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DVD Moves onto World Stage; Warner Launches Divx Counteroffensive

Yesterday, Japan; today, America; tomorrow, the world: Disney's Buena Vista Home Entertainment and Warner Home Video have signed a pact to distribute DVDs in Europe, Africa, the Middle East, and the former Soviet Union. Distribution of more than 100 titles to more than 30 regional territories will begin this fall. Studios to be represented include Warner, Disney, Hollywood Pictures, and Touchstone Pictures. Some independent films have also been picked up for distribution.

Each copy-protected DVD will be released with a soundtrack in the language of the country in which it is to be sold; the original soundtrack will be available as a user-selectable option. Most of the early offerings are heavily weighted toward action thrillers like Con Air, The Rock, Crimson Tide, and Air Force One, but they will also include softer fare like 101 Dalmatians, Phenomenon, and Pretty Woman. Disney plans to bring out many of its animated features, like Alice in Wonderland, The Lion King, Beauty and the Beast, and Dumbo. "Disney's expansion in the global DVD market is a major step in the international growth and development of the format," says Warren Lieberfarb, president of Warner Home Video. The discs will be released simultaneously with VHS.

Meanwhile, Warner has launched a counteroffensive against Divx, which is currently being test-marketed in San Francisco and Richmond, Virginia. In cooperation with Warner and MGM, Hollywood Video stores in San Francisco are currently running full-page ads in local newspapers offering three DVD movies and a DVD player for three days for a rental fee of only $15. The stores carry over 300 DVD titles, any one of which normally rents for $3 for two days. The ads emphasize that all titles are open DVDs.

Warner Home Video, long one of the staunchest supporters of the open format, does not intend to lose the war with Divx, even if it means losing money initially by buying market share. The contest could come down to which side can afford to lose the most to establish itself. Divx, backed by Circuit City, is an underpowered pip-squeak compared with media giants like Time-Warner, parent company of Warner Home Video.

Since the format's inception, Warner has grossed $110 million from its DVD business, Lieberfarb announced at the Video Software Dealers Association trade show in Las Vegas last week. He also pointed out that a market penetration of 10% is necessary for the format to thrive, adding that he believes this level can be reached within three years.

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