DVD Going the way of VHS

[gonzo]

--The Guardian

Katie Allen, media business correspondent The Guardian, Monday June 2 2008 Article historyFirst came mail-order rental services, now film downloads at the click of a button. DVD rental and retail stores are braced for a fresh onslaught of competition, this time in disc-less form.

The DVD is only 10 years old and yet the doom merchants are predicting it could join the likes of VHS tapes - vanishing from high-street stores and household shelves. With reports that Apple is poised to launch full-length film downloads in Britain and other companies offering their own video-on-demand services, even DVD industry insiders admit the format may eventually die out.

Yet they argue that the collectability of box sets, the convenience of re-watchable discs and the relatively slow growth of downloads mean there is still plenty of life left in the little silver discs.

The British Video Association (BVA), which last month celebrated the DVD's 10-year milestone at a gala dinner complete with metallic dress code, expects to hold more celebrations in a decade's time. Lavinia Carey, head of the industry group, says that while its research shows the growing popularity of services such as the BBC's iPlayer and movie downloads on Tiscali, consumers still prefer to own - and give as presents - physical copies.

"Lots of people are getting used to the idea of accessing their content online but there is also this collecting habit," she says. "There are so many uses for the physical disc that people won't just drop it like a hot brick.

"Particularly for TV shows, people love the boxed sets; they love to have the collection and they love to be able to watch it when they want."

The BVA concedes that after being largely flat in volume and value terms in recent years, the DVD market is unlikely to see much growth. But digital films will absorb only a fraction of home entertainment spending - about 6% by 2012.

Screen Digest, a media research firm, predicts that by 2012 digitally delivered films will make up 2.6% of total spending of about £2.2bn on full-length films.

That is after including the assumption that films will become available on iTunes in Britain later this year. The rest will consist of buying and renting Blu-ray discs and standard DVDs, it predicts. The emergence of high-definition Blu-ray discs is keeping retailers and film studios in an upbeat mood for now.

Kim Bayley, head of the Entertainment Retailers Association, said: "When it comes to movies, image quality is important to consumers, hence the boom in sales of high-definition TVs and so our view is that the most exciting new format of the moment is Blu-ray."

But retailers still have to keep an eye on downloads, she said. "It's important that the video business pays attention to the lessons learned by the music industry with the advent of digital."

Film studios argue Blu-ray will help the overall market grow as consumers seek formats that make the most of their high-definition television sets. Their line on video-on-demand is that it will not compete with DVDs, rather it is just another way to reach customers.

Other industry experts argue that major practical considerations mean that digital has a long way to go before becoming mass market. Helen Davis Jayalath, head of video at Screen Digest, says Apple's iTunes service will capture a "substantial" market share but the total online market will remain small for some years.

"Although all these digital services are generating a huge amount of column inches they are actually not generating a huge amount of revenue yet," she says. "One of the key issues that has been a problem up till now is that most online services don't come with a system for getting that content on to the television, which is where most people want to watch it.

"For them to become mass market it has got to become incredibly easy to watch the films on your television set."

Gary Morris, founder of UK-based download service iLoaded, argues that such technology is already available and that the DVD industry needs to reassess both its forecasts for DVD survival and for digital growth. He is telling investors there will be "mass, mass sales" online in just two years' time.

"In 2010 the DVD market will really notice online and really notice a decline. Five years I would take as the time when very few DVDs are being sold," he said, pointing to the emergence of "intelligent homes" with servers carrying digital files of music and films to pipe into various rooms.

"Over time, DVDs will just become one of those things that were lovely and in a couple of years' time you'll be able to download a Blu-ray two-hour film in probably 10 or 15 minutes. This is very much the dawn of that age in the same way it was with music downloads a few years back."