January 14, 2003

While many prominent players in the consumer-electronics game limped into the 2003 International CES bearing the wounds of a brutal Christmas sales campaign, DVD backers were able to bask in the spotlight of revenue figures that could only be described as spectacular.

Even before the convention was 24 hours old, the DVD Entertainment Group and Video Software Dealers Association separately released reports boasting of combined rental and sell-through revenues that, in 2002, hit $20.6 billion. That number elevated spending on home-video products above music, video games and mass-market books. U.S. consumers spent more than twice as much buying and renting DVDs and VHS titles as they did going to the movies.

"Based upon research conducted through mid-December 2002, we derived a preliminary estimate that the video sell-through market will reach $12.4 billion by the end of the year," said Tom Adams of Adams Media Research. Rentals were expected to add another $8.2 billion to that total.

Revenues from DVD sales accounted for 65 percent of the sell-through haul. Receipts climbed $3.4 billion, from the record $5.3 billion collected in 2001. Meanwhile, DVD rental revenues jumped 106 percent, to $2.9 billion. Not surprisingly, perhaps, 2002 VHS rentals sagged 25 percent from the $7.02 billion taken in the year before. According to VSDA's VidTrac program, the DVD rental-revenue figure represented 891.4 million turns vs. 444.8 million turns in 2001. VHS turns reached 2 billion, but, overall, were down by 23.1 percent from the previous year.

Among the DVD titles that contributed to the format's banner year were several that broke through the 4-million barrier. The list includes American Pie II (Universal), Austin Powers in Goldmember (New Line), Beauty and the Beast (Buena Vista), Black Hawk Down (Columbia TriStar), Harry Potter and the Sorcerer's Stone (Warner), Ice Age (20th Century Fox), Lilo and Stitch (Buena Vista), The Lord of the Rings: The Fellowship of the Ring (New Line), Men in Black II (Columbia TriStar), Minority Report (DreamWorks), Monsters, Inc. (Buena Vista), Ocean's Eleven (Warner), Spider-Man (Columbia TriStar), Star Wars - Episode II: The Attack of the Clones (20th Century Fox) and Training Day (Warner).
With an average rental price of $3.20 for DVD and $2.70 for VHS, and DVDs priced for sale between $10-$25, home video remains one of the most affordable forms of entertainment available, said VSDA president Bo Andersen. DVD players now sell for under $100 and are in 35 percent of television homes. Ninety-five percent of television homes already have a VHS player, making this form of entertainment available to everyone.

For those keeping score at home, these were the top-renting DVD titles of 2002: Ocean's 11, Training Day, Don't Say a Word, Mr. Deeds, The Others, Spy Game, Insomnia, John Q, Panic Room and The Sum of All Fears.

The top-renting VHS titles: Don't Say a Word, Training Day, Ocean's 11, The Fast & The Furious, American Pie 2, The Others, Shallow Hal, Rat Race, Domestic Disturbance and Black Hawk Down.

The top-10 renting video titles (VHS & DVD combined): Don't Say a Word, Ocean's 11, Training Day, The Fast & The Furious, The Others, American Pie 2, Domestic Disturbance, Rat Race, Shallow Hal and Vanilla Sky.

According to figures compiled by the DEG, based on data from the Consumer Electronics Association, more than 25 million DVD players were sold to consumers in 2002. This represents a 50 percent increase over 2001, bringing the number of DVD households to more than 40 million. There currently are more than 95 million DVD playback devices in American homes, including set-top players, DVD-ROM drives and DVD-capable video-game machines. More than 10 million homes have two or more DVD players.

The next frontier being targeted by the DEG is DVD-Audio. There currently are some 300 DVD-Audio titles available in the U.S. - compared to 2,000 music videos on DVD -- with another 250 expected to come to retail in 2003. Backers of the emerging format argue that DVD-Audio provides dramatically higher music resolution than CD, as well as superior stereo and multi-channel mixes. Just as most DVD machines also support CDs, DVD-Audio hardware will play CDs and DVD-Video. With some tinkering, DVD-Audio discs also can be made compatible with existing DVD-Video and DVD-ROM players.

Furthermore, DVD-Audio provides artists with options similar to those being exploited by filmmakers on DVD-Video. Recordings of live performances and studio material can be enhanced with music videos, lyric sheets, commentary tracks and discographies.
As impressive as these numbers are, however, they may err on the side of being too conservative.

If the cars parked in booths inside the North Hall of the Las Vegas Convention Center were any indication of future trends, car-video could become the next big cottage industry. Video monitors and DVD players could be found mounted on almost flat surface available in the souped-up racers, SUVs, vans and luxury vehicles on display.

High-end car audio systems already rival those in cinema megaplexes, so the addition of DVD video players to the mobile-entertainment mix was inevitable. And, no, in-dash video monitors can't legally be activated while a car is in motion. Any teenager who knows the difference between a spark plug and a cigarette lighter, however, can find a way to bypass a dealer-installed lock.

And, you thought cell phones were a hazard.

 

EMAIL GARY DRETZKA