Gary Dretzka
Noah Forrest
Leonard Klady
David Poland
Douglas Pratt
Ray Pride

Ten years ago, this week, a small group of journalists joined a couple dozen home-entertainment pros to break bread -- not a bad meal, if memory serves -- while being touted a fledgling digital technology that would deliver movies on shiny CD-sized discs. The luncheon was held in conjunction with the annual Consumer Electronics Show, and, even with the promise of free food, media coverage pretty much was limited to the trades and show dailies.

VHS was the dominant playback platform, and DVD faced competition from several other formats, including one self-destructing format that also enjoyed some studio support. Like almost all such consumer-electronics products introduced at the dawn of the digital age, the obvious question was: why bother?

Flash forward 10 years, to a well-attended reception held Monday night at the Venetian Hotel, and the only dark cloud on the horizon involved the soundness of the goose that laid the golden egg.

According to year-end figures released by the Digital Entertainment Group, consumers spent $24.2 billion renting and buying DVDs and VHS in 2006. While DVD sales were up, VHS transactions were off. This left consumer spending for the home-entertainment category unchanged from the previous year.

DVD retail sales grew slightly from 2005 numbers, to $16.6 billion. Rental transactions were up approximately 10 percent, to $7.5 billion.

Although some observers will argue that "flat" overall revenues are a matter for concern, it’s probably worth remembering that very few consumers are bothering to upgrade their aging VHS systems, and nearly a decade of exponential growth has put DVD players in 88 million households (even adjusting for the 55 percent of DVD owners who have more than one players). Since launch in spring 1997, nearly 200 million DVD players, including set-top and portable DVD players, Home-Theater-in-a-Box systems, TV/DVD and DVD/VCR combination players, have been sold to consumers.

DVD is a mature industry, and, as such, has already experienced its boom times. There’s still plenty of money to be made, however.

There are challenges ahead, of course. They include convincing movie lovers to re-invest in HD-DVD or Blu-ray Disc technology, and combating a possible shift in popularity to downloading movies on computer-based systems. The operative words in the preceding sentence are "re-invest" and "possible." Again, given the excellence of DVD playback, why bother?

Because the DEG is an organization comprised of product suppliers, equipment manufacturers and retailers -- and this soiree is an annual event at CES -- it behooves everyone involved to push products that will drive sales of both hardware and software. To this end, the DEG also put a happy spin on HDTV.

As difficult as it is to believe, the study wants us to believe that "since launch in 1998, more than 34.5 million HDTV sets have been sold to consumers and there are currently 31 million HDTV households that are able to make full use of high definition media players, when set up properly."

Moreover, "Hi-def media devices – including set-top box and game consoles – are available at some 10,000 storefronts, and sold-through well over 750,000 units. … The high definition players – including Blu-ray Disc and HD DVD – are available at some 7,500 storefronts. … There are currently 12 models with prices from as low as $499."

Most cost a great deal more, however. The best deal could be in the multi-use PlayStation 3, which includes Blu-ray capacity but costs north of $600.

The other problem for consumers remains one of pure practicality. Until the industry settles on a single format, it makes sense to avoid investing hard-earned money in a possible loser.

Sunday and Monday, at CES, proponents of Blu-ray and HD-DVD spent way too much time predicting the imminent demise of the each other’s technology. They also promised the release of hundreds of new titles in 2007 … "hundreds," compared to thousands in DVD.

Consumers will be forgiven if they don’t jump into the fray with both feet. Fact is, all DVDs look better on HD and digital television monitors than on analog screens, and, apart from the bonus features, hi-def titles won’t blow anyone’s socks off, just yet.

Indeed, the best news out of CES may lie in LG Electronics’ unveiling of a player that can accommodate both formats, albeit without some key interactive features and CD playback capacity. Warner Brothers also announced development of a "triple-hybrid" Total HD disc.

"The new discs will be compatible with both Blu-ray and HD DVD players and may end the war between the two emerging formats," the WB spokesman suggested. "The initial dual-format Total HD disc should include a Blu-ray and an HD-DVD layer, but eventually it may gain the third layer and provide DVD-compliance as well."

Again, don’t hold your collective breaths.

Whatever happens on the technology front, it hardly seems likely that hi-def discs will jump-start the entire consumer-electronics industry. For the past 10 years, even without 1080i capability, DVD has been the tail that’s wagged the HD dog.

Growth in the home-theater businesses has been a byproduct of the acceptance of DVD, which is far superior in performance to VHS and standard-resolution television.

"Without DVD, I can’t imagine trying to sell flat-screen monitors," said Best Buy CEO Brad Anderson at the DEG reception.

Lest we forget, the original backers of DVD hardly could allow themselves to imagine what their shiny little disc would mean not only for the consumer-entertainment industry, but also Hollywood’s bottom line. Ten years ago, too, the bonus features were limited to the wide-screen and language-track options. It wasn’t until filmmakers embraced the technology wholeheartedly -- if only for ego-gratification -- that commentary became a staple, along with making-of featurettes, interactive games, trailers and other goodies.

In the heyday of VHS and laserdiscs, this kind of treatment was reserved for titles in the Criterion Collection. Now, even "Jackass" qualifies for such tender loving care.

Progress? I suppose.

January 10, 2007

- Gary Dretzka

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