DVD Poised To Take Over From VHS In The Home Video Market In Europe

7-Aug-00

The uptake of DVD is growing at an exponential rate that will see DVD hardware in 30 percent of households across Europe in less than three years, says a report published by Screen Digest. Despite almost all current and imminent DVD hardware being players not recorders, the rate of adoption is far faster than for VCR (which can play and record). By the end of 2003 - after just six years on the market - the number of DVD households will have reached levels that it took the VCR 10 years to achieve. The new in-depth report from Screen Digest examines what the next three years hold in store for consumers and companies in this swiftly changing market. By 2003, total consumer spending on video titles in Western Europe will have grown by over a third of the 1999 market value - a rise of $2.3 billion (Euro 1.9 billion) - with the spending on DVD titles predicted to overtake spending on VHS (despite the fact that less than a third of households will have the hardware). The research shows DVD spending rising from $470 million (Euro 420 million) in 1999 to $5.8 billion (Euro 5.3 billion) in 2003; VHS spending falling from $6.1 billion (Euro 5.7 billion) in 1999 to $3.0 billion (Euro 2.8 billion) in 2003. For the first time, the report also provides a unique snapshot of how specific genres and titles are performing across Europe and individual countries, with top 20 charts based on actual shipments. The dominance of the major U.S. studios with blockbuster action and science fiction titles is unsurprising but the figures reveal that independents can achieve as many sales as the majors, if the film is right. They also show that France has a wider range of genres represented and is the only country in Europe to have domestic titles in its top 20. ""There can be little doubt that DVD is going to change the video market radically over the next few years,"" says Ben Keen, Research Director of Screen Digest. ""Even where DVD has yet to make a positive impact on companies' bottom lines, it has been welcomed as the future of the video industry and many more players look set to enter the market to attempt to capitalize on its opportunities. In terms of the future, the DVD industry is set to receive a tremendous boost from the launch of DVD-based games consoles like Sony's PlayStationÆ 2. These will significantly expand the market for DVD movies."" DVD - Growth To Date Over the past 18 months, the European market for DVD-Video - players and discs - has grown dramatically, with an explosion in consumer uptake of the new format and (consequently) of the number and types of companies seeking to satisfy the demand for DVD products and services. DVD-Video Players Screen Digest estimates that by the end of 1999, there were 1.5 million DVD-Video players in Western Europe. This figure is set to more than treble in size - rising, by the end of 2000, to 5.4 million homes with at least one TV-based machine capable of playing DVD Videos. This is still a relatively low proportion of the total market (3.5 percent of TV households) but by the end of 2003 it is predicted that over 47 million households across Europe (almost 30 percent) will have some form of DVD player hooked up to their TV set. Whilst France still tops the league for the number of players already installed (360,000) in 1999, the U.K. was the fastest growing market with a rise of almost 1000 percent from 27,000 machines in 1998 to 280,000 in 1999. The report points to aggressive hardware price erosion, as a key factor fuelling growth - especially in the U.K., where the price of many models had fallen to below GBP200 by Christmas 1999. In addition to dedicated DVD-Video players, the next generation of games consoles (such as Sony's forthcoming PlayStation 2) will add to the number of households able to play DVD-Video titles through their TVs. Even allowing for a proportion of households having both a DVD-enabled console and a dedicated DVD-Video player, Screen Digest predicts that 30 percent of European households will have some form of DVD machine connected to a TV by the end of 2003 - over 47 million households. DVD-Video Sales And Rental Consumer spending on DVD discs is also rising rapidly. In 1999, West European consumers spent over $450 million (Euro 403 million) on purchasing DVDs and a further $18 million (Euro 17 million) on rentals. Screen Digest anticipates that by 2003, this total will rise by an amazing 1142 percent to a total spending of $5.8 billion (Euro 5.3 billion). The split of purchase to rental is expected to be 84 percent to 16 percent, so although the rental sector will grow dramatically, DVD looks set to remain a predominantly retail business. At the same time, the value of the VHS market is expected to halve by 2003, falling from a 1999 total of $6.1 billion (Euro 5.7 billion) - purchases worth $3.9 billion (Euro 3.7 billion) and rentals $2.2 billion (Euro 2 billion). An indication of the scale of the potential market for DVD titles is given by the fact that this rise of DVD and decline of VHS is predicted for a market where only 30 percent of households will have the necessary hardware! The combined result of growing DVD and declining VHS markets means that the overall balance of spending on packaged video software (DVD and VHS) will be for rental to fall to less than a quarter of spending, compared to one third of spending in 1999. In terms of quantities in 1999 - 17 million DVDs were sold across Europe, with Germany and the U.K. leading the way, both having above average numbers of sales per household. Publishing And Distribution There has been a significant increase in the number of companies actively involved in publishing and distributing DVDs in Europe. As well as the major U.S. studios (6 of which were already releasing DVDs by the end of 1999), there is an ever-growing number of smaller independent publishers/distributors. The report includes detailed profiles of the DVD activity of 115 of these independents, providing a unique insight into the issues and concerns facing such companies, as they take their first steps into the video business of the 21st century. Top-Selling Titles Due to Screen Digest's strong links with the key players in Europe's video industry, the report includes unprecedented data and analysis on DVD-Video performance, looking at the shipment figures for 423 titles released in 1999. The research shows that the best sellers were already reaching levels of 400,000 units across Europe by the end of 1999. The market is currently dominated by major U.S.-based studios and U.S. ""mini-majors"" (those with subsidiary offices in more than one European territory) and the most popular genres are action and science fiction. However, the chart of top 10 titles includes a release by an ""independent"" (New Line), which shipped over 230,000 units of ""Blade"" across Europe through a network of local distribution partners - so there are opportunities for independents to succeed in this market, if they have the right title. Also, the U.S. dominance is not as strong in France, where a wider range of genres are represented and there is a much stronger presence of domestic independent filmmakers. Germany has more best-selling titles from independents than any other European country - 11 titles in their 1999 top 20. The U.K. has the highest shipping numbers of any region in Europe - two titles had shipped in excess of 150,000 units each; five in excess of 100,000 each; and 19 in excess of 50,000 each, by the end of 1999. The Retail Environment To complement the market figures and forecasts, the report provides a comprehensive picture of how video retailers and rental stores view DVD in each of the key European markets. After a slow rollout that began in early 1998, all but three of the companies interviewed were stocking DVDs in 100 percent of their stores by the end of 1999. Inevitably, the number of outlets stocking DVD will continue to rise, as the installed base grows in every European territory. The views and comments of these businesses and their customers on the new format highlight various issues, and points raised are mostly optimistic, recognizing that it is still a relatively small business but one that has huge potential. As yet, the trend seems to be a gradual increase in retail space dedicated to DVD, reducing displays of LaserDisc, VHS or video games rather than undertaking a major refit in order to accommodate DVD display sections. Two issues, in particular, are concerning retailers at present: parallel imports of Region 1 discs and technical developments. Only one company admitted to stocking Region 1 products but the decision by FNAC to do so has created intense frustration among other retailers in France and Spain. Increased demand for Region 1 discs from core movie fans and early adopters could remove a huge slice of revenue from local retailers. However opinion is split on the seriousness of the threat as most models have to be physically adapted (voiding the warrantee) in order for them to play Region 1 discs. The next generations of hardware are also seen by retailers as a potential threat, with fears that recordable DVDs will make piracy more widespread and affordable. DVD Rental DVD rental is not yet a force to be reckoned with, but by the end of 1999 all the companies interviewed were offering DVD rental in at least a proportion of outlets. Unsurprisingly, the rental business is also driven by blockbuster titles - mostly action and science fiction films whose special effects and special features capitalize on the new technology. Dealers widely recognize that the price of hardware is the key to opening up the mass market, although dealers in the U.K. (where the price of players has already fallen significantly) were less concerned than those elsewhere in Europe. One major issue for rental dealers is the current lack of a rental window for DVD. However, there are concerns that this would adversely affect retail sales of discs or encourage additional Region 1 imports. The most likely solution (and one which is already emerging) is a premium rate rental window but the length of window and the degree of additional cost would vary across Europe and might come at the expense of dealers moving over to revenue sharing deals with distributors. Like retailers, rental dealers are also concerned about the threat of Region 1 imports but fewer have recognised the threat of digital TV. However, recent moves by rental giant Blockbuster to actively involve itself in the electronic delivery of movies underlines the competition to the rental market from digital broadcasters and the potential problem of home recording. The full report ""DVD Video - European Market Assessment And Forecast To 2003"" - costs GBP895. Orders can be made via the Screen Digest Web site at www.screendigest.com. Queries should be addressed to sales@screendigest.com. About Screen Digest Screen Digest is the international media business's leading news and research journal, read by senior executives in over 40 countries. Since 1971, it has built up an unrivalled database of reference material and statistics relating to all forms of screen entertainment and digital media. Screen Digest has recently published business reports on the interactive leisure software market and the growth of sport on the internet. Other new, business reports due to be published this summer by Screen Digest, include d-cinema and Broadband Internet. Each of these new reports will contain new statistics and full analysis of the global market. For more information, visit www.screendigest.com.

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