Children's video on DVD is poised for a growth spurt.
While supermarket sales of mainstream hits and catalog titles have led the crossover to DVD, retailers said "kidvid" is catching up and is ready to take more business away from VHS as the all-important holiday selling season approaches. Better-priced hardware and product availability are adding up to more video sales and rentals for family-oriented titles.
"Children's DVD is increasing, but not by the leaps and bounds that other categories are," said Bob Gettner, video buyer/coordinator, B&R Stores, Lincoln, Neb. "We're seeing more in sell-through DVD, primarily the Disney titles. Sell-through is now three to one DVD vs. VHS. So it's increasing, but not as quickly."
"DVD is doing well, and we're moving ahead with it," said Laura Fisher, video coordinator, Martin's Super Markets, South Bend, Ind. "We're definitely increasing our depth on DVDs."
Video executives said the most important factor prompting growth in children's DVD has been the lower price of the hardware, which facilitates its increasing household penetration. Non-traditional DVD players, like game systems and car units, also contribute.
"Household penetration of DVD hardware has grown dramatically during the past 12 months," said Bill Bryant, vice president of sales, Ingram Entertainment, La Vergne, Tenn. "In addition to DVD hardware players, game units such as PlayStation 2 and Xbox both play DVD software." Many of these game units represent additional DVD players located in the playroom, he said.
"Low-priced DVD hardware is also finding its way into the playroom, and parents are beginning to trust young children with the DVD format," he added. "As a result, supermarkets are experiencing a substantial increase in the number of children's DVDs sold."
Kelly Sooter, who heads up Domestic Home Entertainment at DreamWorks, provided several statistics to illustrate the DVD trend:
75% of households will have a DVD player by the end of this year.
86% of families purchased a DVD in the last six months.
Families bought an average of 12.1 DVDs in the last six months.
Family product represents the best-sellers in the category. Six of the biggest top 10 titles in 2002 were family fare.
"There's a huge penetration in the marketplace," she said. "Most of the families are still maintaining VHS, so what we're seeing is an active dual household."
MGM Home Entertainment, Santa Monica, Calif., is launching the MGM Kids brand and moving aggressively into the family video business by forming partnerships with 10 other content providers. These are: Scholastic Entertainment, Nelvana Limited, NBC Enterprises, the Jim Henson Co., DIC Entertainment, WBGH, Broadway Video, Monster Distributes, Brown Bag Films, the Film Consortium, the Mad Science Group and Southern Star Sales.
"As DVD players make their way into family rooms, kids' bedrooms and automobiles, the potential for children's products in this format continues to grow at an accelerated rate," said David Bishop, president and chief operating officer, MGM Home Entertainment, in a prepared statement. "Given this growth, we are actively seeking products and brands to bring to the family home video marketplace."
The trend of children's product moving to DVD will continue, said Gettner, because there has been a change in perception about DVD players and the product itself.
"When DVD players first came out," he explained, "they were more of an adult toy. Parents didn't want the kids playing with it, and the disks were expensive. That thinking is going away. Everybody is turning to DVD. It's cheaper, it's easier, and the life span is almost forever if the disk is taken care of. So the mentality has changed from being an adult toy to a family unit."
That's good news for supermarkets, which have traditionally found children's video to be an attractive purchase for families.
"Children's video on DVD is important to supermarkets because consumers are beginning to replace VHS libraries with DVD software as the format migration continues," said Bryant. "This creates substantial opportunity for all outlets that sell children's DVD."
Brenda Vanover agrees. "It's always important to move forward with technology. Children's DVD is an important part of our supermarket business," said the director of video operations at K-VA-T Food Stores, Abingdon, Va.
The availability of lower-priced hardware is driving the business, said Fisher of Martin's Super Markets. "Everybody has a DVD player now, so it's important to have product that the customer is looking for," she said.
For a long time, buying movies was not "cool" for teenagers, according to Sooter of DreamWorks. Now that's changed for teens, as well as for all age groups. Supermarkets need to capitalize on the new status of DVD, she said.
"For the supermarket channel, it had been a price point issue and a conversion factor," she said. "So they didn't see the reason to switch their mix. Now that you have a broad acceptance of the format, [grocers] are seeing more success."
At some point, VHS will be overtaken by DVD because people will be buying replacement hardware, Sooter explained. Until then, the key will be to provide shoppers with both formats. Studios will market both, but "it's a little harder to make sure that retail is continuing to carry both formats so they don't miss out on the remaining VHS purchases," she said.
"Children's movies on VHS are still ahead of DVD at this point," said Vanover of K-VA-T. "However, [DVD] is beginning to climb."
B&R Stores didn't offer much children's DVD at all last year, according to Gettner. Now it's definitely picked up.
"Children's video titles last year were predominantly purchased on VHS due to the fact that VCRs dominated the playroom," said Bryant of Ingram. "However, game units that play DVD and low-priced DVD hardware units have made it less risky to teach young children to operate DVD players. As a result, sales have increased dramatically."
Overall, like other industry executives, Bryant is bullish on the prospects for the category. "Sales of children's DVD will continue to grow due to the current installed hardware base and due to the number of low-priced DVD players being sold in the marketplace," he said. "Family libraries will continue to grow in the format of the future, which is DVD."
This is a great point in time for DVD and supermarkets, according to Sooter of DreamWorks. Historically, families have been the heaviest purchasers. Those families are now buying more than they did before, plus new families are coming into the category, she said.
Retailers share the enthusiasm. "I foresee [growth] continuing with more than just the Disney releases," said Gettner of B&R Stores. K-VA-T's Vanover said, "As the DVD players continue to go down in price, I think children's DVD will continue to rise."
Fisher of Martin's Super Markets was more restrained in her immediate forecast, but predicted a boom to follow. There will be stable sales for the rest of the year. Then, she said, there will be a boost in business after Christmas when people get new DVD players.
"But also, once the upcoming recordable DVD players come down to an affordable price, I think that DVD will just explode," she said. "It'll be a couple of years yet because they're real expensive. It has to get down to $100 to $150 before you see a real boom in purchasing."
The annual boom for children's video is the Christmas season, and video executives said this year will be no exception.
"'Finding Nemo' will be very hot," said Fisher. "Disney is releasing 'The Lion King' and 'Sleeping Beauty' on DVD, and everybody has to have their Disney collection. They always do well."
Said Bryant, "Some of the event titles in the fourth quarter will include 'Lion King,' 'Finding Nemo,' 'Rugrats Go Wild,' 'Sinbad: Legend of the Seven Seas,' and 'The Cat in the Hat.' Many supermarkets will also be merchandising catalog franchises, such as Barney, Blues Clues, Veggie Tales, Bear and the Big Blue House, Arthur, and Clifford the Big Red Dog."
Other top upcoming children's titles mentioned by retailers were "Santa Claus 2," "Holes" and "The Hulk."