Hot-selling DVD players dim VCR’s once bright star

Ellis Mnyandu in New York

By industry accounts, DVD players closed 2001 as the hottest-selling holiday item and spelt the death of the once popular video cassette recorder. Last year marked the biggest price decline for DVD players since the gadgets debuted in 1997 for about $500. And 2002 may prove to be another bumper year despite worries about the US economy, analysts said.

The appeal of DVD players is quickly eroding the grip VCRs once had on the home entertainment front. The decline of video tape will not be missed by many consumers, who find DVD’s compatibility on computers and gaming consoles more versatile. The surging interest in digital video disc technology, or DVD, has been fuelled by retailers and movie studios, which make more money on DVDs than videos as they carry higher margins.

Retailers like Wal-Mart Stores Inc., Best Buy Co. Inc., Circuit City Stores Inc. and movie rental chain Blockbuster Inc. are expected to have cashed in big from their offers of DVD players, many priced below $100. The DVDs have also benefited from a desire by many Americans to stay closer to home since the September 11 attacks on New York and Washington.

Households go DVD
The penetration of all DVD players, including those on personal computers, is expected to have reached about 36 per cent of US households at the end of 2001, according to Mr Tom Adams, president and senior analyst at entertainment research and consulting firm Adams Media Research.

For 2002, Mr Adams estimates the DVD prevalence at US homes to have climbed to 54.5 per cent. “The really more profound thing is not so much the penetration, but the fact that half the revenues from sales of movies to consumers in 2001 came from DVDs,” he said. In 2000, DVDs accounted for about 32 per cent of home movie sales in the US, Mr Adams said.

As for the price, the average cost of a DVD player in 2001 dropped to $158.88 from $202 a year earlier, according to estimates from eBrain Market Research. For 2002, eBrain forecasts the average price for a DVD player to fall to $146.49, with the cost likely to drop by about $10 through to 2005. But with the latest sales, the price seems to be dropping faster than anticipated. Analysts attribute much of the price decline to a surge in DVD penetration, which in turn is helping lower the unit costs for manufacturers.

Going, going, gone
Blockbuster has planned to rid itself of about 25 per cent of its tape library to make room for the fast-growing DVD discs. Ms Karen Raskopf, a spokeswoman for Dallas-based Blockbuster said the rental chain had even ventured out to sell DVD players priced at $99 over the holidays, going head-to-head with other low-priced offers from big electronics retailers. “Our sales of DVD players were beyond our expectations,” Ms Raskopf told Reuters. She said Blockbuster, a subsidiary of media firm Viacom Inc., may even consider selling more home entertainment products led by the lure of DVDs.

Currently, DVDs account for about 30 per cent of rentals at Blockbuster, with the rest still coming from VHS tapes. But by 2003, the chain expects DVDs to account for half of rentals.

Not everyone hopes tapes just die a sudden death. Ms Ruth Tavel said she has a large library of classic tapes that she plans to keep. “If I buy DVDs, the technology is just going to keep getting changed. Who knows, the DVDs may one day go the way of the vinyl records. I like my tapes,” she said.

— Reuters