Turnaround for DVDs is expected by 2012

HOLLYWOOD — Sit tight, Hollywood, a turnaround in the DVD business is three years away.

That was the consensus of four of the six major studios' home-entertainment presidents, who spoke Tuesday morning at Blu-con, a daylong event in Beverly Hills dealing with Blu-ray high-definition discs.

"By 2012 is when the physical/digital combination will get to the point where we tend to see a growth trend again," said 20th Century Fox Home Entertainment President Mike Dunn, referring to Blu-ray and online-movie distribution, the industry's two growing segments as sales of standard DVDs are falling.

Ron Sanders, president of Warner Home Video; Craig Kornblau, of Universal Pictures; and David Bishop of Sony Pictures all agreed with Dunn's assessment during a panel discussion moderated by Merrill Lynch senior media and entertainment analyst Jessica Reif Cohen.

"Prior to the recession, we thought it would be 2010, (but) now that date has moved out," Kornblau said.

"I think in 2010 we will be down, but not by as much as this year," said Sanders. "In 2011 we have a shot at getting to flat, though we have to see how pricing and other things evolve."

So far this year, total home-entertainment revenue is down more than 3 percent, driven by a more than 13 percent drop in DVD sales. That has been a blow for movie studios, which have in recent years relied on the home-entertainment market for more than half of their revenues.

Accelerating the growth of Blu-ray and digital is critical to turning that around. Although the two categories were up 66 percent and 18 percent, respectively, last quarter, their growth hasn't been enough to make up for the drop in DVD revenue.

In a keynote address that kicked off Blu-con, Mike Vitelli, executive vice president of customer-operating groups for retail giant Best Buy, urged studios to merge Blu-ray, standard DVDs and digital downloads into more of a combined offering in order to reduce consumer confusion and simplify purchases.

"I have a mental picture of walking up to a coffee shop and saying 'How much do I owe you?' (and their replying) 'Well, where are you going to drink that?' " he said by way of comparison to the different prices for DVDs, Blu-ray and digital copies.

The current result, he said, is that consumers who have a Blu-ray player in one room and standard DVD players or computers in others are buying the regular DVD so that they can pay one price for a movie that will work everywhere they want to watch it.

"What's looming in front of us is an increasing amount of confusion as Blu-ray players and televisions and other set-top boxes are becoming more connected to the Internet," he stated. "Until all of this gets settled, there will be massive confusion. And in massive confusion, you get a pause."