Picture This: British Research Report Underscores Vhs' Decline, Dvd And Dvd-rom Growth

PERSPECTIVE: U.S. market researchers love to bandy about numbers about the size of the home video market. The static of conflicting data can be extensive, so it's good to have an outside perspective on occasion. British-based Understanding & Solutions (U&S) has just provided one.
In its annual report, which also includes Europe, the research consultancy indicated there's still growth in VCRs. It projected a U.S. household population of 130.9 million this year, 139.7 million in 2000, and 160 million in 2003‹the equivalent of nearly 1ƒ VCRs per home. If only prerecorded cassettes kept pace.
Since tapes often get passed among parents and children in multi-VCR households, rental growth is sliding into negative territory while sell-through flattens to no-growth. U&S predicts high-priced cassette shipments will drop 2% to 44 million units this year and to 37 million in 2003, a 5% drop-off. Over the same period, the gains in tapes priced for purchase will skid from 6% in 1999 to 4% in 2000 to 1% in 2003. The total number of cassettes delivered to retail that year: 950 million.
Saturation accounts for some of the declines, new formats the rest. DVD obviously is the big winner, although we suspect that satellite-delivered services will be a major contributor. (U&S doesn't include the latter in its analysis.) In any event, DVD provides tape with competition aplenty. The report anticipates a 17-fold increase in DVD household penetration from 1998-2003, from 1% to 17%, or 18.9 million machines. Far, far more impressive is the predicted population of personal computers equipped with DVD-ROM drives, as household penetration zooms 2000%, from 2.45 million last year to 48.19 million in 2003. Growth that rapid will dictate programming choices, especially the PC/Internet connections now in their formative stage.
Disc shipments are stratospheric as new retailers come online. But U&S' estimates carry a warning that the pipeline has finite capacity. The study calculates an astounding 668% increase in deliveries from 1997 to 1998‹4.56 million to 35 million‹and a gain of 171% from 1998-1999, when volume reaches 95 million units. Thereafter, consumers will start applying the brakes, according to U&S, which slashes growth from 63% in 2000 to a still-healthy 28%, or 430 million DVDs, three years later.
DVD unquestionably drives home-video consumer sales. U&S says the total will nearly double from $14.6 billion in 1993 to $25.9 billion 10 years later. The new format's piece of the pie in 2003: a filling 27%. Rental is estimated at 34% and sell-through at 39%. Shipment value, thanks to pipeline fill, is skewed more toward DVD: 34% of $15 billion in 2003. VHS rental's share falls to 15%, while sell-through rises to 50%.
Through this period, the U.S. remains a jump or two ahead of Europe, which will receive correspondingly more attention from marketers as America slows down. U&S predicts a European installed base of DVD players in 2003 of 9 million units, a 6% household penetration. DVD-ROMs should do proportionally better, with 36.2 million units in 23% of homes. The sum of DVD shipments in four years: 193 million units. Through it all, VCRs plod along, increasing from 71% of European households this year to 81%, or 129.7 million units, in 2003.
It's interesting to compare VHS and DVD sell-through in key European territories. The same countries lead both categories, but with some significant differences in share: England had 34% of 1998 cassette sales of 294.1 million tapes and 20% of 4.1 million discs sold; Germany, 14% and 34%; France, 20% and 20%; Italy, 7% and 6%; Spain, 7% and 2%; and the Netherlands, 4% and 6%.
BEST WISHES: Happy birthday, Web site. NetFlix.com celebrates the start of its second year as "the world's largest Internet DVD rental store" (its words) with a slate of promotions that should help elevate two high-flying technologies.
Here's a sampling: (1) Through May 31, all rentals are for two weeks for as little as $2.99 a week. In addition, NetFlix has lowered its "extended" rate of 99 cents a week. (2) New customers, who can select from 3,100 titles, receive the first three rentals free. (3) Through the end of May, NetFlix will conduct a consumer electronics sweepstakes with prizes including a Panasonic Palm Theater, a Toshiba DVD player, and a Replay TV. The grand-prize winner gets a Sony flat-screen TV, a Sony five-disc carousel changer, and 100 free rentals.
NetFlix has struck strategic alliances with Sony, Toshiba, and Pioneer; most of the studios; and E-retailers, including Amazon.com.