Mass-market status for DVD came another step closer to reality over the Labor Day weekend as hardware prices dropped below the $300 threshold for the first time.
Many industry experts see the combination of lower hardware prices and software rental availability as key to the success of the new format. Two other developments around that time also indicated DVD may become a widely used home video format.
Blockbuster Entertainment, Dallas, announced it would roll out a DVD hardware and software rental program to 500 stores by the end of the year (see separate item on page 60). And the prospects for the competing Divx limited-play variant of DVD grew dimmer with reports that Circuit City, Richmond, Va., was having difficulty obtaining the financing necessary to roll out the format.
"It's going to take off. It really is," said Matt Feinstein, vice president of Marbles Entertainment, Los Angeles. Marbles operates leased-space video departments in 20 Vons Cos. and Lucky Stores units. "There is such excitement everywhere for DVD right now."
At last summer's Video Software Dealers Association convention, DVD proponents reported they expected hardware penetration to reach 700,000 units by the end of the year, and to have sold 1 million units to retail. Last spring's Supermarket News video survey found 10.3% of supermarkets with video programs carried DVD for rental.
With hardware selling below $300 and software more readily available, the DVD market should meet industry expectations.
"The lower price point will drive more sales, which will lead to more consumer interest in the software both for sell-through and rental," said Amy Jo Donner, director of DVD Video Group, Los Angeles. "When you are seeing the lower price points, it is a true testament to DVD's ability to hit the mass markets. The demand is there and the price is representative of that," she said.
"How can this not be good for the industry?" asked a studio executive who did not want to be identified. "The hardware coming down in price is going to bring more people into the arena. I don't think the timing could be any better." More retailers probably now will start carrying DVD software, the executive noted. "This might make a little easier for everybody else to get a little more involved in DVD."
"It indicates to us that a lot of people are going to be able to afford DVD," said Feinstein. Marbles is about to start testing DVD in its first store, and will expand it, depending on the results of the test, he said.
"Interest level in DVD merchandising products continues to grow exponentially on the part of supermarkets and specialty store operators," said Stewart Gershbaum, director of national accounts for Specialty Store Services, Morton Grove, Ill. "With the reduction in price points for both hardware and software, and with the increased availability of budget-priced software, we are very confident of the growth of this configuration," he said.
The most prominent sign of the new lower pricing was in the Labor Day circular of Best Buy, Minneapolis, which has been one of the bigger retail proponents of the new format. Proclaiming "Our lowest advertised price ever on a DVD player," the ad showed an unidentified DVD player at $299.99, and outlined several key selling points of the format. Best Buy also highlighted software availability, noting customers have "over 750 titles to choose from."
During a visit to a Best Buy store in North Olmsted, Ohio, SN found a Philips Magnavox unit priced at $299.97. Nine other DVD players were displayed in 8 linear feet. They ranged in price from $349.92 for a Pioneer to $599.99 for a Panasonic.
The store was about to expand its DVD software display area, according to employees. A large space in the center of the store had been cleared for the new fixtures. At the time of SN's visit, the Best Buy store devoted 28 linear feet to software and had about 1,500 units in the store. Prices ranged from $12.99 to $29.99 for regular titles, and $34.99 for a "This is Spinal Tap Special Edition" and $35.99 for a five-disc set, "Titanic: The Mystery and the Legacy."
The Best Buy store had apparently cut its price 2 cents from its advertisement to meet a competing regional chain, Sun Television & Appliances, Columbus, Ohio, which promoted a DVD player for $299.97.
On a visit to Sun's North Olmsted store SN learned Sun had subsequently reduced the price of a Philips Magnavox unit to $299.87.
Three other players were displayed on a prominent endcap with the sign "The DVD Zone," ranging from a $399.97 Magnavox unit to a $499.97 Toshiba.
Sun devoted 12 linear feet to DVD software and had about 400 units in stock, at prices from $10.99 for Jackie Chan series from Simitar to $19.95, $21.97 and $24.97 for regular products.
Wal-Mart Superstores, Bentonville, Ark., offered a Samsung DVD player for $299 in its Web site. However, at the North Olmsted Wal-Mart store, only two were displayed: an RCA for $369 and a Philips Magnavox for $449.
The nearest Sam's Club warehouse operation, in Brook Park, Ohio, had only one player, a Toshiba at $349.99. Both had software behind a glass case, although an employee at the Wal-Mart store said it planned to put a DVD section in-line with its videos.
A Rocky River, Ohio, store of Target, Minneapolis, was aggressively merchandising DVD software and hardware. It devoted 16 linear feet to software and had about 700 units of inventory, and the four hardware models on display ranged from a Philips Magnavox unit at $329.99 to an RCA at $499.99. Monitors throughout the music, video and electronics areas played DVD demonstration discs.
Prices of software ranged from $14.99 to $27.99, including three advertised specials, "Wag the Dog" for $19.99, "US Marshals" for $14.99 and "The Wedding Singer" for $19.99.
All three titles were available for video rental, but had yet to be repriced to sell-through for VHS.
