You might have noticed DVD sales figures make mainstream news lately, with a recent report showing that DVD sales jumped a whopping 40% in the last year, while cinema box office sales decreased slightly. There are now an estimated 50 million discs in Australian households, with 2004 sales pushing past the One Billion Dollar mark for the first time. It seems that mainstream Australia are now building their own home movie libraries with gusto. In Mid-August 2004, Brandon Vogt sat down with Steve Swinfield, Product Marketing Manager for Columbia TriStar Home Entertainment (CTHE), and Michele Garra, Managing Director for CTHE, to discuss both the immediate and long-term future of DVDs and Home Theatre:
Brandon: Steve, at the recent [CTHE Christmas release] launch it was mentioned that CTHE will be releasing 'stocking filler' DVDs for Christmas shoppers at a reduced price. Can you please let us know which titles, and how much they will be?
Steve: Stocking Stuffer DVDs will retail at under $20. Titles in the Stocking Stuffer campaign include: T3, 50 First Dates, Underworld, Once Upon A Time In Mexico, Mona Lisa Smile, Charlie's Angles 2, Bad Boys II, Gothika, Welcome to the Jungle, 3 Ninjas, Big Fish and SWAT.
Brandon: You mentioned to me the other day that CTHE has never supported the rental window with the arrival of DVD. I understand that now no one will be supporting the rental window. How do you think this came about?
Steve: Some distributors still release the odd new release DVD title with a rental window, but for the major releases, a title will generally go direct to retail on DVD (and now sometimes VHS also). From the infancy of the DVD format, it was Columbia TriStar's strategy to enable consumers to rent and own their favourite movies on a premium high quality Home Entertainment format, as close to the theatrical release as possible. This essentially meant that they did not have to wait the full 12 months that they were used to waiting when they wanted to purchase the VHS.
Throughout the 80's and 90's, Australians were very habitual in how they rented VHS, with the overwhelming majority of people that enjoyed watching movies from home very rarely purchasing movies on this format. This was well and truly in contrast to the VHS habitual trends of consumers in other markets such as the US, Asia and Europe, who tended to buy as many Videos as they rented, and in some territories purchasing a much higher percentage of videos than what they rented.
The impact of removing the rental window for the introduction of the DVD format is now evident, with research maintaining that each household in Australia purchased on average 6 DVDs per year in 2003 (in comparison to 1 VHS purchased per household per year throughout the last 20 years). Considering the dramatic increase in the volume of price promoted DVD product released in the past year that has fuelled DVD impulse purchases, the 2004 figure is no doubt much more than 6 DVDs purchased per household per year. Giving consumers the choice to buy or rent movies on DVD as soon as 3 months after they have been released in the cinema has obviously had quite an impact on this dramatic change in Australian household Home Entertainment product purchasing habits.
Brandon: For DVDs, how does the marketing differ between big release titles such as Spider-Man 2, and say other films that people might not have seen at the cinemas, such as Big Fish?
Steve: Essentially, a bigger performing title at the Box Office means a greater marketing budget. This bigger budget allows us to advertise with a massive reach and frequency not only on TV, Radio, Online, and in magazines, but it also gives us the opportunity to look at other mediums available outdoors, in shopping centres and even in the cinema. The DVD marketing spend of those lower profile theatrical releases allows for more targeted advertising on radio and within magazines.
Brandon: Who decides what goes on the Region 4 DVDs, in terms of extras? Would local people, say in Australia, ever get a say?
Steve: For most DVDs, the Columbia TriStar head office in LA primarily decides what special features will go onto the Region 4 DVDs, with great lengths taken to ensure that the Region 4 disc mirrors the content of the Region 1 disc, although in saying this, one of the special features on the Spider-Man 2 DVD that will be exclusive to the Region 4 DVD is a great Killing Heidi music clip, which is obviously a coup for this local Australian talent, their Australian fans and Australian DVD consumers in general.
With the lower proportion of discs that are mastered in Australia, the Australian CTHE Marketing Department does have a say on what is included on the disc. A great example of this is the unique and plentiful special features that were included on the Dirty Deeds DVD.
Brandon: Michele, how competitive is the DVD market in Region 4?
Michele: More intense than the last 8 years since DVD's inception. Indicative signs are; for studios - market share shift and major strategy changes exploiting the product life cycle, and for retailers - recent market share shift from aggressive pricing and consumer positioning. Additionally, new channels are aggressively entering the DVD business, such as supermarkets.
Brandon: CTHE has always provided Region 4 consumers with a lot of choice. For example, I think there's now about 4 versions of the Spider-Man 1 DVD that people can buy, and then there's also the SuperBit DVDs. The common belief was that the Region 4 market couldn't support that much choice. What are your thoughts?
Michele: This is true. Particularly on a variety of SKUs of major releases, as a policy CTHE always match the US offering. We are still struggling on range, where there are 13,000 SKUs on the US market vs 7,000 in Australia. This is mainly due to the expanded niche title range in the US which is uneconomical for a market this size. Rest assured product ranges of major significance are definitely covered here (a lot of the US product is crap!).
Brandon: Is the success of the DVD market tied to the success of the cinema box office? I'm assuming big-release movies at the cinema equal big-release DVDs. Are there DVDs that buck this trend -- say, box office successes that have poor DVD sales or vice versa?
Michele: Yes, Sci-fi action dramatically overperforms on DVD vs BO. For example, Underworld selling over 60,000 units and the upcoming Hellboy in December expected to sell 100,000 plus. Conversely, drama BO doesn't always translate.
Brandon: There's been a lot of talk about Blu-ray and other competing formats on the horizon. What do you see as the future of DVD and technology in the home theatre market?
Michele: An amazing Hi-Definition picture which must be seen to be believed with the arrival of HDTV and the upcoming Blu-Ray DVD format. Expected timeframe in Australia - 2006.
Brandon: As we become an increasingly global market, do you ever foresee a day where Region Coding will be abandoned?
Michele: This is not really an issue, as we most often mirror US release timing here.
Brandon: CTHE obviously has a very strong commercial alliance with Sony. This provides a strong presence in both the 'hardware' and 'software' DVD markets. What, if any, benefits are there for consumers?
Michele: This is evidenced by the upcoming Sony expo in September in Sydney. The most tangible benefit is our ability to communicate new product benefits with Sony as we did with DVD and we plan to with the upcoming Blu-Ray format and the new portable hand-held DVD and game device called PSP with Sony Computer Entertainment/Playstation.
Brandon: Thank you both for your time. It seems that there are plenty of exciting things happening in the world of DVD, both in the 'hardware' and 'software' space!