Studios Try to Save the DVD
A winner has finally been declared in Hollywood’s high-definition DVD war. So why isn’t there more cheering?
In the 1980s, the triumph of VHS over Betamax helped develop the lucrative home entertainment market. DVDs, introduced in the 1990s, turned into an even bigger gold mine, accounting for roughly 60 percent of studio profits in recent years, analysts say. The entertainment giants have positioned high-definition DVDs as yet another blockbuster business.
But the victory of Sony’s new Blu-ray high-definition disc over a rival format, Toshiba’s HD DVD, masks a problem facing the studios: the overall decline of the DVD market. Domestic DVD sales fell 3.2 percent last year to $15.9 billion, according to Adams Media Research, the first annual drop in the medium’s history. Adams projects another decline in 2008, to $15.4 billion, and a similar dip for 2009.
So instead of celebrating the Blu-ray format — which remains a nascent business — the studios are scrambling to introduce an array of initiatives aimed at propping up the broader market. Some efforts, like the addition of new interactive features and changes in how DVDs are packaged and promoted, are intended to prevent further market erosion while nurturing Blu-ray.
But media companies are also introducing technology that they hope will solve the more difficult tasks of generating growth and delaying the obsolescence of DVD altogether.
DVD sales are sagging for various reasons, including a flooded marketplace and competition for leisure time. But the Internet is perhaps the biggest enemy.
Technology companies have watered down the DVD market by aggressively pushing Internet downloads. Apple’s iTunes now offers downloads of 500 movies and last month started renting titles like “Spider-Man 3.” Meanwhile, telecommunications providers like Time Warner and Comcast are pushing their faster broadband lines by promoting them as capable of delivering fast downloads.
Movie studios are fighting back by taking a page from the Internet playbook. Indeed, the centerpiece of the market rejuvenation effort is something 20th Century Fox calls “digital copy.” Fox DVDs, starting last month, now come with an additional disc holding a digital file of the title. Consumers can download the file to a computer in about five minutes — far less time than via the Internet — and then watch the movie there or transfer it to their iPod.
“This puts the DVD at the center of the digital revolution and returns the business to a growth trajectory,” said Mike Dunn, the president of 20th Century Fox Home Entertainment. Sony Pictures Entertainment, Universal Studios, Walt Disney and Warner Brothers are all pursuing their own versions of the idea.
Most technology consultants, while not as optimistic about the DVD’s future as Mr. Dunn, are greeting studio efforts with enthusiasm. Tom Adams, the founder of Adams Media Research, said the packaging of digital files with standard DVDs “has the real potential to steal the thunder from the Internet delivery of movies.”
But John Freeman, an industry analyst, sees the effort as a stall tactic. Although digital copies are “a step forward,” he said, that step is tantamount to Hollywood admitting that its lucrative hard-goods business is growing obsolete. Today, digital files on discs; tomorrow, mass downloading straight from the Internet.
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http://www.nytimes.com/2008/02/25/business/media/25dvd.html?ref=movies&adxnnlx=1203948191-OsonRgW7p1LmKV7F%20sWqEA&pagewanted=all
