MAKING A DVDEAL

DAN ALAIMO

All the pieces are starting to fall into place for DVD.

Prices are coming down, with some hardware now priced below $300. A wide variety of retailers are carrying the software for sell-through and rental. Advertising and promotion will be everywhere during the fourth-quarter selling season.

Supermarkets have not hesitated to get involved. For example, in a new Giant Eagle video department in a Parma, Ohio, store, DVD is featured prominently for rental and sale near an entrance, with Toshiba players going for $299.99. Some chains, like Schnuck Markets, St. Louis, have carried DVD since it was introduced early last year.

One question that will probably be answered by the end of the fourth quarter will be the future of Divx, a limited-play variant of DVD. A major marketing push for Divx, financed primarily by its principal investor, Circuit City Stores, Richmond, Va., is now under way. Consumers buy Divx discs for $4.49 and have 48 hours to view them, at which time they can purchase more time through a modem hookup or buy the movie outright. Many in the video business, however, see Divx as a threat that will confuse consumers and cause them to balk at buying any kind of DVD player.

The uncertainty of Divx aside, supermarkets are embracing DVD. Every one of the five participants in this year's SN video roundtable either was trying the new technology or had immediate plans to start. Although not all were enthusiastic about DVD's short-term prospects, most were positive about DVD's future.

Participants in the roundtable, conducted earlier this year, were Gary Schloss, vice president of general merchandise at Carr Gottstein Foods, Anchorage, Alaska; Brenda Vanover, director of video operations at K-VA-T Food Stores, Grundy, Va.; Kirk Mueldener, director of video operations at Hy-Vee, West Des Moines, Iowa; Greg Rediske, president of Video Management Co., Tacoma, Wash.; and Brad Ufer, video merchandiser at Coborn's, St. Cloud, Minn.

Here is what the retailers had to say about DVD and Divx:

SN: What will DVD mean to your business, long and short term?

UFER: I'm not sure if it's going to have any effect on the business, but it's just a part of being in the business to have the product. My hope is that we will have enough people that are interested in DVD, but who are not sure about it, and they will rent it before they go out and purchase a unit. Part of my marketing plan is to let the stores that sell it know that we carry it for rental. Then, if they have customers that are hesitant about buying it, they can tell them we rent it. So if a customer wants to try it before making an expenditure, that opportunity would be available.

SCHLOSS: It's going to have a great deal of positive effect. Once there's some hardware out there, it will stimulate a whole new interest in the video business. There is the clarity of the picture and the improved digital sound. It's something new and exciting that everybody's going to want to get involved with. That will really help the video industry.

VANOVER: Long term, I think DVD is going to do great. I would like to see it do well in rental and I really think it will be the next format.

REDISKE: In the short term, I see DVD as a rental item and possibly sell-through in the long term. For us at the moment, it is in a rental mode and I am not really worried about sell-through.

MUELDENER: I honestly don't know. It depends on how it shakes out. I think the studios or somebody needs to come out and say, "On this date, we are going to stop producing VHS. This is the format of the future, and this is the direction we are going to go." The customer will still have a VHS player, similar to the cassette player. Like the CD player, DVD will be the primary platform for movies.

SN: What do you make of the Divx variant of DVD?

REDISKE: I don't get it. I don't understand why a customer would want it. The advantages, as I understand them, are relatively nonexistent, so I don't quite understand. I find it more of a distraction.

MUELDENER: I understand the reasons why the studios want to do it. First is probably the international pirating issue. Second, you'll see studios look at it from the packaged-goods standpoint and the opportunity of getting product out on the shelves. But I think it's too difficult for the customers and doesn't give them a sense of ownership.

UFER: If it works, it will revolutionize home entertainment for the consumer. Many video operators are concerned that if it does work, it could vastly affect their business. I'm not sure that it will work. I do think it will confuse the customers and cause customer-service problems if it's a format that we end up adopting. But it might be a good supermarket item because of the price point and because there is no return trip.

VANOVER: I don't think that Divx has a future. The only positive feature that I can think of is that it would eliminate the late fees. But then you wouldn't get the benefit of the return trip. I don't think it will slow consumer acceptance of DVD once it starts to be publicized.