DVD SEEING OLYMPIAN GROWTH TRENDS 2004-08-23 (1)

Dan Alaimo

LOS ANGELES -- As DVD continues its unprecedented growth trend,the format keeps passing milestones like an Olympic runner.

The most recent report presented by DEG: The Digital Entertainment Group here marks two key events for the first half of 2004 for the DVD format, revealed Amy Jo Donner, executive director of the trade group.

About 13 million DVD players were sold through June, a 25% increase over the same period last year. More than 100 million players have been sold since the launch of the format in 1997.

About 650 million DVD software units were shipped to retail in the first half of the year, up 52% over 2003. More than 3 billion DVD units have been shipped since launch.

These growth numbers are surprising because with the high existing penetration of DVD into U.S. households, one would expect a much lower growth percentage, industry observers noted.

"We are going to be in two-thirds of all homes by the end of the year," Donner told SN. "The distribution channels have expanded. The price points are better. We have a lot of first-time buyers, but people also are adding players to their households."

Meanwhile, as DVD has clearly established itself in the retail mainstream, supermarkets have become an increasingly important outlet. "As the DVD market matures and we get into mass market numbers, supermarkets are going to be the first ones to benefit," Donner said.

"The impulse purchasing by the female shopper who sees DVDs at checkouts or in the aisles is going to contribute to these already-strong numbers," she said.

This growth will sustain in the second half of the year, particularly in the fourth quarter, and notably in January -- right after the holidays when new DVD players are acquired, Donner said.

"Consumer buy rates are still really high. They are buying on average of 16 DVDs per player, per household. With a household that has more than one player, that number goes up. The research indicates that number is not expected to go down in the future," she said.

A strong slate of movies and television programming becoming available on DVD, lower cost players and DVD recorders, and the explosion of the car player market will contribute to this growth. DEG is predicting the number of player units will more than double this year to 2.5 million, Donner said.

"There also will be expanded marketing campaigns across the studios, and there will be titles becoming available in January that will help drive traffic as well," she said.

TOP 5 SUPERMARKET VIDEO SELL-THROUGH TITLES

Rank, Last Week, Title (Weeks Out): Studio; DVD Retail

1, N. Hidalgo: Buena Vista; $29.99

2, N. 13 Going on 30: Columbia; $28.95

3, 1. Starsky & Hutch (2): Warner; $27.95

4, 2. The Bourne Identity (3): Universal; $29.98

5, N. The Princess Diaries: Buena Vista; $29.99

N = New

As of Aug. 9, 2004 This chart, tailored for the supermarket video market, is based on information taken from more than 1,000 supermarket rental locations serviced by Ingram Entertainment, La Vergne, Tenn.