When I entered the halls of VSDA this year, I was anxious to find out how it would compare to last year’s show, where VHS was very dominant and DVD although present only accounted for a small portion of the actual show. 

This year it seemed as if someone turned the whole industry upside down - and I guess you know already who that someone was. DVD has changed the face of the video industry quite dramatically. Last year our appearance at some exhibitors’ booths would only garner us sly smiles from staff members. This year however, they would pack us with heavy press kits and plenty of information about their plans and their hot upcoming titles. Does it have anything to do with the fact that “DVD Review” has become more credible over that one year? I would certainly like to think so, but the fact of the matter is that DVD has left its little niche and has opened many people’s eyes. The future of the entire video industry lies within DVD and most people have recognized this fact by now. DVD was all over the show and the publishers that did not have DVD titles in their catalog were rare to say the least. In that respect the face of the industry had dramatically changed in as little as 12 months. But even under the surface many changes have taken place. Take Image Entertainment for example, the biggest proponent the Laserdisc format has ever had, turned its back on the former love interest and has converted into a full fledged DVD authority. Not only does Image release a strong and steady stream of DVD titles, the company has also been heavily investing into authoring and compression hardware over the past months that allows Image to create complete DVDs in-house. To keep up with their schedule and their future plans it has become a necessity for Image to close the Laserdisc chapter and reorient themselves, and I for one am very happy to see how successfully the restructuring of the company has worked.

But there are other examples throughout the industry. While some major studios were timidly sitting on the fence, holding back their titles from the DVD format, other, smaller publishers rose to the occasion and now have market shares they would never have thought of. I am talking of course about Anchor Bay. What started as a shuffleware company that supplied low cost video tapes to discount bins has made a full transition to a major player in the DVD field. This is a major achievement and has to be attributed to their continued efforts in the field and a dramatic increase in quality. While Anchor Bay’s first releases were flawed with serious problems, the company now releases DVD titles on a regular basis that match those of many major studios in their quality and presentation. Once “Halloween” hits the streets and Anchor Bay introduces 16x9 enabled transfers for the DVDs they will even be able to offer quality a notch above of some of their major studio competitors. And all that because they are willing to put the money on the table in order to get the best possible quality and satisfy consumers’ wishes. It has not gone unnoticed by the industry and the consumers alike.
Or look at New Line, a studio that is committed to bringing the best possible DVD versions they can. With 16x9 enhancement for literally every release and technologically always on the forefront, New Line has positioned itself as a major competitor in the DVD field.
The same is true for Tai Seng to an extend who have been able to position their products for DVD in way that gives them a competitive edge over many of their slurring, undetermined competitors. Isn’t it peculiar how some independent studios take DVD much more serious than some of the supposed ‘big guns’ in the industry?

Much of this has to do with the growing acceptance of DVD on the consumer level, of course. By then end of 1998 about 1 million DVD players had been sold to consumers and it has now exceeded well over 2 million players. The installed base of DVD players in American homes could exceed 4 million by the end of the year according to analysts. It is clear from that growth rate that DVD has left the “early adopter” phase that was mostly made up of previous Laserdisc owners and is now entering the mainstream where no content provider can afford to overlook it.

As we could see from numerous interviews with filmmakers in the past and from the keynote panel at VSDA, DVD is also on the minds of the filmmaking community however. Not only does it generate additional profit for the studios, it also offer filmmakers to express themselves in ways that were previously impossible. Interactive supplements are one of the features directors embrace to bring their entire vision to the audiences instead of relying on the limited linearity of the movie alone. Bill Condon and Brett Ratner made it clear how the current generation of directors in Hollywood relies on DVD’s capabilities to enhance their films as a whole and there can be no doubt that these people will keep challenging and pushing the envelope in favor of DVD in the future.

Much of the success of DVD can and must be attributed to the Internet. Online retailers have become an important factor in DVD sales, accounting for an estimated 25% of all DVD sales, as opposed to an estimated 10% of last year according to an analysis by the VSDA. The ability to order rare releases and have them shipped to your down within 24 hours is not only attractive, but for some people essential if the next video store carrying DVD is many miles away. Of course online retailing has had an impact on traditional retailers who are now struggling to take their businesses online too. The VSDA actively supported these efforts with seminars and lectures during the convention to give smaller outlets the chance to make use of the Internet. Whether these stores will be able to compete with the venture capital funded likes of Netflix.com or DVD Express is a completely different story. If they want to survive in the future they will have to keep their eyes open and make sure to attract customers online just as every other industry does. It is a problem that is intrinsic in today’s high tech society in general and is utterly unrelated to the video segment per se.

But also information websites, such as DVD Review and many of our colleagues out on the Internet, have helped giving DVD a strong voice. Unfortunately there is a very high signal-to-noise ratio in everything on the Internet and as a result many supposed supporters did more damage to the format than good. But making DVD understandable and giving people the chance to directly see how the market grows has dramatically helped to make it an appealing format. It allowed us for example to show interested people the conveniences of DVD, the added value and most importantly the dramatic increase in quality over traditional video formats.

But times they are changing, as we all know, and even DVD is not without its problems. The hot topic of the VSDA was DVDS rental and revenue sharing. Originally DVD was placed as a sell-through format, especially to create a foothold in the market. Now that the format is more established, studios have to think about ways how to manage DVD rentals. It would be illusory to believe DVD could live an existence completely as a sell-through medium. Consumers want to rent, be it to try a product or simply to save money, and the success of companies like Netflix, Blockbuster or Tower Video clearly shows how important rental has become to DVD. With that in mind it is imperative for the studios to find ways to capitalize on this trend and to make sure to support these opportunities as they arise. Whether revenue-sharing, split-costs or any other model is the right choice is up to industry executives and salespeople to decide and not material for us to discuss.

One other thing I took away from VSDA this year is some information that was unfortunately not quite as pleasant as all of the above. Prices for DVD have been steadily rising over the past 2 years. Although at first it may seem the opposite is true, with Warner’s low-end $14.95 titles and other publishers releasing many of their titles under $25, the average price of DVD movies has risen from $24.98 in early 1997 to $26.53 in early 1999. This average price is higher mainly because a substantially higher number of titles are released these days with prices between $30 and $40. One thing has to be clear, in order to attract the masses, prices for DVD have to come down to compete with those of VHS releases. Unfortunately most people are forced to buy with what their wallets allow and not what pleases their eyes and ears necessarily.

With additional advertising studios and hardware manufacturers are now trying to push DVD to the next stage. To propel the format forward there is no time to take a breather. Publishers already have their sight on this year’s Christmas season and as we all know, it will be a big one for DVD. Just as it rolled over VSDA like a bulldozer, this Christmas season we will see DVD rolling into retail with all the bells and whistles, taking up more shelf space than most people would have ever expected only some short 12 months ago. If this year’s VSDA was an indication for what’s going to come, you better put on your seatbelts because it’ll be a furious ride.

 July 13, 1998

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