DVDS TOUGH RETAIL SELL

Tepid response to format portends challenges

ORLANDO, Fla. — Although the Digital Video Disc has been trumpeted as the next generation of home entertainment software, a lukewarm response here to the DVD format from music retailers pointed to some of the challenges the technology still faces among those who’ll be selling it.

This was gleaned during a panel discussion Monday featuring several prominent homevid execs at the 39th annual National Assn. of Record Merchandisers.

A main concern among retailers is the lag before audio DVDs are ready for the market. Although retailers were told that DVD sales are projected to hit $2.2 billion domestically by 2000 — a nice chunk of change considering 1996 sales of VHS cassettes topped $7.7 billion — the audio discs are a minimum of two years away from their store shelves.

The next big thing

It seems that with each NARM, a new format is touted as being the next big thing that will increase store traffic and sales, by prompting consumers to refresh their libraries.

There have been several false starts with the introduction of products such as Digital Audio Tape, Digital Compact Cassette and MiniDisc, none of which caught consumer fire, primarily because of competing agendas between the product manufacturers and suppliers supporting the new formats.

Ironically, in 1993, the last time NARM was in Orlando, the DCC and MD were touted as the next revenue stream for retailers. Both formats have all but disappeared.

And cable-fed or satellite-delivered digital music channels have not cannibalized record sales as had been previously expected.

Endorsements lacking

So it’s not surprising that the confab attendees would be a bit leery of the claims of DVD, especially when three of the major studios — Universal, Walt Disney and Paramount — have yet to endorse the new format.

Columbia TriStar, Warner Bros. and MGM have recently released a list of DVD titles that will hit retail starting in April.

But only a fraction of the titles will be music-based, such as Eric Clapton’s “Unplugged” or R.E.M.’s “Road Movie,” both from Warner Home Video.

That could explain the lukewarm reception Warner’s Warren Lieberfarb, Polygram Video’s Bill Sondheim and Sony’s Bud O’Shea got during the 90-minute panel designed to explain the benefits of the new technology and to answer retailer inquiries.

“The economic conditions with film, music, consumer electronics and personal computers are all crying out for the next-generation multimedia packaged good that can drive sales,” Lieberfarb told the audience, adding that DVD “offers the possibility of significant profit potential for all participants.”

Sales of recorded music have been flat in the past two years and a record number of store closings has forced the industry to find new revenue streams in the face of challenges from the Internet, videogames and a dearth of popular product.

But Hilary Rosen, prexy of the Recording Industry Assn. of America, noted that a “massive restructuring of the music industry, including recording studios and mastering plants” would be needed before DVD audio is a reality.

In fact, the specifications for the disc are not yet defined, and there are substantial copyright issues that remain unresolved that preclude the release of the discs.

Royalties question

Also, labels and artists are still debating in some cases the role DVD will play in the career process and to what degree the costs of DVD will be recoupable against an artist’s royalties.

Universal Home Video prexy Louis Feola said that while his studio was making “progress weekly” on resolving such issues as DVD encryption and patent clearings, he suggested that the new discs be “allowed to roll out, allowed to breathe and ultimately you want to convince the consumers of its viability.”

Rosen noted that it took the CD more than 13 years “to overtake sales of cassettes, and that DVD will take some time to catch on.”

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