Biz does splits over DVDs

Warner plans price drop for 'Bait,' 'Gossip,' 'Nuremberg'

WASHINGTON — The DVD format’s split-pricing personality is getting more pronounced. And both the studios and vidtailers are developing a splitting headache as they align themselves on either side of the issue.

Last week, Warner Home Video announced it was dropping the list price on three new-release DVDs from its standard $24.98 price point to $19.98. While the three titles — “Bait,” “Gossip” and TNT original “Nuremberg” — are hardly blockbusters, the move signals that the studio remains committed to driving down DVD prices to encourage sales.

On the other side of the pricing policy spectrum, Paramount Home Video announced it will step up its output of DVD releases next year but adhere to its established price point of $29.98. While Par recently lowered the price on three older catalog titles to $24.98, the studio has shown no signs of deviating from its high-price approach to new releases.

Fox, meanwhile, also plans to step up its DVD output next year, with prices for new releases ranging as high as $34.98.

Shifting the balance

While neither Paramount nor Fox has said anything about raising prices further at this point, the increase in the two studios’ output next year will raise the proportion of new releases in the market priced at the upper end of the scale.

The growing price gap reflects not only differing strategies by different studios, but the pull of various constituencies in the biz.

Both Warner Bros. and Sony view DVD as a long-term investment in prerecorded video.

As more of the vid rental biz is eaten away by video-on-demand and other new technologies, according to Warners and Sony, prerecorded video will eventually have to retreat to a low-priced collectible strategy if it’s to hold onto any market at all.

By making the format as affordable as possible now, the two studios hope to increase the base of DVD players high enough that Hollywood will still have a market to feed after video-on-demand has knocked out the rental biz.

Maintaining VHS viability

Other studios, however, are looking more to the near term and are worried about cannibalizing the still-lucrative VHS rental biz before it has run its natural course. By pricing DVDs too low, they argue, Hollywood is simply letting vid rental retailers shift their buys from high-priced VHS units to low-priced DVDs.

Fox and, to some extent, Universal have even taken the step of delaying the DVD release of certain movies until after the VHS release, to force rental outlets to load up on VHS.

Vidtailers themselves are split on the issue. Most would like to see DVD prices stay low, because the reduced cost allows them to earn fatter rental profit margins on DVDs than they can on VHS.

Blockbuster, while it has also rolled up fat profits from low-priced DVDs, would nonetheless like to see the studios raise DVD prices.The catch: Blockbuster wants them to delay DVD releases until well after VHS, so the vid chain doesn’t have to compete head-to-head with sell-through retailers like Wal-Mart and Best Buy while it cleans up on rev-sharing DVD rentals.

Day-and-date pressure

Needless to say, Wal-Mart and Best Buy are loathe to wait for a DVD until after Blockbuster and other rental chains saturate the market with rental copies, and they have begun leaning on the studios to keep DVD releases day-and-date with VHS.

Privately, even Fox execs acknowledge that pressure from the large sell-through chains — along with competition from lower-price studios — could make it difficult for the studio to hold onto its high-priced strategy.

In the meantime, consumers who score their first DVD players this Christmas are likely to find an even broader panoply of prices and release strategies than ever when they go looking for movies to play on their new boxes.

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