the music business executives, who wanted it to go away, we knew it wasn't going to go away," Bishop said.

Executives on a digital downloading panel said studios this year had become more open to video-on-demand delivery because they were confident of the copy protection and because they wanted to provide a legitimate product to head off illegal downloading. Also, the services appeal to the young demographic.

Downloadable hit movies that can be burned on a DVD playable in any DVD player are in the near future, they said.

Still, they agreed digital downloading won't have much of an impact on packaged media for at least a decade.

"The DVD business is a multibillion dollar business," said Bruce Eisen, president of movie download store CinemaNow. "The VOD business is not quite that."

"Digital possibilities are just going to grow the pie," said Ron Sanders, president of Warner Home Video. Retailers who embrace the digital future will win, he said.

"Get an online site up immediately," was the advice to retailers of Universal's Kornblau. He also urged them to work with studios to enter the digital download world in some fashion.

Still, packaged media could be more resilient than some think, Fox's Dunn said. The packaged media business could develop a "killer ap" in the new high-definition formats, in which interactivity, ease of use and quality could make the disc the premiere storage device for content.

All the executives said the adoption of HDTV - projected to be in 25 million households by the end of the year -- makes high-definition discs a necessity for studios. Consumers will find high-definition content elsewhere if they don't have a packaged media option.

Managing the transition from DVD to high-def disc will be tough, executives said.

DVD is by no means a dying format. Executives expect anywhere from flat to single-digit growth in the business this year, after a tough period last summer.

The sell-through DVD business grew 6.5% from 2004 to 2005, from to $15.1 billion, noted Peter Staddon, executive vice-president marketing at 20th Century Fox Home Entertainment. Still, the falloff in the VHS and rental market revenue resulted in an overall flat business that clocked in at $23.2 billion in both years.

While the price of DVDs and rental transactions (mainly through subscription services such as Netflix) is dropping, the business produces a "huge amount of volume" and is still strong, Staddon said.

Executives must be careful not to confuse the consumer with the new high-def formats, he said. "A confused consumer doesn't buy a lot of product."

Reuters/Hollywood Reporter