Will collaboration pay off for DVD?

There is something rather cosy and unlikely about a group of corporate giants getting together for the greater good of their product.

Five years ago, the idea of Sony, Philips, Panasonic and Toshiba lining up alongside Warner Brothers, Warner Vision, Buena Vista, Columbia Tristar, MGM and Polygram to promote their products would have been unthinkable. But that is exactly what has happened with the launch of the Digital Video Disk (DVD), sometimes called Digital Versatile Disk.

The DVD is the digital replacement for VHS technology. It is more versatile, with additional applications for music and computers. Sound quality from DVD is better than CD quality and computers are now incorporating DVD drives.

The UK DVD committee was formed in November last year, partly inspired by the US model, which was launched in 1996.

The committee was formed to avoid a damaging and costly rerun of the format wars of the early Eighties between Sony’s Betamax and JVC’s VHS. During the Eighties, Sony’s technically superior Betamax – now the professional industry norm under the name Betacam – was outflanked by JVC’s clever marketing of VHS, which is now the consumer norm.

The DVD committee, which comprises ten of the world’s most powerful consumer electronics and entertainments companies, is considering pooling advertising and promotional resources for the next phase of DVD’s launch, which it hopes will capture the mass market.

It is chaired by managing director of consumer electronics for Philips, Simon Turner, who says: “There is a recognition now that the costs [of the launch of a new format] are so high that it is no longer feasible to do it single-handed. The days of Betamax and VHS are gone.”

When Toshiba and Sony each presented the studios with different and incompatible formats of DVD in the mid-Nineties, the studios were understandably nervous and in-sisted that they would only back the format if it was a single industry standard. Their unanimous backing bodes well for the launch of the product.

But there are other reasons for this co-operation, too. The manufacturers dealing with the UK market have learned from the mistakes and successes of the US, which is about a year ahead of the UK. DVD is on the verge of becoming a mass-market product there, with 2,000 titles now available and about 1 million players.

Companies are also aware that by pooling advertising and promotional budgets, they can create attractive savings and a higher impact. This could help avoid the protracted and costly launch of the MiniDisc, which after a false start four years ago, is only now reaping rewards for Sony.

Also fresh in the minds of the industry is the landscape of defunct or marginal formats which never really took off, despite heavy research and development and launch costs. These include Betamax, Laserdisk, Video8, Digital Compact Cassette (DCC) and Digital Audio Tape (DAT).

Manufacturers are keen to minimise the risks to DVD. Cyrus Richardson, DVD product manager for Toshiba in the UK, says: “The only reason it happened this way is because all the companies realised that the risk in going with a number of different formats was very high, so they decided to go down the same route.

“Quietly co-ordinating our efforts has proved to be an extremely efficient way of doing things,” says Turner. “If you were able to turn the clock back I think perhaps the CD could have been launched more successfully with a similarly collaborative effort,” he says.

So far, DVD and DVD players have been aimed at early adopters and boffins. Bottom of the range players now cost between 400 and 500 for the player, and disks cost between 15 and 19. “The next stage is to get ordinary Mr and Mrs Jones to buy into it,” says a spokesman for Philips.

The sound and pictures are markedly clearer and the system is much easier to use than VHS, with no need to fast forward or rewind a tape. Unlike VHS, the quality of the recording is, according to manufacturers, the same the thousandth time it is played as it is the first time.

The format of DVD is neater, smaller and easier to store. And because of the capacity of the disk, there are options to run different soundtracks or commentary on the same movie, show directors’ cuts and provide information on the film, its cast and its director. Finally, with eight hours capacity to play with, it is possible to fit the entire Star Wars or The Godfather trilogy on a single disk.

The unanimous backing of the movie houses is the biggest boon for the format. Other systems have failed largely because they did not have the software back-up. There will be between 150 and 200 titles available by Christmas in the UK and within the first quarter of next year, manufacturers are expecting to launch an additional 100 new titles. At a launch this month, the format was endorsed by Terry Gilliam, director of Brazil and Twelve Monkeys, and Peter Bates, who directed Bullitt. Both titles are available in DVD format.

But while there are significant advantages to the new system, there are plenty of disadvantages.

For a start, existing DVD players do not record, and this may prove to be a hard sell to mass-market consumers, especially if buyers are expecting a recordable version to appear within a couple of years. Once this becomes available, it is widely believed that the product will be a success.

Secondly, the launch of DVD has been overshadowed by the launch of digital television – dubbed the most significant development since the birth of TV. The launch of a single product is an expensive business, but launching major products such as digital integrated sets and set-top boxes around the same time as DVD will be a huge drain on resources.

And persuading a confused consumer to buy two big-ticket items such as an integrated digital TV likely to retail at about 1,000 as well as a 400 DVD player is going to be extremely difficult, particularly if the economic downturn gathers momentum.

Some would argue that the “near video on demand” service provided by digital, with the same film starting every 15 minutes, is a significant threat to DVD as viewers can watch the film of their choice without getting up from their armchairs.

But manufacturers believe the collector mentality of consumers should not be underestimated. “This is a competitive market and you could view digital TV as a competitor because the consumer only has so much money in his pocket,” says Toshiba’s Richardson. “But there is a real market for this product. This is the ultimate collector format and collectors are interested in owning films. And with DVD there are the interactive features, alternative commentaries and soundtracks.”

This is a view echoed by DVD committee chairman Turner, who maintains that home movie ownership is growing year on year, despite the fact that you can record films onto VHS from the television.

“I don’t believe there is a big risk from near video on demand at all. There is an enormous difference between having easy access to a film and actually owning the movie,” he says.

Once the recordable format is available, which the industry estimates should be within a couple of years, the consensus is that VHS will go the way of black and white TV.

“DVD is the natural upgrade from VHS. You have far better picture quality and sound and, once recordable DVD becomes available, this will start to eat into VHS,” says Mike Gabriel head of marketing communications of consumer electronics manufacturer Sharp.

The DVD committee will be discussing the next stage of its strategy in November and whether the manufacturers and studios will follow a joint strategy for advertising and promotion. Turner concedes that there are challenges ahead.

“There is a difficulty in doing joint advertising because manufacturers will be reluctant to put money into the advertising if their brand name is not on the ad,” he says. “And if all the brand names appear, it just looks a mess. We would be more likely to collaborate on an agreed theme and build on that together,” he says.

The aim of the manufacturers and film makers is to achieve critical mass as quickly as possible. Whether they can do this in the short-term is debatable. Jumping hurdles such as the non-recordable format and the launch of digital TV will be no mean feat. However, a combined marketing offensive based on mutual co-operation is a powerful proposition.

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