DVD GROWTH EXPANDS; NEW SYSTEMS ON HORIZON 2004-11-08 (1)

LIZA CASABONA

LOS ANGELES -- The DVD format is here to stay, even as the industry evolves and changes in response to new trends and technological advances, according to a cluster of recent studies.

For example, DEG: The Entertainment Group here has reported a 59% increase in DVD software shipments for the third quarter of this year over the same period in 2003. Figures compiled by Kaplan, Swicker & Simha, Encino, Calif., for DEG showed 340 million DVDs shipped in the third quarter, for a total of almost 1 billion DVDs shipped so far this year, and 3.3 billion shipped since the launch of the format in 1997.

"The unprecedented growth of the DVD format is a true testament of the partnerships between the hardware, software and retail industries," said Bob Chapek, president of DEG, and president Buena Vista Home Entertainment, Burbank, Calif.

Chapek predicted those alliances will be tested in the new few years as the industry starts to define the next generation of DVD technology.

Digital recorders could be part of that new generation in the industry, reported Understanding & Solutions, a British consumer research group with U.S. operations based in Boston. The company anticipated that sales of consumer DVD recorders will surpass sales of DVD players in 2006. More than 40 million DVD recorders will be sold worldwide in 2006, the company's study said.

"The reasons for the growth in DVD video recorders is due to a number of factors. Consumer awareness is building, so ownership is developing rapidly. Prices are falling so there is an increasingly good choice of recorders and combo products available at very competitive prices," said Caroline Baines, spokeswoman, Understanding & Solutions.

In keeping with recording trends that show consumers favoring an easy at-home acceptance of DVDs, The NPD Group, Port Washington, N.Y., released data this year showing consumers are reacting to the fledgling movie-download industry similarly to how they reacted to early music downloading.

The data also showed that the same age demographic of 18- to 24-year-olds and heavy DVD buyers have taken the lead in paid movie downloading.

While movie downloading currently accounts for only 0.3% of video units that were purchased or rented in the first half of 2004, industry observers already have the trend on their radar, sources said.

"With regard to the downloading issue, the studios are keenly aware of what happened to the music industry. They are very committed to not let history repeat itself," said Bill Bryant, vice president of sales at Ingram Entertainment, LaVergne, Tenn.

Toward that goal, studios have started reducing DVD price points, he said. When the music labels did not do this to compete with music downloading, consumers found alternative ways to purchase music. The studios are also researching how to create firewalls to protect future formats, such as Blu Ray (developed to enable recording, rewriting and playback of high-definition television) and high-definition DVD, against piracy, Bryant said.

However, it appears the impact of new formats is still far off on supermarket retailers' horizons.

"We've had no change that I can see based on the numbers of rentals we have and the volume of business we're doing," said Ray Wolfsieffer, video specialist, Bashas, Scottsdale, Ariz. Rental and sell-through are still strong in the stores he oversees. Like so many other things, long-term predictions are difficult, he said.

"I don't think it's going to impact us, at least for the moment. I'm not concerned about it," he said.