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Monday, 10 December, 2001, 12:06 GMT
Demand for DVDs rockets
By BBC News Online's Emma Clark
Last month, sales of DVD players in the US outstripped videos for the first time, according to market research firm NPD Intelect.
Figures of this kind have made 2001 the breakthrough year for the Digital Versatile Disk, and this Christmas it is tipped to become the number one gift in the US.
The amount of DVD players sold both in the US and Europe has virtually doubled year-on-year.
NPD Intelect, a subsidiary of the market research firm GfK, believes 13 million players will have been sold in 2001, up from 6.4 million in 2000.
In the UK, a projected 1.5 million have been sold this year, up from 712,000 last year.
Fears early in 2000 that manufacturers might not pay royalties or licensing fees discouraged US retailers from placing massive orders for Thanksgiving and Christmas trading, he adds.
This year such problems have been resolved and retailers have made DVD players the key promotional item to pull consumers into the stores.
Already, the success of the DVD format has boosted the bottom line of companies that sell DVD software, such as AOL Time Warner and HMV Media Group in the UK.
"[HMV Europe] has increased market share in all major categories, including the fast growing DVD sector," said chief executive Alan Giles.
Meanwhile AOL saw sales of DVD software climb by 96% in the three months ending on 30 September, compared with the same period last year.
Consumers, it seems, are happy to collect DVDs and use them alongside their videos.
The right price
John Binks from GfK in London says the key reason for the DVD's popularity is its price.
"Unlike other consumer electronics products, the price of DVD players came down very quickly," he says.
Special offers during the US Thanksgiving holiday saw them on offer for as little as $68.
"They have hit the price point," says Steven Gaydos, executive editor of Variety magazine in London.
But it is not price alone that ensured the success of the DVD, says Mr Edwards of NPD Intelect.
A massive advertising campaign undertaken by Best Buy and retailers in its camp to back the DVD drove awareness and turned it into a US household product.
"There was so much promotion," says Mr Edwards. "It was everywhere - on the radio, on TV and in the newspapers."
He believes that the slew of advertising advanced sales by about three to five years.
The added attractions of DVD software, including interactive features and directors' cuts, have provided a strong incentive for consumers to switch over from the video format.
"The DVD is part of the home theatre phenomena," says Mr Binks.
"You have your 16 x 9 television in your living room, you have Dolby surround sound and you watch films on DVD."
Variety's Mr Gaydos believes that DVD will become the dominant format within 36 months - and with sales booming this could be a conservative estimate.
However, there are uncertainties clouding the DVD's rosy future.
Cultural differences in the US means this is less of an issue on the other side of the Atlantic.
In addition, the different DVD formats are likely to slow sales, says David Newman, an analyst at Schroder Salomon Smith Barney.
He believes the video format will exist alongside DVDs while there is indecision over which format will become the standard.
"Like Betamax versus VHS, there is a war between formats. As soon as the war is over, videos will be over," he says.
The final issue is the advent of broadband and the possibility of downloading videos from the internet.
With cheap and available broadband, DVDs could become obsolete.
However, question marks hanging over the widespread roll-out of high-speed broadband will likely ensure DVDs a future for some time to come.
"There will be a threat, but how long will it be until that happens?" asks Mr Newman.
Inevitably, however, the rate of growth in the DVD market will slow as the format becomes more entrenched.
Currently about 25% of US homes have a DVD player, compared with 10% in the UK.
In 2002, Mr Edwards is predicting player sales of 20 million in the US, with an annual growth rate of about 50% - considerably slower than 100% in 2001.
But there is still room for plenty of growth in Europe, particularly if the recordable DVD becomes more affordable.
With the prospect of recording your favourite soap operas with surround sound and high-quality pictures, who could ask for more?
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