Dvd Is Taking Off In Europe, But Issues Hinder Full Growth

DUBLIN-DVD is beginning to roll in Europe. Mirroring development in the U.S., Europe will see an installed base of close to 1 million players and disc sales of more than 11 million units by the end of 1999, the second year after launch.
However, regional coding and classification issues are hindering the full development of Europe's DVD industry, according to many of the 250 or so executives attending the recent DVD Summit 2 in Dublin.
So far, France has led the hardware sales, followed by Germany and the U.K. The Germans, though, have been the biggest buyers of software to date, at about 750,000 units, with the French (660,000) and the British (200,000) next. The Nordic countries, at 187,000 units, are also a significant part of the market.
As player prices start to fall from an average of $825 last year into line with the U.S. average of about $400, trade experts such as Ben Keen of analyst Screen Digest predict a sharp rise in both hardware and software sales. Trends indicate disc sales will rise from 2.4 million units in 1998 to 11.2 million units this year and to 25.1 million in 2000, based on player sales of 2.2 million units.
The U.K., the second most important home video market after the States, is now showing rapid growth. The first quarter of 1999 has seen sales equal to 50% of the whole of 1998. DVD titles are already hitting the top 10 of the sell-through video chart. By 2000, Keen said, "DVD should be about 10% of the European VHS tape sales by volume and by value significantly more."
Emiel Petrone, chairman of the U.S.-based DVD Video Group, predicted there will be some 1,000 titles available in Europe by the end of the year. But he stressed that "we need to be more aggressive in motivating both retailers and distributors alike, and, as we are doing in the States, we need to continue to make noise-that is, we need to coordinate newsworthy events to help to increase the exposure for the format."
According to Jim Banting, former new-media manager at MGM U.K. and now of consultancy Edigital, title growth will come from non-movie sources. "I expect to see major companies releasing kids' and special-interest material this year, which will help to broaden the market further and faster," he said. "We will also see real hybrid discs along with lower-priced ranges this Christmas. The rise of DVD-ROM drives will have a big impact on software sales."
David Mercer, service director of research company Strategy Analytics, agreed. "One of the reasons for our optimism for DVD-ROM in the PC environment is that CD-ROM has been weak in the field of video. Frankly, it's been a weakness of multimedia over the last five years in that you cannot get good-quality video from a CD-ROM. DVD gives us an opportunity to do that, to upgrade all those encyclopedia titles."
While the European industry is largely upbeat about DVD prospects, there is concern that a lack of local product and Region One imports from the U.S. will stifle local program development. Says Bob Auger, managing director of authoring house Electric Switch and one of Europe's most active DVD evangelists, "I truly believe that DVD is a remarkable and unique opportunity for Europe and that we can actually control and deliver our European heritage on DVD if we all are prepared to work together. If we don't, it will disappear, and we will simply end up distributing U.S.-produced titles."
(DVD players are encoded so that they will only play discs sold in that region. However, the encoding chip can be removed.)
A key element in the appeal of Region One product is its quality, says Michael Tucker, CEO of authoring house European DVD Lab, which is owned by German studio Babelsberg. "Region One imports are the source of all our troubles," he said. "The consumer is going to prefer them. I've never seen anything in Europe today that can stand up against the average American title.
"It's not just the extra features or the menus; it's also the transfer quality, the audio quality," Tucker continued. "The quality generally is of a different standard. We're getting transfers [in Europe] that would be completely unacceptable even to any independent American distributor, never mind a [Hollywood] studio."
And there are also problems for local markets from within Europe itself. Recently, PolyGram found that a sub-licensee had produced a DVD of an English-language "Mr. Bean" program with subtitles that could be turned off. This could have potentially become an import into the U.K.
"It alerted PolyGram to the fact that we have to be very careful on some of our third-party licenser deals to ensure that what we are instructing them to do they are able to do on DVD," said PolyGram Video International's Maggie Nuttall.
Classification issues are also proving to be a "nightmare" when trying to produce a pan-European disc, Nuttall claimed. She argues for some form of standardization across the region.
But Robin Duval, the newly appointed director general of Europe's strictest censor, the British Board of Film Classification, said European classification harmonization is an immensely thorny issue.
"The British public, and I suspect the present British government, would be quite happy if Europe or America would agree to harmonize with us," Duval noted. "What we fear, particularly from Europe, is a new level of sexual explicitness for which we are, as yet, unprepared."
There is a chink of light in the progress of the Steering Group of European Censors, he said. It is working with the European Commission toward a proposal on classification.
"We believe as a group of national classifiers or censors that the time may arrive, perhaps sooner rather than later, when we may be able to put a prospectus forward on the basis of how we can come together practically in terms of harmonization," said Duval.
Regional issues aside, there is also a wider problem with the development of DVD to consider, said Strategy Analytics' Mercer. He believes that comparisons with the U.S. are not applicable because there are more video enthusiasts in America than in Europe.
"The one thing you can say about U.S. consumers is they can't get enough of movies," he said. "You give them movies on any other format, and they'll go out and buy it."
Mercer noted, "All these DVD people have got [direct-broadcast satellite] at home. They're hooked up to cable, they've got VCRs in every room, they just love getting hold of movies. We don't see that type of environment in Europe generally."