DVD ON FAST TRACK TO MASS MARKET: GROUP EXEC

DAN ALAIMO

LAS VEGAS -- DVD will be well on its way to mass-market status by the end of this year, said Emiel Petrone, chairman of the DVD Entertainment Group, Los Angeles.

"The DVD Video Group expects the installed base to more than double to over 12 million units in 2000," said Petrone, speaking during the Consumer Electronics Show here this month where the DVD Video Group announced its name change to DVD Entertainment Group. "This figure far exceeds 10% of U.S. households -- a benchmark of success for a consumer electronics product," he said.

"It can be said without hesitation that DVD-video is the most successful consumer electronics product launch ever," he said. Petrone also is executive vice president worldwide of Philips DVD Entertainment Group, Los Angeles.

As DVD approaches mass-market levels of penetration, the product will become more important to supermarket video programs, said industry observers. Its value will be heightened because DVD owners buy and rent a disproportionately large numbers of discs to go with their players, they said.

DVD was initially launched in the spring of 1997. By the end of 1998, there were 1.4 million DVD players in homes, with 257% growth in 1999 to 5 million units installed in total. Petrone noted that these numbers pertained to DVD set-top boxes alone and not to DVD-ROM drives in computers.

"In 1999, the industry shipped an incredible four million DVD-video players to dealers. This number greatly exceeded every forecast that was given at CES last year and even those forecasts that were adjusted throughout the year," said Petrone.

In software, the DVD Entertainment Group reported that, in the fourth quarter, nearly 50 million discs were shipped to retail, about the same amount shipped in the first nine months of 1999, and a 400% increase over the same period in 1998, said Petrone. "This means that nearly 100 million DVD movies and music videos shipped in 1999. This figure represents revenue of more than $2 billion for Hollywood studios and music labels for the year 1999 alone," he said.

Retailers confirmed the format's success. "DVD sales exploded during the holiday season with stores reporting double-digit increases in both hardware and software," said Joe Pagano, vice president of merchandising for Best Buy Co., Minneapolis.

"Our December 1999 sales exceeded our expectations, nearly doubling last year's industry-leading volumes," said Alan McCollough, president and chief operating officer at Circuit City Stores, Richmond, Va.

Proclaiming DVD the "medium of the millennium," Rusty Osterstock, general manager for Panasonic Consumer Electronics Co., Secaucus, N.J., said the change of name to DVD Entertainment Group will help the industry better represent all kinds of DVD products. "This will allow us to properly support not only movies and music videos, but all of DVD's entertainment options, including music and interactive games," he said.

The DVD-audio format will be introduced later this year, he said, and all five of the major music companies -- BMG, EMI, Sony, Universal and Warner -- have joined the organization. "This will allow us to establish a new coalition in order to help pave the way for DVD-audio's eventual introduction," said Osterstock. The group plans "a highly concentrated communication and promotional campaign" like the one that successfully backed DVD-video, he said.

Meanwhile, in a broad-based announcement, the DVD industry said it would launch a major marketing drive beginning next month. "Feb. 19 will be the kick-off for the biggest, most comprehensive DVD promotion ever created," said Mark Horak, senior vice president of marketing at Warner Home Video, Burbank, Calif.

The program will run until May 30 and offer five free DVD movies with the purchase of any model DVD player made by JVC, Panasonic, Philips, Pioneer, Samsung, Sony, Thomson Multi-Media (the RCA, Proscan and GE brands), Toshiba and Zenith. It will be supported by a "multimillion-dollar television and print advertising program," according to a statement. The five free movies are "Fools Rush In" from Columbia TriStar, "Get Shorty" from Metro-Goldwyn-Mayer, "The Mask Platinum Series" from New Line, "The Jackal: Collector's Edition" from Universal and "Analyze This" from Warner.

"The opportunity to buy a new DVD player and start a title library with five free movies is an undeniable incentive for consumers," said Best Buy's Pagano. "It's an exciting promotion that will continue to create awareness for the format and make it easy for customers to participate in the DVD experience," he said.

"DVD has realized consumer acceptance and growth unprecedented in the history of consumer electronics," said Paul Culberg, president of the DVD Entertainment Group, and executive vice president worldwide of Columbia TriStar Home Video, Culver City, Calif. "This high-visibility promotion will help us achieve our goal of 10% household penetration this year and ensure the long-term success of this format."