DVD is starting to take over the world.
Homevideo has long been the studios’ ace in the hole when it comes to pic profitability, accounting for more than half the majors’ global revenues for feature films. But the rapid rise of the DVD format is making the backend even more lucrative worldwide, limited only by the lack of market penetration for the new format.
“DVD is having a much bigger impact on the international video business than in North America,” says Adrian Alperovich, exec VP of international sales and worldwide business development at Columbia TriStar Home Entertainment. “DVD is boosting the market overall and driving territories such as the U.K., Japan and Australia, where VHS sell-through was not well-developed.
The DVD boom is more than compensating for the decline of VHS — and it’s helping to offset a slump in the studios’ sales to international pay TV platforms.
Last year, the majors raked in $14.4 billion from video — $10.2 billion in North America and $4.2 billion in the rest of the world.
This year, some execs are forecasting the global vid pie (including non-MPA product) could reach $18 billion, spurred by such mega-hits as “Harry Potter and the Sorcerer’s Stone,” “The Lord of the Rings: The Fellowship of the Ring,” “Spider-Man,” “Monsters, Inc.” and “Star Wars: Episode II — Attack of the Clones.”
And since the digital format was introduced overseas more than a year after it was in the U.S., DVD’s potential internationally has barely been tapped. Hardware penetration is rocketing in markets like the U.K., France and Australia (each forecast to reach 25% by year end) and growing strongly in Germany (17%), Scandinavia (15%) and Japan (14%). Italy (6%), South Korea (5%) and Brazil and Mexico (4% each) are DVD laggards.
“European markets are experiencing 60%-70% hardware growth this year vs. last year,” says Stephen Moore, prez of 20th Century Fox Intl.
Even so, Moore estimates international DVD penetration is just 10% (others believe it’s closer to 18%), still way behind the U.S., where it’s expected 40% of TV households will have DVD players by the end of the year.
While some studios were less quick to embrace DVD than the format pioneers Warner and Sony, all are aggressively exploiting their libraries on DVD. But not all see the merit of taking titles direct to retail overseas, as does Warner (which introduced that policy with “Swordfish” in October last year) and Sony.
“We believe that going direct to sale with a short window after theatrical (typically five to six months), backed by an extensive consumer marketing campaign, is the best way to grow the business,” says Mark Horak, senior VP of worldwide marketing at Warner Home Video.
Conversely, Fox determines its homevid strategy per title. “There are many considerations, including the scale of the box office and genre of the movie,” Moore says.
What is clear is that DVD, on average, now generates at least 60% of the majors’ international vid biz (see chart). Fox’s Moore says DVD retail sales repped 61% of his division’s revs in the fiscal year ending June 30, vs. 35% the previous year. At Sony it’s 66%.
Disney’s Buena Vista Home Entertainment Intl. saw its DVD’s share jump from 27% last year to “well over 40%,” without divulging a precise figure.
Most companies zealously guard their international sales figures, even for their bestsellers, but some numbers are just too good for them not to share: Top-selling DVDs overseas in 2002 include New Line’s “The Lord of the Rings: The Fellowship of the Ring” (14 million units, with a special edition released in November expected to sell another 2 million-3 million copies), Disney “Monsters, Inc.” (13 million) and Fox’s “Ice Age” (on track to reach 9 million).