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Disney to Offer Titles on DVD by Christmas

Home entertainment: Animated films, which are videotape bestsellers, won't be among first releases, however.


The 6-month-old digital videodisc format will get a boost by year's end from the company that dominates the video sales charts. Walt Disney Studios' Buena Vista Home Video announced Thursday that it plans to release titles on DVD in the U.S. by Christmas, though not the animated films that are its largest sellers.

Hollywood has long regarded the DVD format as a potentially huge source of revenue in the future, much in the way CD sales boosted the music industry over the last decade. But the consumer market has been slow to develop, in part because studios are concerned about the possibility of piracy of the master-quality digital images on DVDs.

Analysts consider Disney's move significant for the DVD format--now only 20th Century Fox and Paramount are holdouts.

Studios that have entered the DVD market argue that laserdiscs are a more secure format than videotape, and that laserdisc and pay-per-view transmission are also digital quality and open to piracy. Some think Paramount hasn't jumped in because of its ties to sister company Blockbuster.

Video retailers have expressed mixed feelings about the format, which they fear could cannibalize VHS business or turn out to be a bust, the way laserdiscs have.

The effect of the Disney announcement is blunted because the company will not initially release on DVD--which are the same size as audio CDs--any of its animated films, its best-known and best-selling. According to VideoScan figures for the last five years, eight of the 20 top-selling video titles have been Disney's; all are animated.

Michael O. Johnson, president of Buena Vista Home Entertainment Worldwide, also indicated that Disney would not initially release titles "day and date" with the VHS release, as Warner Bros. and Columbia TriStar have done in some cases. He declined to name specific titles he will release this year. Larry Gerbrandt, a senior analyst with California media research firm Paul Kagan Associates, speculates last year's "The Rock" will be among the handful Disney releases before Christmas.

Other Disney titles that would make likely DVD releases include the Tim Allen vehicle "The Santa Clause," "The Crow" and "Pulp Fiction." The latter was a big hit on laserdisc, and the director's "Resevoir Dogs" has already been released successfullly on DVD.

Since March, DVD titles have been available in a few top U.S. markets, including Los Angeles. Sales have been in the range of 10,000 to 20,000 units per week, according to VideoScan. Last week, Warner Bros., which also distributes MGM/UA and New Line Cinema, started distributing nationally; for that week, ending Aug. 31, sales jumped to 58,000.

Top DVD titles so far: Warner Bros.' "Twister" (about 12,000 copies sold, according to Video-Scan); Warner Bros.' "Eraser" (11,000) and MGM's James Bond film "GoldenEye" (10,000). These may all be outstripped when Live Entertainment releases the remastered and audio-enhanced "Terminator 2" to DVD for the first time Oct. 21.

DVD is seen as a potential salvation for studios' video units, which have been suffering slumping sales this year. In addition to creating a "replacement market"--i.e., people buying titles for a second time in the new format, as they did with audio CDs--the profit margins on DVDs are expected to remain more attractive for studios for some time. DVDs generally carry a suggested retail price of about $25, about $5 to $10 higher than VHS videos.

Johnson said he expects the move will put a spark in Christmas purchases of DVD players. Players now start around $500, a price that is expected to drop in the next year. Less than 250,000 DVD players have been sold so far. Gerbrandt expects that by the end of next year, the number will jump to 2.2 million; by 2006, he predicts, it will hit 39.8 million. Even then, that would be less than half the 80 million VCRs owned by Americans today.

Tom Wolzien, a media analyst with Sanford C. Bernstein & Co., says: "It should be pretty easy to get to 300,000 [players] by year end. . . . DVD may not work with Disney, but there's no doubt that it didn't have a chance to work without [Disney]."

Wolzien says Disney is likely to begin releasing its prized animated films on DVD once DVD reaches critical mass. "They didn't release the animated movies for sale on VHS until VCRs were probably at 30% to 40% penetration. They are very careful in their marketing, at building up demand," he says.

Johnson acknowledges that Disney may release an animated DVD movie as early as next year. Universal, which is entering the DVD market later this year, should offer a good indicator when it releases its family hit "Babe" on DVD in early 1998.

Analysts and even competitors say Disney's entry is important in raising the level of DVD awareness among both the industry and consumers.


Small but Growing

Sales of digital videodiscs began in March. Warner Bros. (which also distributes MGM/UA, New Line and HBO) was the first studio to offer movies on discs, quickly followed by Columbia TriStar, Live Entertainment and others. Sales were fairly steady until the last two weeks, when the titles distributed by Warner Bros., broadened from seven markets to national distribution. DVD now represents a little more than 1% of overall sales of home video titles. Week-by-week sales of DVD, in thousands:

Warner national roll-out: 57 (August)

* Source: VideoScan

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