VSDA Convention: DVD Hardware, Software Take Off in Tandem

The chicken-or-egg issue that plagued the early ramp-up of DVD may now be history. Sales of both DVD hardware and software are increasing rapidly, attendees learned at last week's Video Software Dealers Association convention in Las Vegas.

According to figures compiled by the Consumer Electronics Manufacturers Association, 276,000 DVD players were sold in the United States last year. Added to that were 2.8 million discs, representing more than 1500 different titles. Among consumers, awareness of the new format doubled from 18% to 37% in a recent six-month period, according to a study conducted by Yankelovich/VSDA. Total sales of players nationwide are expected to reach 1 million by January 1.

According to DVD Group chairman Emiel Petrone, more than 2000 DVD software titles will be available by year's end. Mike Fidler, Sony DVD marketing vice president, mentioned that June was a record month for sales to dealers, with over 63,000 players sold. This is especially noteworthy in that June is not typically a busy month for consumer electronics sales. Fidler described Sony's DVD business as "off the charts."

Sales of VCRs have improved by 4% this year, with a total of 7.4 million units sold. However, this figure is a slowdown in VCR sales---the first in four years---and may be expected to continue as DVD gains momentum. The slowdown is also attributed to market saturation---almost as many homes now have VCRs as have TVs, estimated by the Consumer Electronics Manufacturers Association at 97% of all households.

Despite the growing awareness of DVD, a scant 3% of VCR owners also have DVD players at present, although 11% say they will consider purchasing a player in the next 12 months. Warner Home Video's always-outspoken Warren Lieberfarb said the availability of DVD rental software is critical for the format's success, and he foresees a "high probability" of it reaching a 10% market penetration within the next three years. His position was supported by the Yankelovich/VSDA study, which found that among potential purchasers, fully two-thirds say that the availability of rental discs is a critical factor in their buying decisions. Curiously, Leiberfarb does not expect DVD to have "corrosive effects" on VHS, although it seems logical that as one gains, the other will diminish.

The real chicken-and-egg question isn't "How does it start?" but "How does it continue?" Healthy chickens lay healthy eggs, which hatch and grow up to produce more eggs. The encouraging figures presented in Las Vegas are likely to induce more video dealers to take the plunge with DVD, which will generate more player sales, which will generate more rentals, which will improve the variety of titles available at local video stores. To date, independent retailers have been reluctant to stock more than a few of the most popular titles. Larger outlets like Blockbuster are expanding their selections, which are still skimpy compared to the variety available from the film studios. At present, Internet-based sales operations like NetFlix are the best deep-catalog sources for DVD.