Rise of DVD secures marriage of cinema, TV and video giants

It’s self-evident that consumer electronics markets don’t know that intermediate technology is intermediate until the new stuff comes along. But there are contemporary technologies you can reasonably safely assume are intermediate.

This is partly to do with the speed at which digital technology develops. Delivery formats aren’t like buses – if we miss a format, we assume there will be another one along in a minute.

And it’s partly to do with an innate sense of intermediacy. The Internet industries have much of this feel about them, with their cumbersome downloading methodologies and their dots and back-slashes. For those of us who have lived long enough to make the comparison, we just know there is a good deal of the eight-track cartridge mentality about – the audio-tape format of the early Seventies that yielded to the cassette.

The pace of format development alone can lead us to assume that all technologies are intermediate. And, in terms of the advance of human civilisation, I suppose they are. But that assumption can lead us to overlook some of the grind, the protracted commercial development and the leaps of faith that some home entertainment companies make to bring us new formats.

The digital video disc (DVD) is one such format. For the consumer, it appears to have burst upon a retail market from nowhere. For many, as a result, it will be assumed to be an intermediate technology that won’t be around for long. At least the eight-track cartridge was around for a couple of years.

In reality, DVD was born after a long and complicated labour of more than a decade and involves something of a leap of commercial faith by Warner Home Video. This is an important distinction from the assumption that DVD is the latest gizmo from digitally obsessed anoraks for whom a morning’s research and development brainstorming amounts to long-term planning. And I say that for two reasons.

First, the story of DVD’s development explains the nature and the characteristics of the home entertainment market. And, second, that explanation serves to prescribe how the markets for cinema, cable and satellite and video will develop beside one another in the future.

The triumph of DVD as a format – it was the hot Christmas gift in the US last year and there are now some 8 million discs and 1.4 million DVD players in American homes – is largely down to the diligence of Warner Home Video and its president, Warren Lieberfarb.

His view has been that movies should be collected like books, that the market has an appetite to do so and that the delivery method will enable the video industry to develop successfully alongside cable and satellite distribution.

Lieberfarb’s obsession with this vision almost foundered on the lack of faith exhibited by manufacturers, particularly the Japanese. In high volumes, DVDs could be considerably cheaper than the old VHS tape format, a principle that you would expect to appeal to the Japanese. But the likes of Sony and Matsushita were disinclined to pay licence fees to Philips and the pre-Universal MCA for patented laser technology. It took until the early Nineties, when Toshiba fell in with Time Warner to develop film and audio compression for video discs, before the progress that Warner Bros had made in this field with Philips could take off.

Lieberfarb, supported by Warner Bros and Time Warner vice-chairman Ted Turner, had a method of distribution to test his thesis. Given that Warner’s films now account for four out of every ten DVDs sold in the UK alone and that the new format outperforms CDs at the equivalent stage of their development, Lieberfarb has been vindicated – videos can be sold like books.

That serves to redefine the video market. My second point is that there would appear to be a compatibility of purpose for competitors in the home entertainment market. Figures out this week from the British Video Association (BVA) show extremely buoyant rental and sales figures, only partly assisted by the contribution from DVD.

British consumers spent nearly 1bn buying more than 100 million videos last year, the previous record being 1997’s 87 million units. And this was achieved against a dismal retail background generally.

Video was meant to deliver a coup de grâce to cinema in the Eighties. Cinema groups responded with multiplexes and recovered lost ground. Now, rather than being deadly rivals at each other’s throats, the cinema and video markets appear to be mutually supportive. Narrowing release windows between cinema and video, cable and satellite and terrestrial TV would seem to support the view that they feed one another. In this context, it’s worth noting that the two major retail video titles of 1998, Titanic and The Full Monty, were released to retail and rental concurrently.

Cable and satellite continue to make slow progress – their penetration stands at one in five UK households, compared with four out of five with VCRs. But a key BVA statistic is that those homes with cable and satellite watch more videos than those without.

The market is accommodating all available media which, in turn, are fragmenting – cable may have sport sewn up, but video is delivering to the domestic movie “libraries”. Competitive markets can be compatible. And it’s less a case of intermediate technologies than of alternative technologies.

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