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VSDA

It’s literally taken two weeks for me to work up the energy and enthusiasm necessary to write about my experiences at this month’s VSDA convention. It would be easy to blame this tardiness on the “extreme heat” we’ve been experiencing here and in Los Angeles, but, then, it’s almost always unbearably hot this time of year.

Fact is, this year’s gathering of the Video Software Dealers Association was nothing to blog home about, and hasn’t been for most of the last 10 years. What once was a terrifically entertaining summer pastime for store owners, distributors and media, alike, now, in its 25th year, had devolved into a poor excuse to go to Vegas in July. What business there is gets conducted in suites high above the casino floor of the Venetian Hotel, and attendees long ago stopped expecting to be amused by the studios hoping to inspire them to trade free food for precious shelf space in their stores.

No need to conjure up visions of a “slump,” similar to the one invented last year by headline-hungry reporters and entertainment-industry Cassandras to explain last year’s non-alarming dip in raw numbers. The video/DVD dodge remains a tremendously lucrative enterprise for almost everyone involved, even if expectations of continued exponential growth have surrendered to marketplace realities.

As reported by the Digital Entertainment Group, sales of DVD hardware and software remained “stable” for the first half of 2006, with nearly 14 million players being sold to American consumers. This was a virtual repeat of last year’s numbers, which, lest we forget, weren’t bad: in 2005, alone, consumers spent $22.8 billion renting and buying DVDs.

Nearly 85 million American households, representing 80-plus percent of all homes, now have at least one DVD appliance. Approximately 52 percent have more than one player.

In the first half 2006, as well, more than 740 million DVDs were shipped to retail outlets, 4 percent short of last year’s total. The total number of units shipped since the launch of the DVD format, not even a decade ago, is 6.3 billion discs. Because DVD playback units are among the most dependable of all such products, it’s logical to assume that many American consumers simply don’t need new boxes.

Those who’ve prophesized that the well may soon run dry also ought to consider that the 60,000 DVD titles extant represent less that half of all the titles made available in VHS. This is one extremely deep and fertile well.

“What we’ve seen in the first half of the year is a natural, expected slowing of DVD sales,” said Steve Nickerson, DEG Communications Committee Member and Senior Vice President, Market Management, Warner Home Video. “(While) DVD sales are virtually flat … the industry is seeing growth from such genres as music DVD and special interest films, including documentaries.”

Movies continue to make lots of money for investors, and movies are where DVDs come from … they’re the tail that wags the dogs of Hollywood. Just as international box-office revenues have surpassed domestic returns – even with inferior exhibition options -- DVD penetration worldwide isn’t expected to reach 30 percent until 2010. America will continue to supply an inordinate amount of entertainment product to the global marketplace, and, thus, no one need shed any tears for the studios or buy into any self-serving slump theory.

The larger truth is that audiences are as predictably fickle as they are occasionally discerning, and the swine that wallow in the troughs of Wall Street are never satisfied with mere success. Their insatiable appetite explains why the huge numbers generated by Pirates of the Caribbean: Dead Man’s Chest weren’t sufficiently massive to save the jobs and livelihoods of the 650 Disney employees who soon will receive pink slips. (In all likelihood, none were given the same golden parachute as Nina Jacobson, who famously took time away from her partner’s birthing contractions to bug Dick Cook about her job status.)

Apropos of all this corporate mishigas, it also became clear from demonstrations and discussions at VSDA that no one in Hollywood or Tokyo should expect miracles anytime soon from the next big leap in playback technology. Blu-Ray and HD-DVD software is slowly finding its way to stores and early adopters of digital appliances, but the launch has been botched so badly almost no interest has been generated in the marketplace.

The product simply was introduced too soon, and much harm has been done by trumpeting hi-def as the best thing to happen to film lovers since … well … DVDs.

More than anything else, consumers are wary of investing in one competing format over another. Memories of the Beta/VHS conflagration, which took a far greater toll on consumers than it did on manufactures and content providers, remain fresh. DVD promoters had to quash upstart Divx before consumers would jump on board. Once that happened, sales soared.

To the untrained eye, HD-DVD and Blu-Ray are identical in their ability to translate hi-def images for mass consumption. Add digital downloading to the list of options, and no one could possibly blame consumers for sitting on the sidelines.

Then, too, most of the titles currently in the hi-def pipeline derive from standard studio fare, much of which was ignored by moviegoers in their theatrical release. Basic Instinct 2, 50 First Dates, Rumor Has It and Stealth are among the early releases, and no one in their right mind is going to drop a grand to see those pictures. The bonus features available on Blu-Ray and HD-DVD are terrific, but are they enough to drive sales for such dogs as Aeon Flux and Brothers Grimm? Probably not.

Existing technology is perfectly adequate for the needs of 90 percent of all DVD enthusiasts, most of whom would have to invest thousands of dollars into new playback units, appropriate video monitors, advanced sound systems and redundant software to take advantage of either format.

There’s also the problem of not having enough product extant to adequately supply merchandisers, rental outlets and critics. Browsing customers aren’t able to sample hi-def products, and get excited enough by the visuals and features to consider purchasing a unit. Neither can freelance DVD critics -- many of whom are only one or two assignments away from the poorhouse -- afford to purchase one, let alone two, new playback units for their reviews, and test players aren’t yet being made available, either. And, generally speaking, no press, no buzz.

Look for backers of HD-DVD to spend around $150 million on a marketing campaign, which will run from August to February. That will help build awareness. Better, someone should introduce a machine that plays both formats and VHS, and retails for under $500.

On the plus side, VSDA exhibitors demonstrated that there’s no scarcity of titles being sent into the standard DVD marketplace. Niche, genre, docs and arthouse films from around the world are showing up with increased frequency. And, while some are of little worth, others are quite wonderful.

More on that in my next column from VSDA.

July 28, 2006

- Gary Dretzka

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