In fear, Hollywood studios and DVD publishers in general would begin raising the prices on DVD releases and match the price tags to VHS rental pricing, VSDA, the Video Software Dealers Association, wrote an open letter to the studios, which was published in a number of trade magazines. Although this is clearly business and industry-specific material, we thought you may be interested to read it just as well, so here is a reprint.

May, 1999

The unprecedented rate of growth of DVD and its phenomenal promise for the future of home video are due in significant part of the farsighted decisions made by studio executives in pricing their DVD releases. Consumers have warmed to this friendly format because it has offered exceptional value for their dollar and with the promise that both the format and its price/value relationship will endure.

In our view, our studio partners and the consumer electronics industry brought DVD to home video at a critical time – a time marked by the confluence of flattening consumer demand for VHS, and consumer anticipation and thirst for optical-digital quality video and audio, streamlined packaging and portability. We believe these factors will bear upon the growth of consumer demand for DVD software for years to come.

Speculation in industry trade magazines and elsewhere about a potential change in pricing of DVD software has raised earnest concern among many sell-through and combo retailers and among rentailers. The opinion of many is that any change would limit the growth of demand and create substantial doubt among consumers about the desirability of the format.

We believe it is much too soon to cast any doubt in consumers’ minds about the attractiveness of open DVD for the enjoyment of movies in the home, much less to give retailers any reason to doubt the wisdom of fully embracing the format and aggressively investing in it.

For rentailers, consumer penetration levels will not support a reasonable return on investment for DVD products at traditional VHS rental pricing. Here, inexorable economics would drive copy depth to levels far short of consumer demand, again sending the wrong message to consumers. We ask our studio partners not to revise DVD pricing policies at this early stage in the life of this vital format and to allow consumers to fully embrace it. The future of our industry depends on it.