LOS ANGELES — Digital versatile discs may be the new kid in the entertainment world, but they already face serious challenges from both the newer Divx hybrid format and cable company aspirations to provide more digital viewing options.
``We are obviously in the audience-building stage of the DVD marketplace'' and have embarked upon an education process with consumers and content providers, said Charles Van Horn, executive vice president of the International Recording Media Association.
Van Horn spoke at the DVD Production conference, held Aug. 12-13 in Los Angeles.
Format promoters, content providers and disc and packaging manufacturers examined DVD's evolving world at the new industry meeting. They found the young technology is in a difficult competitive environment.
According to IRMA's optical media intelligence report, by 2002 annual worldwide replication will reach 1.28 billion DVDs for video, audio and computer applications. DVD entered the market in February 1997 and is growing faster for data storage than for entertainment.
Van Horn noted that DVD read-only-memory data storage technology will replace CD-ROM in ``105 million [computer] drives by 2002.''
Worldwide, DVD video replication should reach 64 million units this year and grow to 430 million units in 2002, said Van Horn.
Conference attendees welcomed news reports that the last two holdouts, 20th Century Fox and Paramount Home Video, will release movies on DVD, joining other studios in the market.
Divx is filling the pipeline for a national roll-out in mid-September, expanding on tests since June at Circuit City and Good Guy stores in San Francisco and Richmond, Va.
Divx competes with, or complements, DVD, depending on one's viewpoint.
A Divx disc costs $4.49 for two days' viewing and $3 per subsequent view, billed through a modem-style billing procedure. Glenview, Ill.-based Zenith Electronics Corp. is making the first player able to use Divx discs or a regular DVD.
Divx combines the ``collectible'' nature of a DVD with the single-play feature of a VHS tape, Paul Brindze, president of Divx Entertainment in Los Angeles, said during a panel discussion.
``We offer the option of both to the customer,'' he said.
Divx is an acronym for digital video express.
Divx replicators include Carlton Communications plc's newly acquired Nimbus CD International Inc. unit of Ruckersville, Va.; Panasonic Disc Services Corp. of Torrance, Calif.; and Pioneer Video Manufacturing Inc. of Carson, Calif.
Panelists discussed DVD's entertainment-industry role and packaging issues.
The DVD industry is in ``the very earliest days of an evolving format,'' said Ben Tenn, president of Tenn Consulting in Northridge, Calif.
``For now, [there is] probably more advertising than the business warrants,'' he said.
Tenn anticipates DVD pricing will come down over time, following the pattern of the VHS format rather than that of compact discs. Each DVD can cost about $25, although market segmentation may bring some discs under $10 soon and into a new retail rental market.
Mark Elson promoted DVD capabilities and dismissed suggestions that DVD is a ``copycat'' to other media formats. ``DVD is not a substitute technology,'' said Elson, general manager of Dave's Video, a Studio City, Calif., retailer largely serving entertainment-business clientele.
Warner Media Services' printed heavy-duty cardboard insert is surviving in retail traffic, but the market is ``moving toward a plastic sleeve'' for the rental market, said Rick Dixon, senior vice president of entertainment sales for the Time Warner Inc. unit in Glendale, Calif.
Durability of the disc and its inner hub remain under discussion, but Dixon was unconcerned. Warner has replicated 30 million discs without a retail return. DVDs are ``not that delicate,'' Dixon said.
Edward Joyce, president of Joyce Molding Corp. in Rockaway, N.J., sees a possible need for upgraded packaging to protect DVDs, but he recognized a reluctance to go back and redesign the packaging now. Joyce makes a hinged polypropylene Amaray box under license from an English firm.
The Video Software Dealers Association of Encino, Calif., recommended the packaging have a compact-disc jewel box's width, a VHS box's height and a thickness between three-eights and five-eighths of an inch. The retail market is accepting the recommendation, said Ron Burdett, vice president of entertainment and media packaging for Alpha Enterprises Inc. in North Canton, Ohio.
``I think the size standard will remain the same,'' Burdett said.
Alpha sells a PP box that loads like a VHS sleeve.
Rick Tell, vice president of sales and marketing for 20th BOK, a division of 20th Century Plastics in Brea, Calif., suggested ``the size will get as small as it can be'' to bring down the cost.
Meeting coordinator IRMA of Princeton, N.J., announced a second DVD Production conference will occur Aug. 4-5, 1999, also in Los Angeles.