Posted on: Tuesday, December 21, 2004

New DVD format expected to boost profits, quality

By Jefferson Graham
USA Today

Four Hollywood studios recently embraced a new high-definition DVD format from electronics giant Toshiba — raising many questions for video lovers who have driven sales of prerecorded DVDs to new heights.

Consumers snapped up $16.3 billion worth of DVDs in 2003, far more than the $9.5 billion spent on movie tickets.

Does the 2005 release of HD DVD mean the current DVD format is about to die? Here are some answers to common questions about the impact of the new format.

Q: If DVDs are so popular, why introduce a new format?

A: DVD players are now in 70 percent of homes, according to the Consumer Electronics Association. Prices — $500 a few years ago — have fallen below $100. They can be found in some stores for less than $45. Retailers need new, high-margin products to bring customers in.

"Prices have fallen so low, retailers haven't made a profit on DVD players for several years," says Scott Hettrick, editor in chief of trade magazine DVD Exclusive.

Q: What's the consumer benefit of the new format?

A: Greatly improved video and sound.

"Our sales of digital televisions are going through the roof, even though there's little video available to show it off," says Tom Campbell of Ken Crane's Home Entertainment, a Los Angeles-based retail chain. "This really shows off the potential of high-definition TV."

Says Frank Roshinski, a merchandising manager for the Canton, Mass.-based Tweeter chain: "The new DVDs will help sell hi-def TVs, and vice-versa."

Q: Who's behind the new DVD standard?

A: Toshiba is pushing HD DVD. It has the support of NBC Universal, Warner Bros. Pictures, New Line Cinema and Paramount Pictures.

Sony has developed the competing Blu-ray DVD, but hasn't signed up any studios beyond its own. Sony has support from consumer electronics firms such as Dell, Hewlett-Packard and Panasonic.

Q: How much better is the new DVD format?

A: Five times. As in five times the resolution of regular DVDs, says independent analyst Richard Doherty of The Envisioneering Group.

"The quality is as good as a movie, but your feet won't stick to the floor, and the popcorn will be better," he says.

Q: Will my old DVD discs play on the new machines?

A: Both HD DVD and Blu-ray are "backward compatible," meaning old discs will play on new machines.

Q: When will old DVD discs disappear from video store shelves?

A: "Not for quite some time," says Ross Rubin at market-tracking firm The NPD Group. "Not until the next decade, at least."

VHS tapes are still alive after being supplanted by DVDs. Universal Studios Home Video President Craig Kornblau says he still releases movies on tape — but just 10 percent of his shipments.

"It's a DVD world," he says.

Q: Why make the new format announcement now?

A: Companies are gearing up for the Consumer Electronics Show in January.