Survey Shows Dvd, Satellite Services Encroaching On Vhs

NEW YORK‹VHS continues to rule the home entertainment roost and will for some years to come, but it's more a case of holding on to the high ground than climbing to the next peak. DVD and satellite services are fighting for room at the top, says the Independent Recording Media Assn. (IRMA).
The latest survey conducted by the Princeton, N.J.-based trade group, until recently called the International Tape Assn., indicates program suppliers will harvest prerecorded cassette revenue of $10.1 billion this year, a 3.1% increase over the 1997 mark of $9.8 billion. Thereafter, demand should go into reverse.
IRMA predicts wholesale dollars will dip below $10 billion for the U.S. and Canada in 1999. At the same time, prerecorded cassette volume is expected to shrink by slightly over 1% to 985 million units, a drop of 10 million from the 1998 all-time high of 995 million, measured as the equivalent of two-hour tapes.
The slowdowns are slight, but they do mark the first backward steps taken by the studios and independents since Disney effectively launched the video sell-through market a decade ago. "Overall, the market may begin to show declines," IRMA executive VP Charles Van Horn told attendees of an IRMA presentation last month in New York.
Further declines are anticipated, although consultant Richard Kelly, who conducts the annual worldwide survey for IRMA, won't hazard any estimates beyond next year.
The rise of DVD will help confine consumer expenditures to retail, including online outlets and brick-and-mortar stores. However, both are fighting an aggressive outsider, direct broadcast satellite (DBS), now received in 10 million homes.
"There is the inevitable effect of satellite erosion," said Kelly. "Things start to give way" as DBS delivery of pay-per-view movies takes hold. Based on his discussions with studio executives, Kelly doubted Hollywood is concerned about retail erosion.
Whether it's home video or pay-per-view revenues, the money goes into the same ancillary income pocket, he noted: "They're robbing Peter to pay Paul." Kelly suspects the window of time separating cassette and DVD release of movies from DBS will keep shrinking‹but not to the point where one date fits all formats. All parties recognize tape is still too important to be jeopardized.
In fact, what IRMA calls the "transitional stage" for VHS likely will last longer than the experts had anticipated. A year ago, Kelly and Van Horn figured prerecorded cassettes were starting a downhill run.
Instead, Paramount Home Video's 25 million-unit "Titanic," said Van Horn, "moved that peak to 1998." The return of rental, strengthened at least temporarily by the studios' copy-depth programs, also helped. Kelly, who admitted to being taken "pretty much by surprise," estimated the number of higher-priced tapes at 60 million units, approximately 20% more than the average of the past five years.
Because DVD is still largely restricted to video buffs, it's not considered "cannibalistic," Kelly said. "Anyone with a DVD player also has VHS." IRMA's survey indicated 35 million to 40 million discs will be replicated and shipped to retail this year, three times the 1997 output.
Consumers are buying plenty, but not nearly enough to absorb that total. Stores are stocking the rest. "We're filling the pipeline very nicely," Kelly observed‹"good news" for a medium that needs wider retail exposure. "We're looking for a pretty robust 1999."