IN-HOME SUPERHIGHWAY NOT EXPECTED TO BYPASS STORES

DAN ALAIMO

UNIVERSAL CITY, Calif. -- The entertainment software highway will continue to run through retail stores for a long time to come.

That was the viewpoint of several speakers at the Hollywood 2000 conference held here last month by Advanstar Associates, Carmel Valley, Calif.

The new systems propose to deliver many of the same things that Warner's Qube project promised 17 years ago, said Ron Castell, senior vice president of programming and communications for Blockbuster Entertainment Corp., Fort Lauderdale, Fla. "I have seen the future and it's the future," he quipped.

"This stuff doesn't exist. It exists in the imagination and the business plans of people who give conferences," he said. Meanwhile, home video is strong and very profitable business for retailers and for the studios, he noted. It is about a $14 billion dollar industry now, growing by $1 billion a year, and it is projected that it will reach $20 billion by the turn of the century, he noted.

One key to survival will be customer satisfaction. "The customer will dictate what we do. If we don't pay attention to the customer, then we deserve to go out of business," said Castell.

Studio executives at the conference confirmed video's importance to their companies.

"The video business is still alive and well," said Alan Perper, vice president, marketing, Paramount Home Video, Hollywood, Calif. "It's twice the size of the theatrical business." Perper said there will be continued growth for rental and bigger growth for sell-through.

"The reality is that video is what is paying the studios' bills today," he said.

But Tom Adams, managing director, Advanstar Associates, said the future delivery systems are coming and "retailers are going to take the brunt of the current electronic boom."

"It's no longer five years away when video stores around the country will be facing competition for the consumer dollar," said Adams.

Richard Cohen, MGM/UA Home Entertainment, Santa Monica, Calif., disagreed. "Five years from now, I don't think (the video market) will be all that terribly different from the way it is today. Clearly it will change over the course of time, and different forms of digital television will have a huge impact," he said. But the challenges of physically installing and paying for these systems are immense. "While all the technology is there to make all these things happen, the gap between a technology existing in a laboratory and it existing in 50-100 million households is very gigantic," said Cohen.

Separate windows will enable retailers to continue to compete with other delivery systems, said Rand Bleimeister, senior vice president, Virgin Interactive Entertainment, Irvine, Calif. "I don't think that any of us who are investing in very expensive, very exciting intellectual properties are interested in embracing a technology that will supplant existing channels of distribution. What we are interested in doing is staging the release of that product for a variety of different channels in a complementary sort of way," he said.

The new delivery systems will cause the overall entertainment software business to grow, said Larry Kasanoff, chairman and chief executive officer, Threshold Entertainment, Los Angeles. "In the past what happened was each individual medium's piece of the pie,%age-wise, might have gotten smaller. But inevitably, over the history of the entertainment business, the pie gets bigger," he noted.